Microsoft buys enterprise social network vendor yammer for $1.2 b
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Microsoft acquired enterprise social network company Yammer for $1.2 billion in order to integrate social capabilities into its suite of business applications like Office 365 and SharePoint. The deal provides Microsoft entry into the enterprise social software market, allowing it to offer internal and external collaboration solutions. It also validates the growing importance of social business technologies and provides Microsoft with the "social fabric layer" to underpin workflow systems in organizations.
Microsoft buys enterprise social network vendor yammer for $1.2 b
- 1. Microsoft Buys Enterprise Social Network Vendor Yammer for $1.2B June 26, 2012 - IDC Link By: Robert Mahowald; Michael Fauscette; Vanessa Thompson Yesterday's announcement ends weeks of rumor and speculation that Yammer would be acquired by Microsoft, inked in a deal worth $1.2 billion in cash. Yammer will continue to be led by its CEO David Sacks as it becomes part of Microsoft's Office Division, headed by President Kurt DelBene. According to Microsoft, the integration will be handled in a similar way to the Skype acquisition, with a notable exception that Skype is its own division. The intent is to integrate Yammer into as many apps as possible quickly, to include Office365 and of course Sharepoint. IDC estimates Yammers revenue at around $22.3M in 2011, placing them at #8 in the enterprise social software market. The IDC revenue estimate takes into account the enterprise and volume licensing agreements that are negotiable on a number of factors, including total number of intended users of an enterprise social network and how quickly the network will ramp in adoption. The deal price is high taking the revenue into account but Yammer has many more users than the revenue suggests and it is this user base that Microsoft would have targeted, along with Yammer's strong footprint in Fortune 500 companies. The timing of the deal also helps highlight the fact that 2011 was a turning point for social software. IDC surveys show that the basic social software capabilities, activity streams, blogs and wikis, are now an assumed feature and that external collaboration has become a major target, with integration, analytics and extension to mobile devices being critical differentiators for new tools. This highlights the point that different business networks are being created around different types of systems and tasks and that enterprise collaboration happens at the point of work and not off in a separate system. The deal also provides Microsoft a footprint in enterprise social software, which was previously the missing link in Microsoft's domination of collaborative applications. More than 30% of the total market for collaborative applications is made up of Microsoft solutions, including Outlook, Lync and of course Sharepoint. As a standalone solution, Sharepoint doesn't offer social collaboration to users outside an organization's firewall, so it hasn’t previously been directly measured against other enterprise social software providers like IBM Connections or Jive Software. That said, Microsoft haven’t been totally absent from social capabilities, with Sharepoint 2010 including a My Site user experience similar to that provided in Yammer, where users can apply social tags, provide status updates, and post notes or messages. Microsoft have recognized the need to capture both an internal and external collaboration experience, building an ecosystem of over 300 ISV's, reported in 1Q12, to develop applications on top of Sharepoint to extend current Sharepoint functionality. It will be critical for Microsoft to deliver clear messages on future direction for Yammer over the coming weeks, in order to appease any concerns of the ISV community as well as addressing the role (if any) Yammer will have to play in the Office 2013 launch. Over the past year, Yammer has focused on customer engagement through customer success managers (CSM's) that are part of the sales and support business to focus on uptake and adoption of the product. With over 150% growth in user base in the year to the end of 2011, Yammer has recognized that it is not enough to simply provide a tool and user uptake will be a natural progression from this point onward. Once the user base of an enterprise social software tool grows beyond an initial business unit or departmental group and looks to connect users in different departments, ease of integration with other enterprise applications becomes critical to maintain user engagement and adoption. A more moderated and controlled approach to group formation and collaboration rather than user-determined groups also becomes a critical component in adoption of the tool. IDC believes that if Microsoft can retain this momentum and complement the broad Microsoft distribution network with a more consultative and integration based approach based on the CSM model, the dynamics of the major players in this market will be heavily influenced as a result. For Microsoft to solidify a position in the enterprise social software market they must be able to tie together the base capabilities of Sharepoint, the business networks created through ISV solutions and other business - 1-
- 2. networks built around other enterprise systems, into a broader enterprise social network. Yammer has previously indicated their future direction to focus on data-based activity stream integration with shared workspaces and other enterprise applications, to aggregate and port these feeds. Much of this functionality came through the Yammer acquisition of oneDrum in April 2012 that came with seamless real time synchronization from any yammer connected device and provided facilitation of joint work around documents, spreadsheet, PowerPoint, etc. IDC believe that leveraging the capabilities from the oneDrum acquisition as well as the Open Graph protocol, originally created by Facebook to solve the same problem in the consumer space, will be of greatest benefit to Microsoft. It will not only serve as an accompaniment to Sharepoint but enable further development opportunities for the ISV ecosystem that have emerged around Sharepoint. IDC believes that the acquisition broadly validates the notion of a social business and provides Microsoft the missing social fabric layer to underpin the systems of transaction and decision that make up the fundamentals of enterprise workflow. With Microsoft now having their hat in the ring of the enterprise social software market, they will need to quickly capitalize on the opportunity to build a new and even 'cool' image that includes social as a fundamental layer of it's Office business. Please contact the IDC Hotline at 800.343.4952, ext.7988 (or +1.508.988.7988) or [email protected] for information on applying the price of this document toward the purchase of an IDC or Industry Insights service or for information on additional copies or Web rights. Visit us on the Web at www.idc.com. To view a list of IDC offices worldwide, visit www.idc.com/offices. Copyright 2011 IDC. Reproduction is forbidden unless authorized. All rights reserved. - 2-