Microsoft launched its new chat-based Teams app yesterday, and the immediate reaction from many is that Slack is doomed. Some of that was Slack’s own fault. In an unusually arrogant move, Slack decided to take out a full-page newspaper ad in The New York Times yesterday, just hours before Microsoft was set to even unveil its chat offering. It set the stage for direct Slack and Microsoft Team comparisons before we’d even seen Teams, and it made Slack look rather scared. But I’m not sure Slack needs to be too worried just yet.
Microsoft Teams looks impressive. I’ve often thought Microsoft should acquire Slack, and rumors suggested the company considered an $8 billion bid, but decided to build its own competitor instead. In hindsight, that seems like a good move, but many had feared that Microsoft’s alternative wouldn’t compete well. I’m pleasantly surprised by my first brief look at the software: there’s great Office integration, Skype calls that just float in the background of chat windows so you can hop in and out of calls with colleagues, and threaded conversations and search tools that make sense. It all ties together neatly with Office 365, and you can create tabs that integrate with other cloud services, alongside tailored channels and even custom memes throughout chats. Microsoft is also making Teams extensible with open APIs and its own bot framework.
Microsoft Teams is already in preview, but at launch early next year it will include 150 integrations, alongside 70 connectors and 85 bots. All of these features will be key to how businesses choose between Microsoft Teams and Slack, as Slack has successfully converted internet relay chat (IRC) into a service with third-party software on top. Those add-ons help colleagues do a lot more than just chat and share GIFs.
Price will be a key decision for businesses making the choice
Another key decision for businesses is price. Microsoft is limiting Teams to its Office 365 Business and Enterprise plans, which means businesses will need to subscribe to Microsoft’s cloud software to get Teams. The cheapest Office 365 Business plan is $5 per head without Office software, and there’s no free version or plans for a freemium model for Microsoft Teams. Slack starts out free, and plans start at $6.67 per head. Microsoft wants businesses to choose Office 365, and Microsoft Teams is the latest temptation alongside Word, Excel, PowerPoint, and much more.
That temptation will probably be enough to satisfy most of the big existing businesses that rely heavily on Microsoft Office day-to-day. It’s an easy decision for executives, CTOs, and procurement teams to make when Microsoft is throwing in something free, on top of an Office 365 subscription that most will likely move to, even if they’re staunch defenders of on-premises software right now. Microsoft has already convinced 85 million commercial users to switch to Office 365, and Microsoft Teams looks set to continue converting existing Office users over to the cloud. “Microsoft is getting ahead of the curve and not waiting for services like Slack to siphon off meaningful customers like Google for Work (now GSuite) did in the early days,” says Patrick Moorhead, principal analyst at Moor Insights and Strategy.
The door that Microsoft has left open in the workplace is the freemium model, though, and it’s an opening that Slack relies on. Slack has 4 million daily active users, and a total of around 1.25 million paid users. It’s fair to say that the vast majority of Slack users don’t pay for the service, and that’s either a bad thing or a good opportunity, depending on how you look at it.
Slack grew as a viral messaging app
Slack grew largely by word-of-mouth at the beginning, especially in the Silicon Valley bubble, turning itself into viral messaging software. Its quirky human attitude to messaging was a welcome change from the corporate Exchange and Outlook environment, and many smaller businesses have flocked to Slack as a result. A key part of its growth has been the attitude towards freemium software, and its ability to work with the vast majority of business productivity tools.
Slack isn’t the only player taking advantage of this space, and Atlassian’s HipChat has also been competing alongside Slack. “Businesses with smaller budgets can get the power and features of HipChat without having to purchase expensive bundled software,” explains Atlassian president, Jay Simons, in a statement to The Verge about Microsoft’s announcement. “Microsoft Teams is bundled with Office 365 and has stated that they don’t plan to provide a free version.” Big businesses won’t care about free versions, but smaller emerging startups will. A free model offers businesses of all sizes the opportunity to test a service and have it grow alongside their own business.
Slack will still appeal to businesses that don’t rely on Microsoft Office, thanks to its independence. A vast amount of students and startups are starting life without needing Word or Excel, and choosing alternatives from Google, Trello, and Slack. This emerging office environment is one that’s often distributed, with colleagues working from home or in remote offices where chat rooms are now playing a key part of communications. At The Verge we use Google Docs, Trello, and Slack, so Microsoft Teams isn’t a product that fits into our needs because it’s tied to Office 365.
Microsoft and Slack can finally kill office email
That difference is what could allow Slack to keep growing. It’s not going to be able to convince all the top corporations to convert thousands of employees over to Slack, but if it can continue to help businesses that don’t care about Microsoft Office then that’s a good enough business model alone. Slack has managed to convince 28 out of the Fortune 100 companies to pay for access, but it’s clear that the service is primarily targeting the next Fortune 100 that are growing right now. With Microsoft’s entry, there’s going to be a new battle for these existing and emerging companies.
There’s still a lot to prove for both Slack and Microsoft Teams, but it certainly looks like there’s room for both to compete at different levels. If there’s one thing they’re both aligned on, it’s that the volume of email in the office needs to decrease. If Microsoft and Slack can kill email in the office, that’s a great thing for everyone.