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Blogs > MWD Advisors

Microsoft acquires Yammer
Angela Ashenden By: Angela Ashenden, Principal Analyst, MWD Advisors
Published: 25th June 2012
This work is licensed under a Creative Commons License
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So, after 9 days of rumour and speculation, Microsoft has finally confirmed that it is to acquire enterprise microblogging vendor Yammer for $1.2 billion. This is a major result for Yammer, which has been battling furiously in the highly competitive social collaboration arena. It was hardly struggling though – Yammer announced $85m in funding in March, taking its total to $142m. Not bad for a company that’s only been in business for four years. In fact Yammer itself had just started dipping its toe in terms of acquisitions, spending some of that hard-earned cash on acquiring Scottish collaborative editing app maker oneDrum in April.

Yammer looks good on the numbers front too – the company has over 5 million users of its Saas-based service, of which a million are paying users. Over 2,000 companies now have Yammer networks. The vendor was also growing fast – it has 350 employees, with plans to expand significantly this year.

So I’d say it’s clear to see why Yammer caught Microsoft’s eye – it’s a high profile player in the social space with an impressive customer base. The two companies had already been working together, with Yammer developing integration with both SharePoint and Dynamics CRM.

But I’m not yet convinced that this is a marriage that’s going to work. Why? Well, the problem comes down to SharePoint – despite various enhancements over the last couple of releases, Microsoft still hasn’t mastered social in SharePoint. Oh, it has the right features, it’s just that they’ve never really felt central to the user experience; rather they’re a kind of add-on, and they’re awkward and clunky to use. So my question is – why would having Yammer be any better? Yammer’s features are currently integrated into SharePoint using a web part – again, it’s not integral to the overall environment. If this is about rolling Yammer into the core SharePoint platform,  this will take a major architectural change which will take an age to reach the product – take the integration of FAST search as an example. Nevermind the point that Microsoft could just build these capabilities by themselves; they wouldn’t need to splash the cash in this way. However, perhaps Microsoft has more creative plans than this – for example, rather than focusing on the traditional on-premise market, using Yammer as a channel to build adoption of Office 365 and its other SaaS services.

As an aside, I imagine this news is a major blow to Newsgator – for the last couple of releases of SharePoint, Newsgator has been the most common choice for adding a social layer to the platform. Microsoft’s acquisition of Yammer really seems to put this in jeopardy – I can’t help thinking that Newsgator would have expected to be bought themselves if Microsoft wanted to improve its capabilities here.

Microsoft clearly had to do something in this area, as it has been largely left behind in the race for social. Even its arch-rival IBM has left it flagging through the success of IBM Connections and its SaaS-based alter-ego LotusLive. I don’t think the situation is critical yet though; the market is still developing and evolving as businesses get to grips with how social can be of value. But Microsoft can’t afford a big false start here, so I’m waiting patiently to hear how this acquisition is going to change the world. ;-)

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