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Stewart Butterfield says Microsoft sees Slack as existential threat
In a wide ranging interview with The Wall Street Journal’s global technology editor Jason Dean yesterday, Slack CEO and co-founder Stewart Butterfield had some strong words regarding Microsoft, saying the software giant saw his company as an existential threat.
The interview took place at the WSJ Tech Live event. When Butterfield was asked about a chart Microsoft released in July during the Slack quiet period, which showed Microsoft Teams had 13 million daily active users compared to 12 million for Slack, Butterfield appeared taken aback by the chart.
Chart: Microsoft
“The bigger point is that’s kind of crazy for Microsoft to do, especially during the quiet period. I had someone say it was unprecedented since the [Steve] Ballmer era. I think it’s more like unprecedented since the Gates’ 98-99 era. I think they feel like we’re an existential threat,” he told Dean.
It’s worth noting, that as Dean pointed out, you could flip that existential threat statement. Microsoft is a much bigger business with a trillion-dollar market cap versus Slack’s $400 million. It also has the benefit of linking Microsoft Teams to Office 365 subscriptions, but Butterfield says the smaller company with the better idea has often won in the past.
For starters, Butterfield noted that of his biggest customers, more than two-thirds are actually using Slack and Office 365 in combination. “When we look at our top 50 biggest customers, 70% of them are not only Office 365 users, but they’re Office 365 users who use the integrations with Slack,” he said.
He went on to say that smaller companies have taken on giants before and won. As examples, he held up Microsoft itself, which in the 1980s was a young upstart taking on established players like IBM. In the late 1990s, Google prevailed as the primary search engine in spite of the fact that Microsoft controlled most of the operating system and browser market at the time. Google then tried to go after Facebook with its social tools, all of which have failed over the years. “And so the lesson we take from that is, often the small startup with real traction with customers has an advantage versus the large incumbent with multiple lines of business,” he said.
When asked by Dean if Microsoft, which ran afoul with the Justice Department in the late 1990s, should be the subject of more regulatory scrutiny for its bundling practices, Butterfield admitted he wasn’t a legal expert, but joked that it was “surprisingly unsportsmanlike conduct.” He added more seriously, “We see things like offering to pay companies to use Teams and that definitely leans on a lot of existing market power. Having said that, we have been asked many times, and maybe it’s something we should have looked at, but we haven’t taken any action.”
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Microsoft says Teams now has 13M daily active users
Teams, Microsoft’s two-year-old Slack competitor, is the company’s fastest-growing application in its history. That’s something Microsoft has said in the past, but for the first time, Microsoft today also announced actual user numbers for the service ahead of its Inspire partner conference next week. Teams now has 13 million active daily users, Microsoft said, and 19 million weekly active users. Microsoft also today said that Teams is now in use by 91 of the Fortune 100 companies.
The company isn’t afraid of putting those numbers up against Slack, which IPOed only a few weeks ago. Jared Spataro, Microsoft Corporate VP for Microsoft 365, doesn’t mention Slack by name in his blog post, but the company put together a little graphic that clearly shows why it is now willing to share these numbers.
The last official number from Slack is that it had 10 million daily active users in January. Without update numbers from Slack, it’s hard to say if Teams now has more users, but unless Slack’s growth accelerated in recent months, that’s probably the case.
In addition to disclosing these numbers, Microsoft also announced a number of updates to Teams that range from features like priority notifications, which take the annoyance of chat notifications to a new level by pinging you every two minutes until you respond, to read receipts, new moderation and cross-posting options for Teams channels and a time clock feature that lets employees clock in and out of work shifts right from the Teams mobile apps.
Because Inspire is an event for Microsoft partners, it doesn’t come as a surprise that Microsoft is also launching a few new Teams features that involve its resellers and other partners. These include the ability to integrate teams with compliance recording partners like ASC, NICE and Verint Verba, as well as a contact center solution in partnership with Five9, Nice InContact and others. The most important of these announcements, though, is surely the fact that Microsoft is launching a new partner-led Teams trial (PDF) that will enable Microsoft 365 partners to offer a free six-month trial of Teams to customers on the Exchange-only or Office 365 Business plan. This will surely bolster Microsoft’s user numbers for Teams in the coming months, too.
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Teams, Microsoft’s Slack competitor, says it’s signed up over 500k organizations, adds whiteboard and live events support
Microsoft Teams, the collaboration platform that Microsoft built to complement its Office 365 suite of productivity apps for workers — which also ensures a way of keeping those workers staying within its own ecosystem — is hitting a milestone on its second birthday.
Today, the company announced that over 500,000 organizations are now using Teams. The company is not spelling out what that works out to in total users but notes that 150 of them have more than 10,000 users apiece, putting its total user numbers well over 1.5 million.
Alongside this, Microsoft also announced a number of new features that will be coming to Teams as it works on native integrations of more of Microsoft’s own tools to give Teams more functionality and more relevance for a wider range of use cases.
“The rigid hierarchy of the workplace has evolved, and environments are now about inclusivity and transparency,” said Lori Wright, General Manager of Workplace Collaboration at Microsoft, in an interview. “We see these trends playing out all over the world, and this is giving rise to new forms of technology.”
The new features indeed speak to that trend of inclusivity and making platforms more personalised to users. They include customized backgrounds; and support for cameras to capture content to bring in new ways of interacting in Teams beyond text — something that will be further explored with the eventual integration Microsoft Whiteboard, for people to create and ingest presentations that are hand-written into the system.
For those who are either hearing-impaired or cannot use or hear the audio, Microsoft’s adding live captions. And to speak to the purview of CSOs, it’s adding secure channels for private chats as well as “information barriers” that can be put in place for compliance purposes and to make sure that any potential conflicts of interest between channels are kept out; screening for data-loss prevention to prevent sensitive information from being shared.
Finally, it is adding live events support, which will let users create broadcasts on Teams for up to 10,000 people (who do not need to be registered Teams users to attend).
All in all, this is a significant list of product updates. The company kicked off its service as very much a Slack-style product for “knowledge workers” but has since emphasized a more inclusive approach, for all kinds of employees, from front line to back-office.
No updates today to the number of third-party applications that are being incorporated into Teams — an area where Slack has particularly excelled — but Microsoft is focused on making sure that as many users as it has already captured in Office 365, which today number 155 million — eventually also turn on to Teams. “We using as many as the Microsoft services as we can, tapping the Microsoft Graph to feed in services and structure information,” Wright said.
Microsoft is somewhat of a late comer to the collaboration space, coming in the wake of a number of other efforts, but these user figures put the company’s effort well within striking distance of notable, and large, competitors. Last month, Facebook noted that Workplace, its own Slack rival, had 2 million users, also with 150 organizations with more than 10,000 users each included in the number. Slack, meanwhile, in January said it had over 10 million daily active users with the number of organizations on the platform at 85,000.
(Notably, just yesterday Slack made a timely announcement in its bid to court more large enterprises: they will now give regulated customers access to their encrypted keys, an important component to win more business in those sectors.)
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Microsoft’s latest Teams features take aim at shift workers
Collaboration tools tend to be geared toward workers who are sitting at a desk for much of the day, but there are plenty of shift workers, also known as first-line workers, who rarely use a computer, but still need to communicate with one another and management. Microsoft released several new features today aimed at including these workers.
In a blog post announcing the new features, Emma Williams, Microsoft corporate vice president for modern workplace verticals, wrote that there are two billion such workers. By making the product more mobile-friendly and linking to existing enterprise employee management systems, Microsoft can make Teams more relevant for shift employees.
For starters, Microsoft is making mobile Teams more flexible to meet the needs of a variety of shift worker jobs. Some might need to record and share audio messages, while others might need to share their location or access the camera. Whatever the requirements, Microsoft has started with a Firstline Worker configuration policy template, which IT can customize to meet the needs of various worker types.
The mobile tool also includes a navigation bar, which allows workers to add the tools they use most often for easy access. The idea is to make it as simple as possible to access the tools they need, given that these workers tend to be on their feet or on the move a good part of the day.
Photo: MicrosoftNext, the company has released a new API to help IT connect Teams to existing workforce management systems. The Graph API for Shifts enables first-line managers, who are responsible for setting up worker schedules, to share data between a company’s workforce management system and Teams, allowing employees to get all of their shift information in one tool. This will be available in public preview later in the quarter, according to the company.
Finally, the tool now includes a new Praise feature, designed to let managers recognize good work by their employees by issuing badges with messages like “Thank you” and “Problem solver.”
The company wants Teams to be more than a tool for knowledge workers. These new features provide a way to include workers that are sometimes left out of these kinds of collaboration tools. The new features also help Microsoft compete with a number of startups that trying to attack the same problem.
These include Crew, a startup that scored a $35 million Series C round just last month and has raised almost $60 million, and Zinc, which also takes aim at the deskless worker, and has raised $16 million, according to Crunchbase.
Whether Microsoft can appeal to both the knowledge worker and the first-line variety in the same tool remains to be seen, but these updates are clearly an effort to take on this space.
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In a Slack world, Microsoft bets on Teams and Yammer
The growth of Windows has slowed as Microsoft’s mobile platform goals have faded and the PC market matured. As a result, Microsoft has had to seek new revenue outside of its operating system.
In 2017, as part of that effort to grow, Microsoft announced a new subscription product called Microsoft 365, bringing together Windows, the company’s cloud-centered productivity suite Office 365 and enterprise tooling into a single package.
The introduction of Microsoft 365 presaged the company’s re-organization which, to quote CNBC, “rebuilt the company around the cloud instead of Windows.” This seems reasonable; if Windows isn’t going to return to growth, other services have to keep adding top line revenue. Microsoft’s evolution to a cloud-powered, services-focused company is therefore set to continue.
In the pursuit of new, non-Windows top line, Microsoft wagered that it could expand its “commercial cloud” revenue to a $20 billion run rate by the end of its fiscal 2018. It beat the goal, reaching the $20 billion mark far ahead of the calendar-equivalent date of mid-Summer of this year.
One of those products, Teams, is a component to Office 365 and part of what Microsoft CEO Satya Nadella called a “growth opportunity” that is “a lot bigger than anything [his company has] achieved.”
Today we’re going to explore Microsoft’s current actions in one part of the cloud productivity space through the lens of Teams.
Microsoft Teams
Microsoft’s Teams product is a communications tool often compared to Slack . TechCrunch, for example, recently called the software service “Microsoft’s Slack competitor.” ComputerWorld, in a news item earlier this year, wrote that “Microsoft turn[ed] up [the] heat on Slack” when it announced new Teams features.
It goes on and on, allowing us to comfortably hold up Microsoft Teams as Redmond’s answer to Slack, a company famous for its quick growth, impressive mind share and its independent status from any major tech company. That last fact remains true despite rumored acquisition interest from Microsoft itself, along with pretty much every big company in the sector you can name.
To see Microsoft invest in its own tool that competes with Slack isn’t surprising. There is a large market for the product, and Redmond is loath to let any rival service cut in on its productivity revenue.
Therefore, if there is a hot productivity tool in the market and Microsoft isn’t going to buy it, it might as well build one of its own. Unsurprisingly, the company has been hard at work doing just that.
Joining a big company when you are a comparatively small company can be arduous.
News that Teams could release a free version made headlines. Teams also picked up guest access in February, its introduction of Cortana integration made it into mainstream tech publications and this week Microsoft announced new “retention policies” for Teams.
All that and Microsoft bought Teams a friend this year in the form of Chalkup, a collaboration company focused on the education world.
In short, Teams is adding new features while building its org chart and expanding access. All good things, certainly. However, it was not too long ago Microsoft spent quite a lot of money to buy a different, distinct collaboration tool. What happened to it?
Yammer
Microsoft bought Yammer in 2012 for $1.2 billion, building out what TechCrunch called, at the time, its “Social Enterprise Strategy.” And while the Yammer-Microsoft deal was “great news” for the company and its investors, it also marked the beginning of the “tough part” for the newly acquired startup.
Joining a big company when you are a comparatively small company can be arduous. And if you do so when the larger company is undergoing a massive change in leadership (Microsoft hired a new CEO two years after the Yammer deal) and a business model change-up (Microsoft bought Nokia in 2014, also two years after the Yammer deal, before closing that strategic idea out years later), it’s probably even harder to integrate.
Externally, that difficulty showed. Following the Microsoft deal, Yammer search volume grew before stagnating and later slipping. The product was eventually switched on for free for Office 365 customers in early 2016, four years after it was purchased. Office 365 itself launched a half-decade before, making the moment a bit long in the works.
But all that is the past, and, notably, Microsoft is putting more emphasis on Yammer today than it has in recent years. That may feel odd, given what we just went over concerning Teams.
To dig into that, Crunchbase News got Microsoft’s Seth Patton on the phone, who explained the company’s thinking. According to the 15-year company veteran who now works on Office 365, Microsoft has two separate views for Teams and Yammer. Teams is built for what Patton calls inner-loop communication: stuff for teams, smaller companies and the like; Yammer, in contrast, is better for outer-loop communication: less tactical decisions and more company-wide communications.
The split between Slack and Teams products and the Yammers and Convos of the world isn’t hokum or mere corporate-speak. I’ve worked in newsrooms that used the mix of tools to allow for simple direct messaging between individuals (Slack) and team-wide threaded communications (Yammer). It takes a little getting used to, but it can flow well if you need that level of inter-party discussion.
Even more interesting than the fact that Yammer is not dead is that Microsoft is actively investing in it. According to Patton, Microsoft’s chiefs “doubled down” on Yammer while Teams was being brought into the market in late 2016. This gave Yammer about a year of redoubled investment and attention.
Taking all that together, Microsoft is investing in two communications products at the same time, both of which are baked into its productivity suite. So why the huge push now?
Slack: Software’s favorite rocket ship
You are no doubt familiar with Slack’s growth arc. It’s been a nearly chronic narrative in tech for the past few years. And I don’t mean that in a pejorative sense. (I’m as guilty as anyone else.)
But, in case you have a life, here are some highlights: Slack reached ARR of $50 million in December of 2015. In October of 2016, Slack hit the $100 million ARR mark. Then the company bested $200 million last September. That’s darn quick, and investors took notice, showering the company with cash and ever-rising valuations.
One way to get acquired, after all, is to stick out by worrying the biggest companies in the market through growth.
Fueling Slack’s continued growth is a push into the realm of bigger companies. The firm launched Slack Enterprise Grid last January, bringing enterprise-grade management tools to Slack’s product. With Enterprise Grid, Slack can keep going after bigger accounts. (To that point, IBM has more than 200,000 active users on Slack that use Enterprise Grid.)
That quick growth has made Slack an acquisition target. One way to get acquired, after all, is to stick out by worrying the biggest companies in the market through growth. It’s just hard as heck to do, as incumbent revenue numbers are so large that, well, you have to grow fast to become interesting.
An even bigger scrap
As we know, Slack has rebuffed acquisition offers. As a result, we’re seeing Microsoft, the dominant player in the world of productivity, attempt to slow down Slack in an effort to not lose future users and future dollars. Hell, even Google is in on the race. Its Slack competitor launched for early users in February. Facebook is also tinkering around the edges. It’s fun to watch.
But productivity is Microsoft’s cash cow. For Google, it’s a big side project, but nothing compared to its advertising revenue. That puts Microsoft and Slack more up against one another in the enterprise chat fight.
(In mid-March, Microsoft announced that 200,000 organizations now use Teams, up from 125,000 in September of 2017. That’s 60 percent growth in a half-year or so — a quick growth pace, too.)
What we’ll learn over the next few years is if Microsoft’s enormous enterprise channel can be leveraged enough to slow Slack’s growth, or if Slack’s momentum can actually capture a piece of the productivity market and hold onto it.
It’s a startup against a platform company, a classic enough battle. But with big tech bigger, richer and more powerful than ever, it’s a more relevant business case than we might think at first blush. More when one draws blood or Slack goes public.
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Microsoft is going all in on Teams and plans to phase out Skype for Business
Microsoft Teams, the company’s Slack competitor with deep integrations into the Office 365 apps, has seen a lot of pickup over the last few months, with over 125,000 organizations now using it in one form or another. Maybe it’s no surprise, then, that the company today announced it is going all in on Teams as its core communications platform for the enterprise. Read More
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Teams, Microsoft’s Slack rival, opens to all Office 365 users
After unveiling a limited preview of Teams in November last year, Microsoft is now rolling out its collaboration and communication platform, positioned as a rival to Slack, more widely: Teams is now available, and free, for all 85 million monthly active users of Office 365, Microsoft’s suite of cloud services and apps as a web app and native apps for Windows, iOS and Android. Read More
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Enterprise social comes roaring back
You’ll be forgiven if you missed it, but lost in the avalanche of this year’s tech news, enterprise social software made an impressive comeback. Led by products like Slack, Workplace by Facebook and Microsoft Teams, a software category that had been languishing for the last several years, suddenly came alive. A decade ago, as social software emerged, it was coined Enterprise 2.0… Read More
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Software is due for a bundling event
We are approaching a new phase of enterprise software, where every niche of Software-as-a-Service has been filled and cloud companies are being consolidated into larger companies. Markets have a tendency to cycle from bundling to unbundling, and software is due for a bundling event. Read More
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Microsoft Teams feels like déjà vu all over again
Microsoft introduced Microsoft Teams today to much fanfare and hoopla — as only Microsoft can seem to do these days. But when you take a close look at today’s announcement, what have you really got here — a 10-year-old idea on how to communicate and collaborate in the enterprise with a distinctly Microsoft twist. As I wrote previously about Slack and more recently Workplace… Read More
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