In The Next Version

In the last year or so the social business/collaboration vendor landscape has changed dramatically. Startups such as SocialCast, Podio, Bluekiwi, and Socialtext have become parts of larger organizations. Jive Software went public via IPO. Enterprise software vendors such as SAP, Oracle, Salesforce, IBM, Saba and Cisco have introduced new or improved collaboration offerings. Google introduced Google+, which may not be targeted at enterprises today, but you'd be foolish to think a variant will not become part of Google Apps For Business in the future. So who's not on this list? Microsoft.

Customers, Not Code

Love them or hate them, Microsoft is often considered the standard when it comes to business applications via products such as Outlook, Office and SharePoint. However, thus far they have not been able to gain much of a positive reputation in understanding the way modern social business applications work. Instead they have had to watch as companies like Jive Software, Yammer and Salesforce establish themselves as the new leaders. To combat this, Microsoft is spending $1.2B mainly to get access to Yammer's customers, culture and reputation. This is very similar to Facebook's billion dollar acquisition of Instagram, where they bought the company but then released their own camera app just a few weeks later. Clearly Facebook did not need Instagram's code, they wanted access to their customers and the networks/relationships they were forming.

Microsoft could obviously develop Yammer-like functionality for less than $1B, but that's not the primary thing they were after. By gaining access to Yammer's customers, they now have access to not only the internal networks but also all the external customer facing networks that Yammer customers are creating. This provides a good opportunity for Microsoft to sell their other collaboration products, especially those in the cloud-based Office 365 family. For example, if Yammer customers could instantly launch a Lync Meeting with their external networks it would reduce the usage of products like WebEx. Similarly Yammer integration with Office 365's documents and spreadsheets could impact the usage of Google Docs, especially among SMB customers who use both Yammer and Google today.

What Does This Mean For Yammer and Their Customers?

In the short term, I don't think there is much to be concerned about. Integration of Yammer's features into Microsoft's products will most likely not happen for quite sometime. However, integration of some Microsoft features into Yammer may occur more quickly. I'd like to see integration with Skype (and/or Lync) and Skydrive be at the top of that list.

On the other hand, the long term implications do worry me, many of Yammer's design philosophies and go to market strategies are the very definition of anti-Microsoft. In every meeting I've had with Yammer, they have emphasized how quickly releasing minimum viable versions of features enables them to rapidly get new code into the hands of their customers. With their snail-paced 3 year release cycles, that is clearly not the Microsoft way. Perhaps will change their ways as they deliver more of their portfolio in the cloud. I imagine that in the short term Microsoft is going to leave Yammer alone, but how long can that last? Once integration begins between Yammer the Microsoft portfolio Yammer's code will need to be locked down. I hope customers won't have to wait for Microsoft Office Yammer 2015?  

On the plus side, I think being part of Microsoft can help accelerate the company's vision of being a core business tool. For many people whether right or wrong, the perception is that Yammer is just "Twitter for the enterprise". That leads people to think of Yammer as a tool for posting status updates, not really a place to get work done. Via tighter integration with Microsoft Office, SharePoint, Outlook, Lync and especially the Dynamics family (ERP and CRM), Yammer could become a more key component in their customer's core business processes.  It will be interesting to see how Yammer and Microsoft handle identity/authentication (profile/directory/security) across the various product lines.

It's important to point out that Yammer is a cloud-only offering. Even thought Microsoft is starting to heavily promote their cloud based portfolio, a majority of their customers (especially Exchange and SharePoint) are still using on-premises software. This could lead to complications between integration of SharePoint and Yammer as customers may not want to be broadcasting events or sharing files beyond their corporate firewall.

What This Means For Yammer's Competitors

As mentioned above, over the last year or two the major software vendors such as IBM, SAP, Oracle, Cisco others have being ramping up their social software platforms. While the purchase of Yammer does not immediately improve Microsoft's products (ex: it does not fix SharePoint's lack of social features) it will cause decision makers to at least speak with their MS reps in greater detail than they may have in the past.  However, it's going to take Microsoft many years to catch up with their competitors. For example, Jive already offers excellent integration with Office and Outlook; SAP is already integrating their CRM and ERP products with their social platform; Salesforce is gaining lots of ground with Chatter being integrated with their CRM, Radian6 and Rypple offerings; IBM and Cisco already offer seamless integration between their social platforms and their unified communication tools. I imagine several of Yammer's competitors were thrilled about this news, viewing this as "one more competitor off the board", similar to how many of them have told me that SocialCast stopped showing up in deals after their were acquired by VMWare.

What This Means For Business Partners

I've often said that the success of a product is based on the depth of its partner ecosystem. Yammer has been doing a nice job lately of working with 3rd party vendors to build additional functionality for Yammer. I hope that these partners will not be hindered by the red-tape, rules and regulations that come along with being a Microsoft Business Partner.  Ideally the opposite may occur, and the thousands of MS Partners that work with tools like Sharepoint and Lync will now be taking a look at Yammer. On the technology side, both Microsoft and Yammer are big supporters of the Open Graph protocol, so that should help partners provide all sorts of great integration points between various components. If you're a Yammer or Microsoft partner, I'd like to hear your thoughts on this.

The Coolest Person In The Room Is The One Who's Not Trying To Be Cool

Overall, I'm not terribly excited about this deal. I've really enjoyed watching Yammer evolve from the time I competed with them while I was at Socialtext until now where I cover them as an analyst^* and am also a user myself. On their own they established themselves as one of the dominate social business startups, separating themselves from the pack in a crowded market. I hope that becoming part of Microsoft does not stifle their growth and innovation. I hope that as Microsoft tries to buy their way into a better position in social business they don't cause Yammer to vanish into the massive Microsoft portfolio, nor scare aware customers who may not be interested in dealing with Microsoft for political, technical or financial reasons. I am optimistic that in the medium to long term Yammer customers will benefit from tighter integration with the Microsoft portfolio but I don't think we'll be seeing that materialize in 2012.


* Yammer is a Constellation Research customer