Microsoft buys Yammer, solidifies SharePoint enterprise social chops

Microsoft’s purchase of Yammer gives products like SharePoint enterprise social media capabilities that customers have requested and purchased from ISVs, industry watchers say.

With Microsoft CEO Steve Ballmer calling it a fundamental part of the Office family, Microsoft today revealed one of the tech world’s worst-kept secrets -- it’s Yammer, for a reported $1.2 billion.

Consultants and analysts alike speculated the move should help consolidate Microsoft’s position in the enterprise social media space while admitting to certain shortcomings in the latest version of SharePoint.

Yammer, a Software as a Service (SaaS) enterprise social media company launched in 2008, describes its product as being as easy to use as Facebook and Twitter but intended for business collaboration. The company counts more than 80% of Fortune 500 companies as clients and nearly 4 million people reportedly use its free version.

In the weeks leading up to the announcement, there was speculation around what the acquisition of the San Francisco-based Yammer would mean, but with a few details released, some questions persist.

“Why buy something like this on the eve of your big triennial software push?” asked Tony Byrne, president of Real Story Group, an analyst firm based in Olney, Md. “I think Microsoft did this as a pre-emptive move.”

Byrne speculated that the acquisition, made just months before Microsoft is expected to introduce the latest version of its SharePoint collaboration platform, might indicate there are deficiencies in SharePoint’s enterprise social software.

“Really getting the integration right is clearly one of the most motivating opportunities for both teams,” Ballmer said during the announcement before Microsoft Office Division President Kurt DelBene noted that Yammer’s “phenomenal list of talented employees” will continue working out of San Francisco under current CEO David Sacks.

The acquisition is somewhat unusual. While Microsoft has made other acquisitions, when it comes to SharePoint capabilities, the company has tended to develop in-house, Byrne said.

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“I think they’re getting it because they can, and they’ll sort out the technology aspects later,” Byrne said, explaining that Yammer, as an independent company with a large user base, gives Microsoft the opportunity to sell Yammer to existing SharePoint customers and dilutes the arguments of independent software vendors who have SharePoint-compatible social media products.

This is about “social-enabling the enterprise,” said Rob Koplowitz, principal analyst at Forrester Research Inc. in Cambridge, Mass., who pondered why Microsoft would go after what he considers the thought leader in enterprise social computing.

“Maybe because it is a pure SaaS offering -- with pure cloud development and delivery. And maybe because it is agnostic to systems and could potentially work with many Microsoft properties,” he said.

Yammer has also figured out the “freemium” business model. Once the free application is spread virally throughout a company and users prove its business value, the organization often purchases licenses for back-end control.

Ballmer noted as much during a conference call with analysts and media, explaining that Yammer’s business model was also attractive to Microsoft. “Yammer is a set of capabilities and Yammer is a whole adoption model,” Ballmer said.

This deal also means, said Koplowitz, “that one of the most high-profile, most disruptive vendors in the space is now a property of the leading collaboration vendor. It gives them an immediate global reach.”

“Microsoft customers would like to see a single social product that would work across all the products together,” said Mike Snyder, president of Sonoma Partners LLC, a consultancy and systems integrator for Microsoft Dynamics CRM in Chicago. He explained that Dynamics CRM, SharePoint and Office would all benefit from a Yammer integration.

Calling such a cross-product integration a perfect storm of enterprise collaboration, Jacob Morgan, principal and co-founder of Chess Media Group, a management consulting and strategic advisory firm on collaboration based in San Francisco, said such a move was a long time in coming for Microsoft. “It’s about time. They add a huge list of capabilities to their products that people are asking for and not getting right now.”

SharePoint will become a platform that actually offers a collaboration capability, he said. “Yammer plus SharePoint is going to be a pretty tough competitor to beat.”

Microsoft will solidify its user base and likely begin an aggressive campaign to take customers away from other vendors, Morgan said. Among existing SharePoint customers, the conversation about what social media product to buy becomes moot. “There’s now no reason to even consider any of these other guys out there,” he said.

“This immediately makes Microsoft a competitor in the social workplace market, which is now characterized by a Facebook-like experience,” said Larry Cannell, a research director at Gartner in Stamford, Conn. “Facebook is training people how to collaborate and share online and are expecting these familiar experiences at work. SharePoint could not satisfy these needs.”

Microsoft would also benefit from the work Yammer has done to integrate business applications with Microsoft’s product , and that’s to enable users to keep working in business applications while maintaining contact with colleagues, he said. For example, users can see their Yammer feeds inside SharePoint, eliminating the need to toggle between the two applications. They can also post messages, polls and events, upload files to Yammer or maintain SharePoint’s version control, and send links to documents and tasks from SharePoint to Yammer feeds.

But it’s not a simple as just handing over a check for more than $1 billion.

“It’s going to require some work for Microsoft to turn this into a more polished platform,” said Byrne, who thought the acquisition doesn’t really shake up the enterprise social media space all that much.

“I’m not sure that this really does anything except potentially draw more investment money to other private, smaller startups, having seen the effect of yet one more firm successfully exiting. … I don’t think it’s a magic bullet for Microsoft or anybody else.”

 

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