Is Slack serious competition for Microsoft Teams?

The news that Amazon and Slack have formed a global strategic partnership took many analysts by surprise. Even though it came against a backdrop of speculation about where Slack is heading and how, in the long term, it could compete with Microsoft Teams.

The trouble was, with the upsurge in working from home, a clear gap in Slack’s offering quickly became apparent. While voice and video are enabled in Slack Calls, the user experience for meetings is not up to the standard that business consumers now expect.

Slack has been overshadowed in this respect. All the other key players in the collaboration space: Cisco Webex, Avaya Spaces and Microsoft Teams provide a significantly superior meetings and video experience.

Even the smaller UC competitors are upping their game. Zoom have added calling; RingCentral have built their video app to enhance their own Zoom offering, while GoToMeeting now offer enhanced video.

BlueJeans and Fuze

To bridge this gap, speculation focused on Slack buying a ready-made solution. After apparently being beaten by Verizon in their $500M BlueJeans acquisition, the smart money was on Slack buying Fuze.

Fuze provides sophisticated calling, video, meeting and call centre solutions. Not only does it already integrate with Slack, it works well with Microsoft, Google, Salesforce and Zendesk. Integrating all these features into Slack would have made it a much more competitive proposition in the fight against Microsoft.

Critical threat

That rivalry between Slack and Microsoft Teams has been going on for some years now, and Slack openly see their main rivals as a serious threat to their survival. Slack CEO, Stewart Butterfield, recently declared that “Microsoft is perhaps unhealthily preoccupied with killing us, and Teams is the vehicle to do that.”

However, Butterfield saw the threat as working both ways, stating that if Slack did well, the whole Office empire could be less viable. “In a different universe where Slack is incredibly successful over the next two years and 98% of knowledge workers use Slack, it does matter to Microsoft because the relative importance of email is hugely diminished…If email becomes less important, then that whole $35, $40 billion-a-year collaboration productivity business unit is threatened.”

https://www.theverge.com/2020/5/26/21270421/slack-ceo-stewart-butterfield-microsoft-teams-competition

Amazon-Slack Partnership

Shortly after the above statement was made, the Amazon-Slack partnership was announced. The headlines focused on Slack gaining an 840,000-employee rollout at Amazon, a massive increase from their previous biggest customer, IBM at 350,000.

When analysing the deal, the early consensus was that Slack needed Amazon more than the other way around. Some even questioned how many of Amazon’s 840,000 employees would even use Slack.

The partnership has certainly come at some cost to Slack. Slack prides itself on being independent of Azure and Amazon Web Services (AWS), but is now their preferred cloud platform. This means a $425 million commitment from Slack to AWS, up from $250 million.

Amazon Chime

Each side does stand to make technology and market gains from the partnership. This is particularly true with Voice. Slack will migrate Slack Calls to Amazon Chime, radically reducing the costs of maintaining their own UC infrastructure and providing a much more developed fully UCC solution.

Amazon’s Chime Voice Connector provides low-cost SIP trunking and links cloud-based meetings to existing PSTN lines and PBX systems. Chime allows cheap calls to 115 countries and offers the following attractive features:

• Smartphone or web-browser access
• Voice assistant support with Alexa
• Easy meeting scheduling
• 323 and SIP video conferencing

Deploying Chime will certainly bolster Slack video, calls and meetings, on both desktop and mobile, but will that be enough to seriously worry Teams?

Slack vs Teams

While Zoom appears to have taken a healthy slice of the more casual business and consumer video calls market, Microsoft have not held back on publicising the enterprise market uptake of Teams in the pandemic.

Slack has largely held back on making their numbers public, and the share value dropped by 15% when they recently held back a full year billings guidance. It seems that, even with their partnership with the mighty Amazon, Slack still appears to be the weaker player.

However, it would be wrong to write Slack off. Their product really does have plenty going for it. The UX is arguably better than Teams – it was designed from scratch as a collaboration platform to create an enhanced user experience.

For this reason, it’s not uncommon to see whole departments of keen Slack users (often creatives, developers, and Mac users) in companies that are firmly entrenched with Microsoft. The ‘Users love Slack’ refrain is not just a marketing ploy either.

Microsoft are well versed in dealing with the ‘best of breed’ argument, and the vision of an enterprise-wide platform integrating the whole suite of 365 tools and solutions is not easy to counter.

Integration and Apps

Both offerings deliver extensive application integration and each provides the capability to rapidly develop bespoke applications to manage, say, business flows or third-party connectivity. Extendibility will be key to future competitive success and this is an area where both Slack and Amazon gain from their recent partnership:

“Together, AWS and Slack are giving developer teams the ability to collaborate and innovate faster on the front end with applications, while giving them the ability to efficiently manage their backend cloud infrastructure…” Andy Jassy, CEO AWS.

Costs

Each has a free version, but Slack is potentially more expensive than Teams, especially if a company has already invested in a 365 solution. They then face an extra £5.25 per month for SMBs using Slack Standard, and £9.75 for larger companies with Slack Plus.

Enterprise Grid is available for larger and regulated industry customers with up to 500,000 employees and the price is negotiable.

For an SMB customer who hadn’t made a big investment in Teams and 365, this isn’t that expensive an investment especially if, in the future, they can offer cheap calls at the same price.

Market shake-up ahead?

Faced with formidable competition and having a potentially more expensive product, Slack is certainly still the underdog in the struggle with Microsoft. Even with Amazon on board.

However, a look at the bigger picture might just give you pause for thought. In the wider market for cloud services, AWS was launched in 2002, followed by Google and Microsoft entering the cloud market in 2009 and 2010 respectively.

Currently Azure holds about 29.4% of all installed application workloads while AWS stands at 41.5% and Google holds just 3%.

(https://www.simplilearn.com/tutorials/cloud-computing-tutorial/aws-vs-azure)

Amazon wants to maintain that cloud services lead, (a need underlined by losing the $10 billion Pentagon deal to Microsoft), but will partnering with Slack give them the edge they’re looking for?

That question might be easier to answer if Amazon decide to acquire Slack. Such an acquisition is already being predicted by Business Insider who report that the partnership gives Amazon the opportunity to ‘look under the hood’ to see how Slack works, as a technology and as a business, before buying the whole company.

Buying Slack would certainly fill a perceived gap in Amazon’s offering; their weakness in enterprise software. Plugging that gap could potentially prevent another Pentagon defeat.

Uncertain future

If, and it’s still a big if, Amazon do buy Slack, then we could see them using their formidable resources and the AWS cloud infrastructure to make Slack a product that really can challenge Microsoft Teams’ dominance in the unified communications and collaboration solution market.

That challenge could signal a significant market shake-up ahead, and Butterfield’s prediction that 98% of knowledge workers would be using Slack in the future might not be so far-fetched, after all.

A new twist

In an unexpected move, Slack has now filed an EU anti trust law suite, arguing that Teams should be sold separately, rather than bundles with O365. How well they will fare there, remains to be seen.