Amazon is reportedly interested in acquiring Slack Technologies, which makes collaboration and chat tools for businesses. Here's why a deal could be construed as savvy or totally wacky with little in between.
According to Bloomberg, Amazon and other technology companies are sniffing around Slack, which would carry a value of about $9 billion in a takeover.
Slack has become an enterprise player as it has landed corporations that are using the chat software to manage teams. Slack is often used in a broader mix of tools from the likes of Atlassian, Microsoft, Google, and others.
The emergence of Slack is fascinating to me. On one level, Slack and the open floor plan are the two largest productivity myths of recent times. Both approaches increase the noise of getting work done and minimize the signal. Slack can be useful for real-time collaboration and its bots are handy at times. At other times, Slack is a glorified AOL chat room from back in the day.
However, the funny part about Slack is that no one wants to say out loud that there's too much noise in fear of looking like a tech Luddite. Yet, it's not hard to find folks to rant about Slack's downside.
So, why would Amazon blow $9 billion on Slack? Here are a few reasons why it makes sense--and doesn't.
It make sense
- Amazon's profits are driven by Amazon Web Services and that unit has disrupted the enterprise technology pecking order in the last decade. Amazon started with infrastructure as a service and is moving up to databases and has been building higher-end software as a service and productivity assets. Rivals Google and Microsoft already have well known productivity and collaboration suites to tack on to broader cloud deals. Slack could give AWS tools to occupy the higher end of a larger cloud stack. AWS launches Amazon Connect, a cloud contact center as a service | How AWS' Chime, cloud business productivity apps play into Microsoft Azure, Google Cloud battle
- Slack is building its enterprise footprint nicely. Slack will build recurring revenue with enterprises and have a predictable model. That Slack model could get a significant boost with Amazon's scale, infrastructure, and growing AWS sales team. Slack adds screen sharing for video calls | Slack refines admin controls for guest access, profiles | Slack launches message menus in effort to boost workflow tools
- AWS and Slack could advance AI. Slack's AI could be helped with AWS knowhow and minimize the noise of its service. Slack and Alexa combined with AWS' developer army could be a juggernaut on the AI front. There's a mutual win on the bot front with a combination of Slack, Amazon and AWS. Slack rolls out AI-powered Highlights feature | Slack launches Enterprise Grid, introduces intelligent search features
- Paying $9 billion for Slack would be out of character. Amazon bought Zappos for $1.2 billion and Kiva for $775 million in 2012. Kiva, which makes the robots that are in Amazon's distribution centers, may ultimately become one of the most forward-looking purchases. Amazon's acquisitions are typically in the tuck-in category and fill a need (Audible, Twitch, etc). Slack has a big valuation that may fill a need for Amazon, but it doesn't fill a huge void.
- Collaboration is a tough market. Today's Slack can quickly become tomorrow's Yammer, Jive, or some other tool. The enterprise is littered with collaboration tools that started out well but lost momentum. Slack could dominate or become an also-ran. The odds are 50-50 at best. Will Amazon pay $9 billion for a coin flip?
- If Slack is truly the future of enterprise software then why sell now? Enterprise technology companies -- Twilio, Okta come to mind -- do well over time on the public markets. Slack is an enterprise company and could do as well too. Sure Slack is going to listen to offers, but perhaps it's just seeing what its value could be. The Bloomberg story may just be a trial balloon that could seal more enterprise deals and partnerships by generating buzz.