Following days of rumors, Microsoft officially announced an agreement to acquire enterprise social-networking company Yammer for $1.2 billion in cash.
Under the terms of the agreement, Yammer will continue to evolve as a standalone service, with its technology presumably finding its way into complementary Microsoft platforms such as SharePoint, Office 365, and Microsoft Dynamics.
“When we started Yammer four years ago, we set out to do something big,” CEO David Sacks wrote in a June 25 statement. “We had a vision for how social networking could change the way we work. Joining Microsoft will accelerate that vision and give us access to the technologies, expertise and resources we’ll need to scale and innovate.”
In many ways, the Yammer deal echoes Microsoft’s $8.5 billion purchase of Skype in 2011. Rather than merge Skype’s assets with its own products, Microsoft decided to integrate the company as a separate division headed by Skype CEO Tony Bates. It also preserved the core Skype experience.
Self-billed as “The Enterprise Social Network,” Yammer offers workers a cloud-based network for crowd-sourcing projects and queries, trading information, and organizing into groups. On the surface, buying such a platform seems like a slam-dunk for Microsoft, giving the company a new way to compete against business-cloud firms such as Salesforce.com.
However, the success of the acquisition could boil down to one thing: how well Microsoft integrates Yammer into its existing offerings.
Yammer’s placement in the Office Division, Forrester analyst Rob Koplowitz suggested in a blog post ahead of the acquisition, could be the best possible way forward for Microsoft. “These guys can position Yammer as part of a broad horizontal collaboration offering,” he wrote. “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.”
Such a move could also blunt the competition. “This keeps Microsoft customers from having to augment their collaboration strategy with third-party offerings from folks like IBM, Jive, Telligent and others,” he added. “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.”
Microsoft’s rivals are also making big plays in enterprise social. Salesforce recently announced it would acquire Buddy Media, a social-networking firm, for $689 million. That came days after Oracle bought Vitrue, a cloud-based marketing and engagement platform. Not to be outdone, Google purchased Meebo, a vendor of social-networking tools for consumers and advertisers, which in turn could help strengthen its Google Plus social network as an alternative to Facebook.
If Yammer allows Microsoft to turn back the threat from Salesforce and these other competitors, then it could end up being $1.2 billion well spent.