As Microsoft touts Teams growth, Slack CEO says it's not a competitor

Slack's CEO says Microsoft ought to be a little frustrated with the growth of Microsoft Teams.
Written by Liam Tung, Contributing Writer

As Microsoft last week revealed that its Teams collaboration platform now has more than 75 million daily active users, Stewart Butterfield, CEO of Slack, denied that Teams is even a competitor. 

"What we've seen over the past couple of months is that Teams is not a competitor to Slack," Butterfield told CNBC in an interview after Microsoft's Q3 earnings update. 

Butterfield also downplayed the impact on Slack's growth caused by Microsoft "bundling [Teams] and giving it away for free" with Office 365 over the past three years. 

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"Over that time we've grown our entire enterprise business," said Butterfield. "All of our grid customers, all of our customers with more than $100,000 revenue come up during that time, so I think there's this perpetual question – which at this point is a little puzzling for us – that at some point Microsoft's just going to kill us."

However, as The Verge points out, Slack's recent 10-Q SEC filing names Microsoft as its main competitor. 

Microsoft launched Microsoft Teams in 2016 as a direct rival to Slack and has bundled it with Office 365. It also launched a free version of Teams to match Slack's free version.  

At last week's Q3 earnings update, Microsoft boasted that Teams had more than 75 million daily active users, up from the 44 million daily active users it reported in March, while Office 365 had 258 million paid seats.    

Slack recently reported that the "majority" of Slack's "$1m and above" customers also use Microsoft's Office 365, the commercial versions of which include Teams for no additional cost. 

However, Slack only has 70 customers in this category, with the remaining 110,000 paid customers being small and medium businesses. Slack hasn't updated user numbers since October 2019 when it reported 12 million daily active users.  

Microsoft officials meanwhile boasted big-name customers using Teams, including Continental AG, Ernst & Young, Pfizer, SAP, Accenture – its first customer with over 500,000 Teams users – and the NFL.   

Butterfield last month revealed Slack's "simultaneously connected users" increased from 10 million on March 10 to 12.5 million on March 25. Slack also added 9,000 new paid customers between February 1 and March 25, he said. 

While remote work under the pandemic has probably helped boost Teams and Slack user numbers, Butterfield said the latest results must still be frustrating for Microsoft, given Teams users represent less than a third of Office 365 users. 

"I mean in another sense they've got to be a little bit frustrated at this point," he said. "They have 250-ish million Office 365 users, they just announced this massive increase in growth of Teams to a little under three years.

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"So after three years of bundling it and pre-installing it on people's machines and insisting that administrators turn it on, forcing users from Skype for Business to switch to Teams, they still only have 29%, which means 71% of their users have said, 'No thank you'."

A Microsoft spokesperson responded by saying it is IT administrators who decide whether Microsoft Teams is rolled out to users – and that includes companies that previously used Skype for Business. Furthermore, the 75 million daily users of Microsoft Teams and 258 million paid seats of Office 365 are different metrics.

Microsoft also said it has provided a "long, transparent" process for phasing out Skype for Business, at the end of which organizations can switch over to Teams if they choose to. 

In July 2019, Microsoft set July 31, 2021 as the date on which Skype for Business Online will be retired. 

Butterfield was uncertain about how the pandemic would play out for Slack, especially since most of its customers are small and medium businesses that may struggle to recover from the impact of the pandemic.   

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