The rivalry between tech giant Microsoft and office software start-up Slack Technologies is a reflection of a decade in which the enterprise collaboration market has become highly competitive. The Microsoft Teams application continues to have an edge, according to the Q4 Technology Executive Council Survey conducted by CNBC, with 58% saying their firms use the Microsoft app. That was almost twice as many as those (30%) who said their firms use Slack.
The CNBC Technology Executive Council survey released Tuesday was conducted from Dec. 2–11, 2019. It included a limited sampling of 51 of the 157 members of the council, who serve in senior technology positions at large companies, as well as at government and nonprofit organizations.
Earlier this month, Slack CEO Stewart Butterfield told CNBC that most of Slack's top customers use parts of Microsoft's Office 365 suite, but are choosing Slack for messaging instead of the competing Microsoft Teams app.
"In general, we continue to see tremendous adoption across customers of the Office suite," Butterfield said. "They choose Slack despite having a bundle alternative" that wraps in Teams, he said.
The interview with Butterfield followed a Nov. 19 announcement in which Microsoft said publicly that Teams had more than 20 million daily active users — Microsoft first began providing metrics for Teams after Slack's IPO — ahead of the 12 million users Slack reported in October.
"We realize customers have a choice and we're happy that they're choosing Teams. People love Teams because they can do more in a single app," said Jared Spataro, corporate vice president, Microsoft 365, in a statement provided to CNBC.
In its December earnings report, Slack said the number of paid customers with greater than $1 million in annual recurring revenue exceeded 50 for the first time, and was up from 30 a year ago. Butterfield told analysts after the earnings that almost 70% of those customers also use Office 365. As of Oct. 31, there were 26,000 companies using shared channels, which allows two Slack-using companies to collaborate across two organizations. Total paid customers rose 30% year over year to 105,000 and Slack raised its full-year outlook, but its shares have dipped lower since the earnings.
Some market watchers have made claims that Microsoft's ability to package Teams with its Office 365 suite helps make the numbers look better by including as active users people who boot up their computer without intentionally opening the Teams app. Microsoft has pushed back against those claims, saying that just because Teams is installed on a PC and automatically opens on start-up, that doesn't mean the person gets counted as a user.
Slack's Butterfield referred to confusion in the market that's "deliberately created" during a recent analyst call, and claimed Teams also has users who were recently pulled over from Skype for Business. Microsoft announced in July that it will retire its Skype for Business Online service in 2021.
"It's important to remember that not all daily active users are created equal," said Brian Elliott, vice president & general manager of platform at Slack, in an email statement provided to CNBC. "These survey numbers are unsurprising and, in fact, we expect them to keep rising. Fundamentally, Slack and Teams are different tools used for different purposes, no matter how much Microsoft wants to confuse the marketplace."
"The success Slack has had, especially with tech and tech-forward companies, threatens a little bit of the core of what Microsoft does. People are spending less time on Outlook and that's a big part of their business and that's why you've seen Microsoft messaging around Teams and their daily active users get so aggressive," said Rishi Jaluria, D.A. Davidson analyst, in a Dec. 4 appearance on CNBC's Power Lunch.
"It's a huge market," Jaluria said, but what Slack investors are worried about is Microsoft having what he called a "good enough" effect. "Could Teams becomes good enough? That's what people are worried about," he said, but he added that people are misreading the situation and he thinks they are overly concerned about Microsoft. Unlike many other start-ups that recently went public, Jaluria — who maintains a neutral rating on Slack shares — said the company has demonstrated it has a path to profitability.
Slack shares have dropped by more than 40% since the first-day close in June when they began trading on the New York Stock Exchange via a direct listing.
In July, The Verge reported that sales teams at Microsoft have been focused on getting more people to use Teams, and that the tech giant's strategy included attracting new and old Microsoft customers.
Five of the 51 survey respondents anonymously told CNBC that their company has been pressured by Microsoft to discontinue use of Slack or other messaging platforms and use Teams instead. But the majority (90%) said they did not feel any pressure from Microsoft.
A spokeswoman from a third-party PR firm that represents Microsoft said such activity would be "against Microsoft's business practices."
This past July, Butterfield said that he doesn't see Microsoft's reach as a threat. "If it's based on the bigger distribution, I don't think that's really a threat," the Slack CEO said at the Fortune Brainstorm Tech conference in Aspen, Colorado.
