Microsoft says Yammer sales are booming

The enterprise social networking's product revenue grew 259 percent year on year in the quarter ended in March

With the backing of its new parent company, Yammer more than tripled its revenue year on year in the quarter that ended in March.

Sales of Yammer's cloud-based enterprise social networking (ESN) software shot up 259 per cent in Microsoft's third fiscal quarter, compared with the same quarter in 2012, when Yammer was still an independent company, Microsoft said on Thursday.

Microsoft isn't disclosing Yammer's revenue in dollar figures, but the growth and momentum -- Yammer added 312 new customers in the quarter - is a validation of the $US1.2 billion it paid for Yammer last July, a Microsoft executive said in an interview.

"We're really pleased with the acquisition, with the process of the teams coming together and with the continued customer acceptance and demand," said Jared Spataro, senior director of the Microsoft Office Division.

"There are always questions after an acquisition, like, 'How is it going?' There's a worry about cultures clashing, and about products and strategies coming together," Spataro said. "When we did the acquisition, we talked a lot about how it would accelerate Yammer's momentum. So this is a great data point to demonstrate how well things are going in general."

Spataro specified that to calculate the revenue spike, Microsoft considered only sales of standalone Yammer licenses, and left out revenue coming in from Enterprise Agreement volume licensing deals involving the ESN product.

It should also be noted that after the acquisition, Microsoft eliminated Yammer's Business edition and slashed the price of the more sophisticated Enterprise edition from $15 to $3 per user per month, so in this year's quarter Microsoft generated significantly less revenue per license than Yammer did in the prior year's quarter.

Microsoft expects Yammer sales to get another boost this summer when the Yammer sales team is merged with Microsoft's global salesforce, boosting the number of reps pushing Yammer from about 100 today to thousands worldwide.

As a frame of comparison, worldwide revenue for enterprise social collaboration software grew about 25 percent in 2012 compared with 2011, according to Michael Fauscette, an IDC analyst.

Another market benchmark is Jive Software, a publicly traded ESN vendor, whose revenue grew 34 percent to almost $34 million in the quarter that closed at the end of March.

"Clearly with this announcement Microsoft is trying to put a certain amount of validation out there that says they made a good acquisition, because some people thought they had overpaid for Yammer," Fauscette said.

Looking back, it's clear to Fauscette that Microsoft picked the best ESN product available at the time, and that so far the acquisition appears to be working well for both parties.

Microsoft bought Yammer primarily to boost the ESN features in its all-purpose and ubiquitous SharePoint enterprise collaboration server, which has an on-premises version and a cloud-based version called SharePoint Online that is part of the broader cloud email and collaboration suite Office 365. The newest on-premises version is called SharePoint 2013.

Integration of Yammer and SharePoint is grinding along and will take probably two years to complete. In March, Microsoft offered an integration road map that calls for Office 365 customers to get the option this summer to replace SharePoint Online's activity-stream component with Yammer's, a modest, basic first integration point.

Also by this summer, Microsoft will deliver a Yammer application that will let users embed a Yammer group feed into a SharePoint site. This Yammer application, which will be available in the SharePoint app store, will work both with SharePoint Online and with SharePoint 2013 servers installed on a customer's premises. Microsoft will also make it possible for customers to replace the newsfeed in SharePoint 2013 servers installed on premise.

Later in the year, the integration will deepen with a single sign-on and the inclusion of Yammer in the Office 365 interface. Yammer will also gain integration with Office Web Apps, the browser-based version of the Office productivity suite, before the end of the year.

Next year, Office 365 customers can expect integration between Yammer and other Office 365 components beyond SharePoint, such as Lync and Exchange. Yammer is already being integrated with Microsoft Dynamics enterprise software.

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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