How did Microsoft Teams beat Slack even though it launched many years after Slack?

Decoding the winning strategy behind Microsoft Teams’ victory in the team communication and collaboration tools market.

Here goes the facts 👇

2013: Slack was launched and quickly gained popularity, reaching 10M DAU in 2019 & 18M in 2022

2017: Microsoft Teams was launched and surpassed Slack’s DAU count with 20M DAU in 2019 & 270M in 2022

Here’s how Microsoft Teams beat Slack even though it launched many years after Slack.

Image Credit: https://www.businessofapps.com/data/microsoft-teams-statistics/

Brief background ⏮️

• Slack was an early and successful entrant in the team communication and collaboration tools market. The vision of transforming the way people work by making it easier for teams to collaborate, communicate, and stay organized helped it stand out from the competition and inspired other companies to enter the market, including Microsoft with its product, Microsoft Teams.
• Microsoft Teams and Slack are both team communication and collaboration tools category that allows users to chat, make calls, share files, and work on projects together in a virtual workspace.

How did Microsoft Teams beat Slack? ⚡

1. Target customers 👫

• Slack’s initial target audience was small and medium-sized businesses (SMBs) and startups, making it a popular choice for tech-savvy teams. As Slack was a startup, it was not feasible for the company to target larger enterprises in the beginning. Therefore, the company’s decision to focus on SMBs first was a wise move. This allowed Slack to establish a solid position in the market, which later helped them to expand its customer base and include larger enterprises.
• Microsoft Teams was specifically designed to meet the needs of larger enterprises right from the beginning. Given Microsoft’s already established presence in the enterprise space with numerous innovative products for team interaction and communication, it was a logical decision to launch Teams as a solution tailored to the needs of larger organizations.

Insights — Microsoft’s established presence in the enterprise market and its extensive portfolio of collaborative tools and communication solutions such as Office 365, gave it an advantage over Slack in attracting larger customers, even though Microsoft Teams was launched years after Slack.

2. Bundling 📦

• Slack is a standalone product that is designed solely for team communication and collaboration and is commonly used in conjunction with G Suite.
• Microsoft strategically bundled MS Teams into its MS Office 365 suite, capitalizing on the fact that MS Teams complements existing suite tools such as Word, Excel, and Powerpoint. For existing MS Office 365 users, it was a seamless transition to adapt MS Teams, making it an attractive option for those seeking an integrated solution.

Insights — Microsoft’s decision to bundle Teams with Office 365 suite was a smart move, as it made it easier for existing Office 365 users to transition to Teams and have an integrated solution for all their productivity needs. This could have also led to increased adoption rates for MS Teams among Office 365 users.

Image Credit: https://images.app.goo.gl/qsifS6S5L88XZqMu5

3. Cost friendly 💰

• Slack offers a freemium model. The cost of Slack paid plans in India starts at ₹218 per user per month for the standard plan and goes up for the premium plan.
• Since MS Teams is bundled with MS Office 365 suite, which is a subscription-based service, it made it more convenient & cost-effective for customers to use multiple Microsoft products together, which can improve their overall user experience. The cost of Office 365 subscription plans in India starts at ₹137 per user per month for the basic plan and goes up for the premium plan.

Insights: Microsoft Office 365 provides a wide range of products and features that even if Slack had lowered its prices to match MS Office 365, it still would not have been able to match the overall value offered by Microsoft Office 365.

4. Robust Feature Set: 📹 🤙 🔐

Microsoft Teams offered more robust video conferencing capabilities than Slack, including support for larger meetings, screen sharing, and virtual backgrounds. This was particularly important during the COVID-19 pandemic when many companies shifted to remote work and relied heavily on video conferencing to stay connected.

Also offered more robust voice calling features than Slack, including support for phone numbers and voicemail. This made it a more attractive option for companies looking for a unified communication tool.

Had stronger security and compliance features than Slack, which was an important consideration for many enterprise customers. Teams offered features such as data encryption, multi-factor authentication, and compliance with regulations like HIPAA and GDPR.

5. Microsoft’s decision to build rather than buy Slack: a case of success in enterprise communication. 🏗️

Slack’s rapid growth and success in the enterprise collaboration services market posed a competitive threat to other players, including Microsoft. In response, Microsoft CEO Satya Nadella and founder Bill Gates contemplated acquiring Slack for $8 billion in 2016. However, they ultimately decided against it and instead focused on enhancing their existing communication tool, Skype. While acquiring Slack may have been a viable option, Microsoft’s decision to build its own solution proved to be successful in this case. http://tcrn.ch/1Rt8nvv

Conclusion: Overall, Microsoft Teams’ ability to offer a comprehensive collaboration and communication platform at a competitive price, along with its integration with other widely used tools, enabled it to surpass Slack in popularity and market share.