Microsoft Redefines Itself upon Purchasing Yammer for $1.2 Billion

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To stay in the game, computer mega-giant Microsoft is going beyond their current bulwark, their Office suite applications, from which they earn most the money that maintains their empire, and is picking up a different kind of software: they recently bought Yammer for $1.2 billion.

With their Office Suite, Microsoft earned 60 percent of their profits last year, more than they did from their windows operating system, and their business tactics has been to sell the technology and rights to use Microsoft Word and Microsoft Excel, amidst other programs in their suite, to businesses and home consumers. With Yammer it’s different. For one thing, this will be the first social networking application to be part of their package. Secondly, Yammer will operate like Yahoo email and Facebook, a program you get for free and can then upgrade for bonus features.

In fact, Yammer is a lot like Facebook. Its been called “Facebook for the workplace.” The program lets corporations create social networks behind a firewall within their operation, and also lets employees network to previous employers and coworkers. But unlike Facebook and LinkedIn, Yammer is not ad-driven, but subscription based.

  

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The four-year-old Yammer is already 5 million strong and is run by 400 employees from their San Francisco headquarters. Microsoft isn’t changing any of that; Yammer’s current CEO David Sachs is even staying on board.

“This acquisition will immediately make Microsoft a strong competitor in the enterprise social market,” said tech analyst Larry Cannell. “It was a stretch to call the capabilities in Sharepoint’s MySite feature a social network site.”

Microsoft had spent $8.5 billion lat year to obtain Skype, also a free program with the possible to pay for an upgrade.

What difference does it make if Microsoft owns these companies or not? Microsoft is incorporating their technology into its suite, so that the functions of each program cross-over into the others. The next version of Office, for instance, will integrate Skype into its features. Offering integrated and compatible software is one of the clear advantages Microsoft offers over rogue software.

Enterprise software in general includes the tools companies use to manage their business, from doing payroll to making spreadsheets. Peter Livine, a general partner of Andreesen Horowtiz – sees such moves as Microsoft is now making as part of a “full-blown reawakening” within enterprise software. The licensed business products that made Microsoft an empire may be replaced with the ever more popular software-as-service applications, such as Facebook, Vitrue, Buddy Media, and Yammer. With the global enterprise market being valued, according to research firm Gartner, at $280 billion – roughly the same as Greece’s annual GDP – keeping on top this ever evolving market is absolutely necessary for titans such as Microsoft.