Microsoft closes Yammer acquisition

Microsoft plans to integrate Yammer's enterprise social networking software with its collaboration products and business applications

Microsoft's $US1.2 billion acquisition of Yammer has been finalized, less than a month after the companies announced the cash deal.

Yammer will become part of Microsoft's Office Division, which is led by its president, Kurt DelBene. Yammer CEO David Sacks will remain at the helm of the Yammer team.

Microsoft has said that it will continue to offer Yammer's software as a stand-alone product, and that it will also integrate it with its enterprise collaboration products, such as SharePoint, Office and Lync, as well as with its Dynamics business applications. A level of integration already exists between Yammer and SharePoint.

Yammer's software is cloud-hosted and, like similar ESN (enterprise social networking) products, offers Facebook-like and Twitter-like features adapted for workplace use.

ESN products typically include employee profiles, activity streams, microblogging, discussion forums, wikis, idea generation software, joint document sharing and editing. Other features include tagging, rating and reviewing of content, and IT management and security capabilities.

These products are viewed as complementary to traditional communication and collaboration software such as email, IM, Web meetings, IP telephony and video conferencing.

Demand for ESN software is forecast to grow strongly in the coming years, as organizations bet that these products can significantly improve the way their employees interact and work together.

According to Forrester Research, spending on ESN software will grow at a compound annual growth rate of 61 percent through 2016, a year in which the market for these products will reach $US6.4 billion, compared with $US600 million in 2010. IDC recently reported that spending on ESN software grew almost 40 per cent last year to $US767.4 million.

These products started appearing around 2007, provided mostly by smaller, niche vendors focused primarily on ESN, such as Socialtext, NewsGator, Jive Software and others.

However, larger vendors such as Oracle, Salesforce.com, IBM and SAP have also incorporated ESN capabilities and modules into their broader collaboration and business applications.

Microsoft's flagship collaboration product for the enterprise, SharePoint, has been seen as lagging in native ESN features, so it wasn't surprising to see the company go out and buy an ESN specialist like Yammer.

"Yammer will be an important addition to Microsoft's cloud services, and this acquisition underscores our commitment to helping customers move to the cloud. Together we'll deliver the most complete solution in the marketplace," DelBene said during the press conference when the deal was announced on June 25.

It remains to be seen to what extent Microsoft will allow Yammer to continue to interoperate with products from other vendors with which it has been integrated via custom connectors and via its open APIs (application programming interfaces).

Yammer's software is used by more than 5 million corporate users and in more than 85 percent of the Fortune 500 companies. It offers a basic, free version of its software and three fee-based tiers. Yammer, which has raised $US142 million in funding, has about 300 employees.

About 200,000 businesses use Yammer in more than 150 countries, including Deloitte, which rolled out Yammer to 190,000 employees. Other customers include Tyco, Ford and Nationwide Insurance.

Juan Carlos Perez covers enterprise communication/collaboration suites, operating systems, browsers and general technology breaking news for The IDG News Service. Follow Juan on Twitter at @JuanCPerezIDG.

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