Salesforce, Slack & and a New Chapter in the Platform Wars

Salesforce bought Slack this week for $27.7 billion, the eighth biggest tech merger in history. There was a lot of racehorse commentary about the tactical and competitive reasons for the deal, but I tend to look at it as part of a much broader story. It’s a story about the power of platforms, and I think it has lessons for every sector of the economy. 

Salesforce has bought at least 60 companies in its history, including 27 in the last five years, according to S&P Capital IQ. I had the good fortune of being involved in the company’s first four acquisitions. What started as a cloud-based database for sales representatives has since become one of the most valuable software companies in the world, passing up Oracle, SAP, IBM, Cisco and Intel in the process. 

John Somorjai has built a masterful infrastructure that enables newly acquired companies to plug seamlessly into Salesforce like Lego blocks. In the case of Slack, much of the chatter (see what I did there) was around Benioff’s yet-to-be-realized vision of a “social enterprise.” They now have an outstanding communications layer after making some unsuccessful attempts at their own (Quip, Chatter, etc). 

But while all that may be true, I see this acquisition as a new chapter in what I call “The Platform Wars.” Let me explain. 

Today, CIOs around the world are trying to decide which platform to standardize on. With limited time and resources, they need to pick a commercial ecosystem that will provide concrete dividends: new applications, new talent, new revenue streams. They have to decide whether they’re going to be an Oracle shop, an SAP shop, a Microsoft shop or a Salesforce shop. Salesforce’s purchase of Slack is part of its strategy of winning the platform wars, to get companies to build with them, as opposed to Microsoft. 

Now, the platform wars are nothing new. Some of us may remember the IBM/Compaq/Windows battles from the “Halt and Catch Fire” days of the 1980s. But as I see it, there are two new wrinkles in today’s conflict. 

First, in the old days, the key platform battleground was around systems of record. Then the battle moved on to data. Today it’s about collaboration, particularly in remote work settings. That was the hole that Salesforce just plugged with this acquisition. Microsoft already had it covered with Outlook and Teams. Will Oracle or SAP be forced to buy something next (and no, I’m not talking about Tik Tok)?  

Second, and perhaps more importantly, this isn’t just a software story anymore. Platforms are appearing across virtually all industries. Uber is a transportation platform. WeWork is a workplace platform. Will we see a new health & fitness platform soon? If so, will it come from Sutter Health or Fitbit?

As R “Ray” Wang, CEO of Constellation and the author of the book Digital Duopolies says, "platform ecosystems will power the next generation of digital giants. Their success comes from how they build digital feedback loops with data so they can predict trends, determine pricing, mitigate risks, and market to customers at scale." Yes, you need technology to do all of those things, but you certainly don't have to be in the technology industry to build a platform.  

Platforms have an outsized effect on the global economy because they create huge marketplaces that facilitate interactions between large numbers of participants. According to Interbrand, four out of the top five most valuable brands in the world are platforms: Apple, Amazon, Microsoft and Google. But that’s just scratching the surface. According to the World Economic Forum, emerging digital ecosystems could account for more than $60 trillion in revenue by 2025 (or more than 30% of global corporate revenue), and yet only 3% of established companies have adopted an active platform strategy.

So, dear Subscribed reader, no matter what industry you are in, it’s not enough to just make and sell a great product anymore. You need to create a community and a marketplace that allows people to interact, transact, and ideally learn from one another. That’s the broader idea that the Slack acquisition represents. That’s the power of platforms.  

So what platform war will you be part of?

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Disclosure: These opinions expressed are mine, not those of the company. The companies mentioned in this newsletter are not necessarily Zuora customers.