Microsoft is planning a major assault on the social networking market with a $1.2 billion acquisition of Yammer, writes Tony Glover.
Microsoft trusts Yammer will nail social network goals
Microsoft is planning a major assault on the social networking market with a US$1.2 billion (Dh4.4bn) acquisition of Yammer.
The Yammerpurchase will allow Microsoft to add social networking to its Office set of business tools. The Seattle software giant's Sharepoint software already allows users to collaborate on projects. But as yet, the company has no effective social networking service for business users.
"Microsoft Sharepoint is where people do work. Yammer is where they talk about it. Although Sharepoint has the ability to allow this, its interface is not as user-friendly as that of Yammer," says Richard Edwards, an analyst at the international research company Ovum.
According to Duncan Clark, a senior analyst at the research firm Canalys: "Microsoft's latest move to acquire Yammer demonstrates the vendor's strengthening commitment to the enterprise communications market.
"This development is another indication that the market is moving away from traditional communications technologies to richer and more integrated social networking and collaborative solutions. This market continues to gather momentum."
Although the underlying technology that powers social networking is hardly new, it is now being introduced in a far more palatable form than in the past.
"While it is true that the internet forums of 20 years ago could be used to achieve the same thing, Yammer is more suited to the needs of users familiar with existing social networking services such as Facebook and LinkedIn," says Mr Edwards.
In servicing fully integrated social networking among staff, organisations can ensure that their knowledge base is accessible to all employees at any time.
"By enabling social networking rather than a direct emailing system between employees, an organisation can tap into hidden pockets of expertise among staff that might not otherwise be identified," says Mr Edwards.
Some industry watchers have already caught a whiff of desperation in Microsoft's attempt to enter the social networking market at this stage.
"Right now everyone is talking social networking in this class, and if you don't have a solution you are seen as out of date and thus out of luck. Yammer is fixing a critical technology shortcoming for the firm," says Rob Enderle of the Enderle Group, a Silicon Valley analyst.
Microsoft hopes that by buying an off-the-shelf service it can close the time gap on competitors and bring its own full-fledged social networking service to the market faster. It is also seen as a move by Microsoft to revive its Office toolset. Although the firm has never fully revealed the importance of its Office software, competitors believe that it has traditionally accounted for up to half of its profit.
But many of the features of Office are now widely available free of charge from other sources over the internet, and the Microsoft product is showing its age. Even businesses that have been loyal to Office are now starting to question the wisdom of paying high licensing fees indefinitely. It is, therefore, essential that Microsoft have a popular addition such as social networking.
But even this may not be enough to drag Office software kicking and screaming into the 21st century.
"It faces a tough battle with a social networking platform pitched against consumer alternatives. In the workplace, people still gravitate towards social networking platforms that they are familiar with from the consumer world," says Mr Clark.
There are also fears that Microsoft's track record of losing newly acquired key staff in the period after a corporate merger may prove a problem. Some of the Yammer staff may jump ship as soon as they can after the acquisition.
"Yammer is fixing a critical technology shortcoming for the firm. However, Microsoft has a poor employee retention history after acquisitions like this," Mr Enderle says."If they don't correct that, much of the value of Yammer will likely end up over working for Google, whose strategy with regards to this stuff is to mine someone else, in this case Microsoft, for talent as opposed to buying the firm."
But Microsoft still has a vast business customer base that remains loyal to its software. In medium to large enterprises, in particular, the costs of retraining staff to use rival software and services can be prohibitive.