Microsoft challenges Slack with a free tier for Teams

Key Points
  • The free Teams offering comes with access to online versions of Word, Excel, PowerPoint and OneNote.
  • More than 200,000 organizations are paying to use Teams.
Satya Nadella, CEO of Microsoft
Stephen Lam | Getty Images

Microsoft announced on Thursday a free version of its Teams app, stepping up competition with chat service Slack. 

Until now, Microsoft only provided Teams to clients that pay for Office 365 and its portfolio of subscription productivity apps. Slack has offered both free and premium options since its public launch in 2014.

In promoting a free service, Microsoft may be leaving money on the table in the short term, but the company is betting that it will lure customers who will eventually be drawn to pay for Office as they grow and need more services and professional support. The free tier is limited to 300 users.

Slack isn't the only competitor in the space. Last year Google introduced a Slack rival called Hangouts Chat as part of its G Suite bundle, less than six months after Microsoft unveiled Teams. Facebook also offers a chat app for work.

With all of those options, an easy and free on ramp has become that much more important. 

"We wanted to remove all barriers to entry for all business, individuals and work settings to be able to use it," said Lori Wright, general manager for Office 365 collaboration apps, in an interview. "I suspect that people will find ways to use the software in all aspects of their lives, whether personal or for work, but our design lens is for work."

Microsoft doesn't view the free service as a lightweight version of the paid offering, as is the case with Slack. It's including availability in more languages and offering increased storage space, messaging search features and more integrations of third-party tools. It will also let users make group video and voice calls, while Slack's free tier only enables calls between two people at a time.

Slack is now worth over $5 billion
Slack is now worth over $5 billion

Later this year Microsoft will enhance the free version of Teams with smart features, like translation of messages into different languages and a way to blur the background on video calls, to prevent messy rooms and other things from being seen by others.

Perhaps most importantly the free edition of Teams will give users a way to access some of the most prominent Office apps — Word, Excel, PowerPoint and OneNote — which are integrated right into Teams. Customers get file storage courtesy of SharePoint and OneDrive.

Not everything is included in the free product. Email hosting through Exchange or Outlook still requires clients to pay. But there's no guarantee clients will need it, as chat apps like Team and Slack are designed to lessen reliance on email for internal communication.

Microsoft said in March that 200,000 organizations were using teams, less than half of the client base of Slack, which reported in May that 500,000 organizations are customers.