Yammer Bid Would Put Microsoft on the Enterprise Social Bandwagon

If rumors are true that Microsoft is about to acquire enterprise social media company Yammer, it would be worth Microsoft’s effort to catch up with Oracle, VMware and Salesforce.com.

In a sense, the question of the day is not whether Microsoft is going to acquire the enterprise social media provider Yammer, but what took them so long?

Rumors began circulating June 14 that Microsoft would be acquiring Yammer, a 4-year-old business social media company with 200,000 companies as customers, for a total of 4 million users, at companies such as Ford, Nationwide Insurance and 7-Eleven convenience stores. The reported purchase price is $1 billion. On June 14, the Wall Street Journal reported that Yammer had agreed to the deal, but a Microsoft spokesman declined to comment.

Microsoft got its foot in the door with Yammer on April 24 when Yammer announced its integration with Microsoft Dynamics, its enterprise resource planning (ERP) and customer relationship management (CRM) software suites. Updates from the CRM solution, such as changes in CRM accounts, campaigns or other opportunities, for instance, will appear as €œan activity story€ in a Yammer feature called Yammer Ticker.

But the Yammer acquisition, if it occurs, would just be the latest in a long line of recent acquisitions by Microsoft€™s competitors to gain leverage in enterprise social media, prompting a question about what took Microsoft so long.

€œThey€™d be a little late doing this because the others have already moved,€ said Rob Enderle, principal analyst with Enderle Group, a research firm.

The others include Salesforce.com, whose social media platform is called Chatter, which also announced June 4 its plans to acquire Buddy Media for close to $700 million. VMware acquired Socialcast in 2011 and recently unveiled a new pricing strategy to give away Socialcast for free for up to 50 users. Oracle, meanwhile, picked up the Atlanta-based Vitrue to roll out social media-based marketing campaigns.

Collectively, Forrester analyst Melissa Parrish calls this space the €œthe Social Media Management Platform (SMMP) space€ and she has been tracking the acquisitions of late. In a June 4 blog about the pace of acquisitions, Parrish explained the importance that companies place on their social media strategy.

€œBrands are maturing in social media and they€™re realizing they need something like a true social software stack to manage it all, especially as social media spreads across the enterprise and grows beyond the boundaries of just the marketing department,€ she wrote.

Secondly, enterprises want to integrate their enterprise social media platforms with other enterprise IT systems, she said. The two most often mentioned systems are non-social analytics, such as Adobe/Omniture and Google Analytics, and non-social CRM, such as those from Salesforce, Oracle and SAP.

Parrish cautioned, however, that these acquisitions may not generate a lot of revenue for the acquirers.

€œThe actual revenue being earned by SMMP vendors is a drop in the bucket compared to overall revenue in the enterprise technology sector,€ she wrote. €œThese acquisitions are not about adding immediate significant revenue. They€™re about adding technology offerings.€

Analyst Enderle says that it€™s important for companies acquiring SMMP firms to recognize the talent inside the companies that they are acquiring. Microsoft needs to do a better job of preserving the unique skill set that employees, particularly software developers, bring with them to Microsoft because, in this case, enterprise social networking is a relatively nascent field.

€œMicrosoft has done a poor job of retaining the talent when they make an acquisition, especially in this space, because adding social to office productivity tools is a recent development,€ Enderle said.