Slack has now become Amazon’s favourite acquisition target.
On June 4 2020, Slack and Amazon announced a new multi-year agreement to deliver solutions for enhanced enterprise workforce collaboration. Slack has been underperforming even during the coronavirus whereas enterprise workforce software demand has skyrocketed, Amazon Web Services (AWS) has seen slack as a perfect opportunity to enter the enterprise workforce market by leveraging their industry-leading cloud infrastructure.
“Strategically partnering with AWS allows both companies to scale to meet demand and deliver enterprise-grade offerings to our customers. By integrating AWS services with Slack’s channel-based messaging platform, we’re helping teams easily and seamlessly manage their cloud infrastructure projects and launch cloud-based services without ever leaving Slack.”
Stewart Butterfield, Co-founder, CEO of Slack
What does it mean?
Slack will migrate its Slack Calls capability for all voice and video calling to Amazon Chime. AWS’s communications service that lets users meet, chat, and place business calls. AWS will utilize its global infrastructure to support Slack’s enterprise customers’ rapid adoption of its platform and to offer them data residency. Features in storage, compute, database, security, analytics, and machine learning continued to be developed in Slack under AWS support. Audio, video, and screen-sharing capabilities are now advanced in Amazon Chime by Slack’s technologies.
Additionally, The partnership also integrates AWS Key Management Service with Slack Enterprise Key Management (EKM) for encryption key management, with adoption AWS’s machine-learning chatbot service and direct integration with AWS AppFlow to enable secure transfer of data between Slack and Amazon S3 storage. Which mean users are allowed to revoke access on a granular level and data are managed in a much secured level.
Slack & Amazon Relationship
It is an interesting topic because the tie between Slack & Amazon as well as Amazon & Microsoft have began much earlier than this year. In 2017, Slack was one of the only workplace collaboration application that have predominant professional applications seamlessly integrated. Amazon was intending to acquire Slack to expand AWS coverage, however the deal didn’t go through due to its cost reasons.
Throughout the past 3 years, Slack has chosen AWS as its preferred storage provider and even resides its chat application in AWS. The partnership agreement takes that to a whole new level whereas Slack’s is now utilizing AWS as their technology platform foundation, Slack also refers Amazon as their preferred partner, implying an increased reliance onto AWS services into their operation and development.
The war between Amazon and Microsoft is tensed and have primarily taken place in the cloud industry. Microsoft’s Azure and Amazon’s AWS in earlier January was fighting for the government $10 billion Pentagon JEDI cloud contract, which Microsoft have won eventually. Amazon has further filed claims onto the National Defensive Ministry to put the contract on hold.
Another Reason for Merger & Acquisition
If we look into Amazon’s history, companies who have shared close relationships with Amazon, they tend to fall apart in future because they lose power against Amazon’s practices. For example, Fedex was Amazon’s preferred distributor and now Amazon becomes Fedex’s existential threat, Amazon’s Influencer Program had driven majority of the traffic in its early stage of development and now influencers Amazon’s commission incentives are diminished. Amazon’s rationale to the strategic partnership is to boost Amazon Chime’s capability as well as to increase Slack’s reliance to AWS in order to increase control over Slack.
Amazon Web Services (AWS) is the dominant player in the cloud infrastructure industry, the cloud infrastructure industry is complement to a variety of digital sectors including media, telecommunication, government, education, collaboration tools etc. When Slack continues advancing its capability to providing better services to grow the business, Slack is actually increasing reliance with AWS’s infrastructure.
Given Slack operates in the cloud infrastructure as AWS, owns a growing pool of paid-customers, strategic relationship with Amazon. It incentivizes Amazon to acquire the company to expand Amazon Chime’s services against Microsoft Team in the future over any other companies.
Future of WORK
All in all, Slack Technologies an aggregated platform for workplace communication. Being First-To-Market has granted them massive exposure in media and allowed them to acquire large volume of customers. Due to rising competitions, the introduction of Microsoft Team, Amazon Chime, Notion, Facebook Workspace have began to catch up in the collaboration market.
During the Coronavirus lockdowns, WFH transformation have created billions of value for video-conferencing tools and new competitors from tech giants. It is a bad for WORK as there has not been any major breakthroughs since the business model is established. In addition to factors like reliance onto AWS, over-optimism and rising competitions, Slack is going to be taken advantage from Amazon Web Services (AWS) if Slack was not able to better differentiate itself and complete in the market.