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What will Microsoft's £1bn Yammer gambit mean for its customers?

5th Jul 2012
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While clearly one of 2012’s worst kept secrets, Microsoft’s confirmation last week of its intention to buy Yammer nonetheless is far from a done deal – and could have interesting ramifications for the wider market.
The top line analysis is simple enough: for a $1.2 billion purchase price, Yammer will be built into Microsoft’s Office, Office 365 and Dynamics products where it is hoped that the social capabilities and Cloud deployment model will help to boost market share.
There are other examples of similar pitches out there already of course.’s Chatter is perhaps the best known, but Oracle has its Oracle Social Network which is positioned as a key part of the firm’s customer experience push while SAP picked up Jam when it bought Cloud giant SuccessFactors earlier this year.
The deal with Yammer is understandable as Microsoft has watched the likes of take on leadership roles in the social business applications market, argues Alan Lepofsky of Constellation Research.
“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,” he observes. “This provides a good opportunity for Microsoft to sell their other collaboration products, especially those in the Cloud-based Office 365 family.”
Nucleus Research points out that Microsoft itself has been down this road before with its 2011 purchase of Skype, a deal which the US analyst firm reckons provides some insight into the direction and associated concerns that the Yammer integration will take.
Nucleus argues: “The ongoing success of the Yammer acquisition will not be measured solely through the growth of Yammer traffic and subscribers. Ultimately, the integration of Yammer into all of the on-premise Office and Cloud-based Office 365 applications, will determine whether Microsoft has spent its money wisely.”
Lack of dynamic change?
That said, Yammer may have little impact on the performance of Dynamics, argues Ovum’s Carter Lusher. “For at least several years Yammer will not provide any unique functionality for Dynamics,” he suggests. “The acquisition of Yammer does not provide Dynamics with any differentiation in the CRM market, in part because there is already a Yammer plug-in for Dynamics.
“Yammer has been systematically creating plug-ins between its service and a variety of enterprise software packages. For example, it has plug-ins for NetSuite, and SAP. The Dynamics plug-in was late to the game, having been announced in April 2012, nearly a year after the NetSuite plug-in announcement.”
Lusher goes further and suggests that in fact the Yammer deal may end up raising false expectations among customers. “Enterprises and public sector organisations that are in the market for a CRM application or current Dynamics customers looking to upgrade might expect deeper integration between Dynamics and Yammer that provides unique functionality,” he reasons.
“However, this is likely to be a difficult task for the Dynamics team to pull off because Yammer is being positioned inside the Office group as an independent product team. As a consequence, the Dynamics team will have to wait in line, perhaps for years, to get the attention of the Yammer technical team.”
For his part, Microsoft CEO Steve Ballmer identified enterprise Cloud-based services as a prime mover behind the acquisition and Nucleus takes a similar tack. “Yammer has been a pioneer in developing the freemium enterprise Software as a Service (SaaS) business model, which has resulted in acquiring five million end users in more than 200,000 organisations,” it notes.
“At a time when Microsoft is seeking to support new businesses and provide Cloud-based services, they have acquired an organisation that has proven their ability to sell these services and find customers without embedding their software into end user hardware or selling enterprise client access licenses (CALs).”
Nucleus adds: “Yammer’s DNA is in the Cloud and Yammer is already used in highly regulated industries and verticals, Microsoft also has acquired personnel who are accustomed to answering questions about Cloud security, governance, risk management, and compliance. As Microsoft eventually becomes a Cloud-first organisation, this expertise will be helpful in supporting all of its software solutions.”
Constellation’s Leposky also picks up on the Cloud angle to the deal, but finds a potential reason for concern. “It's important to point out that Yammer is a Cloud-only offering,” he states. “Even though 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.”

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