Microsoft Puts Slack in Cross Hairs With New Office Chat App

 

In the last couple of years at Microsoft, some old habits have been tossed away, like obsessively placing Windows software at the center of all the company’s big bets. But the company would still dig trenches to protect Office, its $23-billion-a-year software franchise.
Microsoft on Wednesday took the wraps off Microsoft Teams, an addition to the Office package that will allow professionals to huddle virtually with colleagues in private chat rooms to talk about anything from work projects to where to get lunch.


If you think Microsoft Teams sounds a little like Slack, the relatively new chat service that has pulses pounding among Silicon Valley investors and customers, you would be correct.
In fact, if this were 1997, a more bellicose time at Microsoft, people inside the company would be whispering that the new application was a Slack killer. But the tone is different these days, even if the intent is essentially the same.
“Look, my job No. 1 is to make sure that the 85 million users I have on Office 365, we go meet their needs and keep growing that base,” Satya Nadella, Microsoft’s chief executive, said in a conference room last week on the Microsoft campus. “This is not to take away any success anyone else has. We’ve always had lots of tools out here that have competed and also coexisted.”

Microsoft Teams is the most significant new addition in years to Office 365, the current name of the Microsoft software suite, which has over the years migrated from the PC to become a product delivered over the internet that includes Word, Excel, PowerPoint and other applications. Bill Gates, a Microsoft co-founder and now technology adviser, even had a hand in its creation.
The reception to Microsoft Teams will help determine whether Mr. Nadella, who became chief executive of the company in early 2014, can extend his recent run of success.
Microsoft is finally viewed as a credible player in cloud computing. A new desktop PC it announced last week, the Surface Studio, is earning favorable comparisons to Apple hardware. And the company’s stock is even trading near a high.
Microsoft plans to use distribution, an old standby, to get people using Microsoft Teams, bundling it with the business version of Office 365 at no additional cost.
“We are orders of magnitude bigger in terms of the users we serve,” said Rajesh Jha, corporate vice president of Office engineering at Microsoft.

Customers generally pay $5 to $20 a month to subscribe to Office 365. Mr. Nadella’s 85 million figure is the number of active monthly business users of the software.
Samir Diwan, chief executive of Polly, a start-up in Seattle that has created polling software that works with Slack and Microsoft Teams, said Microsoft had an advantage because Slack did not yet have the credibility Microsoft enjoyed among the biggest companies.
“That’s where Microsoft has an inherent advantage around security,” Mr. Diwan said.
But distribution power does not guarantee victory for Microsoft or any other big tech company. Microsoft’s influence with Windows did not help it vanquish Google in internet search. Google was unable to use search and YouTube to beat Facebook in social networking. And Facebook has not yet figured out how to make Snapchat go away even as it introduces its own Slack competitor.
“The moral of the story is if you’re a large incumbent with many lines of business, it is incredibly difficult to take on a smaller, focused start-up that has traction in the market,” said Stewart Butterfield, co-founder and chief executive of Slack.

Slack has about four million daily active users, 1.25 million of whom are paying for the software. (Basic Slack functions are free, but people can pay $6.67 or more a month for other features like unlimited searching of message archives.) The San Francisco company, which introduced its product just over three years ago, was valued by private investors at $3.6 billion when it raised money last spring.
What’s more, most people are using Slack because they want to, not because it is being shoved down their throats by a corporate I.T. department. Slack has been embraced by many as a more efficient way for teams to communicate than email, which is not designed for real-time conversations.
“Are people going to to be as delighted to use this Microsoft product as they are using Slack?” asked James Allworth, a business strategist and co-host of a technology podcast, Exponent, who has not used Microsoft Teams. “You want to use the best tool possible, not the one that’s included with your subscription product.”

Messages in Slack are archived and searchable, and people can use it on mobile devices and PCs. Mr. Butterfield said Slack had particularly helped create more transparency across boundaries inside companies, allowing, for example, marketing teams to see what sales staff are talking about and engineers to eavesdrop on product designers.
Atlassian, a company that held an initial public offering last year, also has a team communications product, HipChat.
In a demonstration last week at Microsoft’s headquarters, executives showed how Microsoft Teams both resembles Slack and adds to its innovations. Like Slack, the software lets people pepper their messages with GIFs and emojis. There are also ways of connecting Microsoft Teams with other applications and services like Twitter and GitHub.
The most noticeable difference is that Microsoft Teams organizes conversations into threads, grouping messages on the same topic to make conversations easier to follow than they are in Slack’s unthreaded message streams. It has customizable tabs for making it simpler to get to commonly used services and files, like budget spreadsheets.

Mira Lane, principal architect of Microsoft Teams, demonstrated how people could spontaneously start videoconferences inside the software if they would rather hash things out face to face. “It’s a really low-friction way of having an ad hoc meeting,” Ms. Lane said.
Mr. Butterfield of Slack said the service had plans to support both threaded conversations and videoconferencing in the future.
Microsoft began working on Microsoft Teams about 18 months ago, after Mr. Gates encouraged Brian MacDonald, a respected Microsoft engineer credited with creating Outlook, the company’s flagship email application, to come up with a new take on productivity applications.
“We’d have pretty frequent conversations, sometimes group reviews, sometimes one-on-ones,” Mr. MacDonald said. “He’d send me big, long memos to consume. I’d send him a few ideas back. It was great.”

Microsoft does not always build a new product when it wants to expand the range of Office. About four years ago, it paid $1.2 billion to acquire Yammer, a social networking app that had found a following in the tech industry. So did Microsoft consider buying Slack?
“It’s not something that I looked at,” Mr. Nadella said, adding that he did not know if others who work for him seriously considered it.
Mr. Butterfield declined to say whether he was approached by anyone from Microsoft about a deal, but it would not have mattered if someone had. “I think we’ve been pretty clear publicly, and in private conversations with everyone else in the industry, that we have no interest in being acquired,” he said.