Microsoft is reportedly set to acquire the Yammer business social network for an estimated $1 billion. The deal would give a much-needed social network injection to its SharePoint business collaboration platform.

Yammer - with an estimated valuation of $500 million - makes business-oriented social network tools for internal company sharing and discussion centered on blog posts and automatically generated content (such as notifications that a document is ready to edit or a sale has been closed).

The companies aren't talking, but this kind of software should be highly attractive for Microsoft, as it tries to move from being perceived as an old-school desktop software provider to being the source of modern, connected, social-media-aware solutions.

SharePoint Is the Key

One key to that transition is the company’s flagship corporate collaboration platform SharePoint. And by Microsoft’s own admission, social tools are still weak within SharePoint - now, and in the upcoming 2013 version as well. And some think that played a part in the reported deal price.

"Microsoft has been deluding itself into believing SharePoint plays in the social space, arguably the most important market in software in the last decade," says Aaron Fulkerson, founder and CEO of MindTouch, a maker of social help software. "Microsoft acquiring Yammer will make them relevant in the social space, but their lack of execution is forcing them to pay a premium."

SharePoint began adding social media capabilities with the release of SharePoint 2010, but in April Jon Barrett, Microsoft Australia’s solution specialist of business productivity, told Australia’s Image and Data Manager that “the improved new social media features in Wave 15 would not match the richness of solutions such as Newsgator Social Sites.” (Wave 15 is the internal Microsoft code name for the SharePoint 2013 release.)

That’s a big problem for Microsoft, especially if it wants SharePoint to remain a dominant business collaboration platform. SharePoint’s comparatively high price and the rise of more mobile-connected workers is driving customers to look at less-expensive, more social platforms like Igloo and Alfresco.

Social Must Go Mobile

Social features like sharing, microblogging and instant approval make internal collaboration easier for computer users, and they are regarded as critical to mobile users who don’t have the bandwidth or tool set to create or collaborate on content. Social tools can make workflows a lot more frictionless for mobile workers.

If Microsoft wants to make sure SharePoint remains relevant, buying Yammer makes perfect sense - even at a hefty premium. If this deal comes to fruition, the inclusion of Yammer’s social media tools within SharePoint - and other Microsoft products (including the flagship Microsoft Office productivity suite) - would deliver social capabilities that customers demand and help Microsoft retain SharePoint’s market share. It could also help Office compete against more sharing-oriented competitors like Google Docs.

The fact that Yammer already has SharePoint feature integration should make any integration that much easier.

Competitors to Yammer include Chatter, Tibco Tibbr and VMware Socialcast.