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Microsoft Teams Sees Robust Growth, Slack Tanks

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On November 19, Microsoft declared that Teams, its workplace chat app, had over 20 million daily active users. It showed a more than a 50% surge in daily active user volumes from July, when it had nearly 13 million active users.

This user count was way higher than Slack’s (WORK) count of over 12 million in September. The news rattled Slack’s investors, and the stock lost 8.4% in yesterday’s trading. However, Slack has chosen to focus more on user engagement. It told CNBC yesterday, “Slack continues to see unmatched engagement on our platform with 5+ billion weekly actions, including 1+ billion mobile actions.”

Microsoft said that last month, Teams users had engaged in more than 27 million online meetings. Users also performed more than 220 million edit or download actions. So, in terms of engagement and use, Slack has beaten Teams.

Microsoft’s Teams app is part of the company’s Office 365 subscription bundle. In September 2017, Microsoft announced that Teams would replace Slack for Business, reported Tech Crunch. Its bundling Teams with the Office 365 suite means all of its customers will use the app by default. There’s a free version of Teams with limited features, but there are no separate pricing terms for the app.

Usage is a bone of contention

While user numbers point to Microsoft being ahead of Slack, the latter has questioned the usage metric. Microsoft’s offering Teams as part of its Office 365 business package means users have to sign up for it automatically.

Slack believes in highlighting engagement levels instead of daily active users. As a result, Slack CEO Stewart Butterfield has criticized Microsoft’s publicizing of its daily active user numbers as being “a little bit misleading.” An October article in WinBuzzer cited Butterfield as saying, “If you look at our top 50 biggest customers, 70 percent of them are not only Office 365 users but they are Office 365 users who use the integrations with Slack.”

The Microsoft-Slack rivalry heats up

Microsoft is about to see increased attacks from Slack. Teams belongs to the Office 365 suite, which makes it easier for companies to switch among other productivity apps. Realizing this, Slack is now increasingly collaborating with third-party developers to provide its users with a holistic experience. In October, The Verge stated that Google (GOOG) and Zoom were two such third-party developers teaming up with Slack.

Is there room for interoperability?

With Microsoft, Cisco (CSCO), Zoom, Google, and Slack jostling for space in the workplace communication market, competition abounds. However, the industry demands a degree of interoperability or a seamless way to switch back and forth. If there’s interaction between two organizations and both are using different platforms, the communication won’t be smooth unless there’s integration among various service providers. Therefore, during its November Ignite Conference, Microsoft announced a collaboration of Teams with Cisco and Zoom Meetings, according to UC Today. For example, a Webex Room Device user will be able to join a Microsoft Teams meeting and vice versa. These integrated solutions will be available in early 2020.

Even Slack’s vice president, Brian Elliott, said, “Switching apps is painful,” noted the Wall Street Journal. He also acknowledged that Slack uses Microsoft APIs to build tools that can collaborate with Office 365. Elliott also believes in interoperability. Despite the fierce competition, he said, “At the end of the day, customers are going to see value in using our tools together.”

Microsoft Teams to boost the Office 365 segment

On Microsoft’s fiscal 2020 first-quarter earnings call, CEO Satya Nadella said that the number of commercial monthly active users for Office 365 had crossed 200 million. He added, “Microsoft Teams continues to gain traction….More than 350 organizations now have more than 10,000 users of Team.” Apart from Azure, Office 365 is critical to Microsoft’s growth. In the first quarter, Office 365 posted 25% growth in revenue, and increased growth in Teams is likely to give it a big boost.

It will be interesting to see how competition between workplace collaboration services pans out in the market. While Slack stock slumped 8.4% to close at $21.18 on November 19, Microsoft traded flat. Year-to-date, Microsoft has rallied nearly 40%.

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