On the surface, it's safe to say Microsoft has missed the social networking revolution. With Facebook and Twitter dominating the landscape — and Google trying to elbow in — you'd be forgiven for assuming Microsoft has walked away from the space entirely.
Just below the surface, however, it's a different story. Its SharePoint collaborative platform has evolved into a de facto standard for collaboration, internal and external-facing portal creation, and enterprise document and content management. The company's Exchange services have long dominated the corporate email market and remain an important linchpin of its future messaging roadmap.
And if the rumours of a $1.2 billion buyout of Yammer play out — Bloomberg Saturday quoted a source "familiar with the matter" saying the deal was done, and Microsoft has called a secretive announcement after close-of-market Monday — the Redmond-based software giant may yet take social networking somewhere Facebook CEO Mark Zuckerberg never even conceived: to work.
Social networking for office workers
Yammer specializes in a relatively unknown space known as enterprise social networking. ESN is little more than social networking focused specifically at the corporate market, with tools designed to add secure, managed and focused social smarts to existing platforms like Office or SharePoint.
In Yammer's case, it works like Facebook for companies, using a so-called freemium model — free for basic functionality, subscription-based for a richer feature set — except instead of sharing activities far and wide like consumer-focused social media services, it's limited to users within an individual company's domain, and can be more easily aligned with corporate security, data management and regulatory compliance processes.
Acquiring Yammer would allow Microsoft to more tightly integrate social networking and collaborative tools like file sharing and chat into its legacy Office products, as well as SharePoint and the Dynamics lineup of ERP solutions. The latest update to SharePoint, in particular, included a wide range of social networking capabilities, but an acquisition of this scale would accelerate the transition to full-on collaboration throughout Microsoft's product lineup and make those features more accessible to a wider audience.
Although it's flown below the public's radar, ESN is exploding among the corporate raider set. Bloomberg says large tech companies are increasingly targeting startups as they work to bolster their capabilities in this fast-evolving market. They spent $715.5 million U.S. on enterprise software acquisitions in 2009. Two years later, they broke the bank with $17.4 billion in spending. Yammer is already cashing in on the wave, with Bloomberg reporting its software is used in 200,000 companies, and last year founder David Sacks, a former PayPal COO, said the company had penetrated into 70 per cent of Fortune 500 companies. More recently, he said 4 million corporate users were using Yammer.
A feeding frenzy — even here
It's a trend that hits particularly close to home in Canada. Salesforce.com's $326 million U.S. acquisition of social media monitoring outfit Radian6 in March 2011 almost single-handedly woke the industry up to the value of social media in enterprise circles — a sentiment reinforced by Salesforce.com's just-announced $745 million buyout of Buddy Media, and Oracle's acquisition of social media analytics specialists Collective Intellect Inc. and Vitrue Inc.
Salesforce.com remains the one to beat, and other acquisition targets, including Huddle, Jive Software, and Moxiesoft, only add fuel to the ESN frenzy.
Microsoft has announced a secretive major announcement for Monday after the markets close. Even if the announcement isn't Yammer-related — AllThingsD says Microsoft will instead announce details of Windows RT on tablet based on ARM processors — it's only a matter of time before Microsoft makes a move in ESN.
As corporate buying patterns evolve in response to changing end-user needs, the company has no choice but to evolve its own productivity, messaging and collaborative offerings, as well. The goal: gradually transition Office, traditionally an individually-focused productivity suite, into a more collaborative tool to better compete against the slow-but-steady growth in web-based competition from Google.
Protect the franchise
The stakes for Microsoft couldn't be higher. Over the nine months ending March 31, Office raked in $17.7 billion in revenue, up 6.4 per cent over the $16.6 billion logged in the year-earlier period. Despite growing industry speculation that the iconic productivity package is vulnerable to web-based upstarts that offer much of its functionality for free, Office continues to account for over half of Microsoft's operating income. A Yammer acquisition would allow Microsoft to more quickly plug Office's feature gaps and prepare it for an increasingly collaborative, social-based future.
Whenever Microsoft chooses to pull the trigger on a major-league ESN buy, the writing is already on the wall. $1.2 billion or so may seem high, but given growing interest in the market and the sheer size of its all-important Office franchise, it's cheap insurance for whatever comes next. Indeed, the longer Microsoft and other potential suitors wait, the higher the pricetags for playing in this market will become. The costs for staying on the sidelines may yet be higher.
Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own. email@example.com