Confirming what we already knew, today Microsoft announced they are acquiring Yammer for $1.2 billion in cold cash. Here's a blog post by David Sacks, the CEO of Yammer.
Microsoft doesn't report a revenue breakdown for their individual products but SharePoint is believed to be one of the fastest growing products with annual revenue of more than $1 billion. Regardless of how Microsoft markets and positions SharePoint, it has always been collaboration software and not really social software. Microsoft does seem to understand the challenges it faces in moving their portfolio of products to the cloud, including SharePoint. Microsoft also understands value of having end users on their side even though SharePoint is sold as enterprise software. Microsoft's challenges in transitioning to the cloud are similar to the ones faced by other on-premise enterprise software vendors.
But, I really admire Microsoft's commitment by not giving up on any of these things. Skype's acquisition was about reaching those millions of end users and they continue to do that with their acquisition of Yammer. Going from collaborative to social requires being able to play at the grassroots level in an organization as opposed to a top down push and more importantly being able to create and leverage network effects. It's incredibly difficult to lead in with an on-premise solution retrofitted for cloud to create network effects. Native cloud solutions do have this advantage. Yammer will do this really well while helping Microsoft to strengthen SharePoint as a product and maintain its revenue without compromising margins. If Microsoft executes this well, they might unlock a solution for their Innovator's Dilemma.
With Yammer, Microsoft does have an opportunity to fill in the missing half of social enterprise by transforming productivity silos into collaborative content curation. As a social enterprise software enthusiast, I would love to see it happen, sooner rather than later.
Instagram: $1B. Yammer: $1.2B.And that, my friends, is why you do enterprise software.At personal level, I am excited to see the push for social in enterprise software and a strong will and desire to cater to the end users and not just the decision makers. I hope that more entrepreneurs recognize that enterprise software could be social, cool, and lucrative. This also strengthens market position for the vendors such as Box and Asana.
— Aaron Levie (@levie) June 15, 2012
It's impressive what an incumbent can do when they decide to execute on their strategy. Microsoft is fighting multiple battles. They do have the right cards. It's to be seen how they play the game.