What's the next acquisition for Microsoft, after GitHub?

In the wake of Microsoft's $7.5 billion acquisition of GitHub, a lot has been written about the deal and how much it makes sense for GitHub, Microsoft, and developers. But it got me thinking about the path Microsoft is on and contemplating its next move.

First, some facts about GitHub and this deal

San Francisco-based GitHub is an essential tool for coders. Several large corporations, including Microsoft and Alphabet Inc.’s Google, use it to store their corporate code and to collaborate. In hindsight, it's easy to see why Microsoft pounced on GitHub. Based on multiple accounts, Microsoft is (one of) the biggest contributors to GitHub, with more than 1,000 employees pushing code to various GitHub repositories. Microsoft's VS Code project alone is beloved by millions of developers, entirely open source, and built using GitHub’s Electron platform. GitHub hosts 28 million software developers (in more than 1.5 million organizations) working on 85 million repositories of code. The company was last valued at $2 billion in 2015, is on track to generate $200 million in subscription revenue in 2018, and has yet to turn profitable; but Microsoft clearly sees tremendous value in the network, agreeing to pay a whopping 37.5 times sales for the company. Clearly, the value isn’t in the current financials of the company but rather in the potential value of the data – how prolific developers are, what products and tools they use, which other developers they collaborate with, the list could go on.

Microsoft of the future - a revolution or reincarnation?

Satya Nadella’s Microsoft is a far cry from the Microsoft of previous eras. It has transformed from a company milking legacy products and assets of a "hardware-centric", "on-premise" flavor to embracing a "mobile-first" and "cloud-first" strategy with a commitment to developing software that uses cloud technology and is easily deployable on mobile devices. While, with the acquisition of LinkedIn, the company bought itself a formidable asset of connected knowledge workers, the technology behemoth has taken it one step further with the GitHub deal and appears to be renewing its vows to the developer community. With this in mind, I got to thinking about where Microsoft may venture next and, while companies of its size and scale are highly active in the M&A world, a number of possibilities came to mind. One set of companies cater to the burgeoning gig economy – the likes of Upwork, Toptal, and SpareHire, and there are several others. These would complement LinkedIn by providing work opportunities to talented professionals and growing a community of such professionals with ratings based on past performance (LinkedIn has recommendations but lacks a rating component). However, I believe Microsoft’s next notable acquisition will be a company that caters to a vast professional community and provides services to that network agnostic of the technologies or platforms they use in addition to providing access to work opportunities.

Stacking the deck?

One such company that comes to mind is Stack Exchange, operator of Stack Overflow. Founded in 2008, and coincidentally, around the same time as GitHub, this company of 250+ employees has characteristics strikingly similar to GitHub and LinkedIn. It touts itself as a network of online communities (170+ at the time of this writing) of experts on and enthusiasts about a wide range of topics. The apple of its eye is Stack Overflow, the largest online community for developers to learn their trade and advance their careers. The site boasts 7 million developers who visit the site multiple times a week. Stack Overflow also operates a job board geared to developers (3,100+ active postings at the time of this writing). While I am not a developer, I can profess to the wealth of knowledge accessible within this community by virtue of the fact that it became my go-to resource for technical help as I worked through my recently completed MS in Analytics degree program from Texas A&M University. And, while Stack Exchange is a private company and its financials are not publicly available, it is backed by leading VCs, including Andreessen Horowitz, which is also an investor in GitHub.

An acquisition of Stack Exchange would fit well with the previous acquisitions of LinkedIn and GitHub. With the three properties combined, Microsoft would own the largest professional network and a leading online learning platform for technical skills (in Lynda.com, a subsidiary of LinkedIn), the largest community of developers collaborating on software projects/products using the most popular version control system, and the largest community of developers exchanging ideas and solutions to technical issues. Stack Exchange would also nicely complement Microsoft’s existing assets, notably TechNet, a portal for IT professionals that provides discussion forums, online training, and a vast library of documentation and other technical resources for Microsoft products. It is easy to see that there are a number of synergies between Stack Exchange, GitHub, and LinkedIn, and how such an acquisition would fall in line with Microsoft's unfolding playbook to (re)dominate the world of software development.

Whether this comes to pass or not remains to be seen but I'm certain that this is something that Microsoft's corporate development team will chew on, if they haven't started already. And, if Microsoft applies the same hands off approach to integrating GitHub as it did with LinkedIn, it will be easier yet to see how such a deal may well benefit developers in making software development easier and more accessible.