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Posted by Rob Koplowitz on June 15, 2012
In the wonderful movie Sliding Doors, Helen runs for a train and just makes it on as the doors are closing. Moments later we see her running again for the same train only to have the doors close a moment before she arrives, forcing her to wait several minutes for the next train to arrive. We then see two versions of Helen's life unfold, one where she had made the train and one where she did not. The seemingly trivial moment in her day proves to lead to two wildly different outcomes.
There are reports that Microsoft will acquire Yammer. If true, and sitting here on a beautiful Friday morning looking out at the hills of Oakland, monitoring Twitter, texts from friends on the inside, news, and any other information source, my best guess is that it is and paperwork is frantically being prepared, what does this mean? Well, for one, David Sacks, CEO of Yammer, is about to have a very happy 40th birthday. The number that is being bandied about is $1 billion. And this is not an Instagram moment. The value and potential of Yammer in the enterprise software market is clear. David and team have been working very hard for a long time to build a viable enterprise business. They were recently named a leader in Forrester's Activities Streams Wave. They have one million paying enterprise customers and another four million freemium users in the wings. It's a real business and it's been a real pain in the backside to some larger and better established competitors. In the case of Microsoft, a much larger and much better established competitor.
Microsoft has been slow to the game in enterprise social. Their primary delivery mechanism, SharePoint, is a very big product with a traditionally long delivery cycle. When you upgrade your enterprise social story every 3-4 years, you're going to be constantly behind in a market segment that is rewarded for being forward thinking. Hence, they've not been a thought leader. So, if you have gobs and gobs of cash, what do you do? Buy an undeniable thought leader. And Yammer is that.
So, on the surface it makes sense. The Yammer crew gets rich and avoids the hassle of an IPO (and Facebook has certainly made the terms social and IPO about as attractive as peanut butter and cauliflower for the moment). Microsoft gets way cool in enterprise social really fast. Everyone wins.
Back to Sliding Doors. Somewhere in Redmond, someone is driving this deal and that will drive the future of Yammer. That someone could be in the Office group, which owns SharePoint, Lync and designs most of the applications for Microsoft's cloud collaboration offering, Office 365. That someone could be in Dynamics, Microsoft's business application unit that competes with SAP, Oracle and Salesforce. Yeah, Salesforce. As in, those folks with Chatter, one of Yammer's stiffest competitors. The different scenarios that unfold based on who is driving this deal will lead to very different outcomes. (A third scenario has folks from the consumer side of the business like Skype and Bing driving the deal to compete with Google and Facebook, but Yammer's cred is in the enterprise and this seems unlikely.)
If Yammer ends up with the Dynamics team, it is likely to be positioned as their answer to Salesforce and Chatter. They have social-enabled business applications, we have social-enabled business applications. This is the Sliding Doors moment that ends very badly. Why? Because Chatter is not about social-enabling Salesforce CRM. It's about social-enabling your enterprise. Salesforce CRM is just one of many things that gets social-enabled by Chatter. The Force.com platform and AppExchange are the facilitators of a much broader story that Salesforce is telling. They have worked very hard to position Chatter as a horizontal collaboration platform. Chatter doesn't compete with Dynamics, it competes ultimately with SharePoint. If not in all functional areas, at least for IT budget. If Microsoft pigeonholes Yammer into a business application adjacency, they miss the big market opportunity and play right into Salesforce's hands. And the Dynamics team is no way ready to address a broad collaboration play.
Sliding Doors scenario number two has Yammer going the Office team. This has the potential to end better. These guys can position Yammer as part of a broad horizontal collaboration offering. This would mean that Microsoft, in one fell swoop, becomes good at social and places it adjacent to their very strong market offerings in email, unified communications, workspaces, etc. This keeps Microsoft customers from having to augment their collaboration strategy with third-party offerings from folks like IBM, Jive, Telligent and others (we'll talk about close Microsoft partner NewsGator at a future time if this deal goes down). If Microsoft plays their cards right, they seriously cripple the ability for competitors to disrupt their market-leading position in collaboration and likely place themselves as long-term leaders in enterprise social.
So, what about those out there that bought into the Yammer vision, especially customers? Does Yammer become the next Groove, a bold vision of collaboration that goes to Redmond to die? Here is what Microsoft needs to do to make this work:
- Keep Yammer largely autonomous. If they close the offices in San Francisco and move the operation to Building 36 in Redmond, the passion that drove Yammer will be gone in a heartbeat.
- Keep Yammer a pure SaaS play. When I first met David Sacks he said they would always keep Yammer pure to the cloud and he kept that promise. It is what has allowed them to move so fast and stay so close to consumer trends in social. And I know he's turned down some big money from customers that were willing to pay to have an on-premises implementation. Microsoft will need to do the same because once there is a common code base between an on-premises and cloud offering, it can never be as quick and nimble as a pure cloud offering again.
- Fulfill the vision of a service. Yammer needs to be part of Office 365, but available anywhere, starting with Dynamics. While they shouldn't own it, the Dynamics team should be able to fully leverage the asset. Everyone else should too. Yammer is currently following a road map that creates a social layer that can consume from any back-end system and feed into any user environment. In the long run, Microsoft wins if Yammer plays as well with SAP on the back end and an iPhone on the front end as with Dynamics on the back end and Windows Mobile on the front end. Not sure this will jive (no pun intended) with Steve Ballmer's view of the world.
So, as we sit waiting to hear the final word we can wonder whether this will be one of so many botched acquisitions we've seen in our industry, or one of the few really good ones. It's up to Microsoft. Could go either way, as some of us will remember from the closing scene of Sliding Doors:
James: You know what Monty Python used to say?
Helen: "Always look on the bright side of life."
James: No, "nobody expects the Spanish inquisition."
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