Is Microsoft in denial on Social? It appears not.

June 16, 2012June 16, 2012 Richard Boardman

I met up with Chris Bucholtz, editor of CRM Outsiders, who was in town for the Gartner conference, on Tuesday, and was bemoaning the fact that I didn’t get to write as many pieces about implementation strategy these days (which has been our traditional fare over the years), because there’s been so many comment-worthy developments in the CRM market in recent months. Based on developments this week, I’m not going to get an opportunity this time either.

No sooner was the metaphorical ink dry on last week’s post, about how Microsoft was going to have to respond to Oracle and Salesforce.com’s acquisitions of social media marketing platforms, Vitrue, Collective Intellect, and Buddy Media, when – and there’s a certain irony that social media should play such a key part in leaking a potential social media acquisition – a tweet about an overheard conversation in The Creamery in San Francisco last Wednesday, spawned a rash of rumours, which appear to have substance, that Microsoft is in negotiation to buy Yammer for a reported $1 billion plus.

Yammer, established in 2008, provides social collaboration tools to over four million users and 200,000 companies, including 80% of the Fortune 500, and would be Microsoft’s largest acquisition since its purchase of Skype for $8.5 billion last year.

Relations between the two companies have become increasingly close of late, culminating in the April announcement of Yammer’s integration into Microsoft CRM (though it would be extremely interesting to know how long the potential acquisition has been in the pipeline, and whether it’s been directly triggered by Oracle and Salesforce’s recent acquisitions).

The deal certainly appears to make a huge amount of sense. As discussed last week Salesforce.com and Oracle have been on a tear acquiring companies to fill out their social capabilities. Microsoft needed to respond quickly to stay in the game.

And respond quickly it seems to have done. Yammer has been competing successfully with Salesforce.com’s Chatter application, and would fill out Microsoft CRM’s social collaboration capabilities that it had tentatively been trying to fill with its Activity Feeds feature.

Yammer will also potentially compliment Microsoft’s Skype, SharePoint, and Lync, products, and is sure to benefit from Microsoft’s sales channels.

On the negative side, Yammer has prospered against Chatter, partly at least, because in the words of its CEO, David Sacks, ‘Yammer is social Switzerland’. With Yammer owned by Microsoft, that neutrality is compromised, though CIO’s might consider Microsoft a more benign owner, than Salesforce.com or Oracle.

Secondly, the success of the purchase will depend on the ability to effectively integrate the acquisition into Microsoft and its product line up, as well as retain key Yammer staff. Never an easy task at the best of time but this may also be complicated by how many different areas of Microsoft Yammer potentially touches.

That said, if it does come to pass, and if Microsoft can make the acquisition work, it’s a great step towards achieving its ambitions as a player in the enterprise CRM market. It will not, I suspect, be the last acquisition Microsoft will make in this area, with many social gaps still to fill.

It remains a good time to be a start-up with a B2B social platform.