Slack has plunged into the enterprise market with a revamped team messaging product that has many must-have business features. But if the startup hopes to generate enough revenue to justify an investor-fueled $4 billion valuation, then the company will have to convince potential buyers to choose it over tech heavyweight Microsoft.
Slack Enterprise Grid, introduced this week, is a business-friendly version of its online software. Unlike the original Slack application, Slack Enterprise Grid tackles corporate priorities, such as regulatory compliance, security and integration with business applications. Slack did not disclose pricing.
But technology is only a part of the sales pitch Slack will have to make to companies -- many of which will likely subscribe to Microsoft's Office 365. For those millions of organizations, the choice comes down to paying for Slack or using Microsoft's rival Teams application at no cost as a part of Office 365.
"If you live your life in Microsoft Office, Slack is a tough sell," said Irwin Lazar, an analyst at Nemertes Research, based in Mokena, Ill.
Slack's integration pitch
Slack said its better integration with business applications is a key advantage over Teams. The original Slack provided integration with software and services from Salesforce, IBM and Box. Slack Enterprise Grid adds ties to products from business application maker SAP. Those products include the HANA Cloud Platform, SuccessFactors and Concur.
Irwin Lazaranalyst, Nemertes Research
But those integrations might not be enough, if Slack insists on competing head-to-head with a general-purpose team messaging product, said Mike Gotta, an analyst at Gartner. "You don't compete well with Microsoft if you're trying to be a horizontal platform that's very generalized and generic."
Instead, Slack should add features that tailor Slack Enterprise Grid for specific business groups, such as marketing departments or supply chain managers.
"Let Microsoft be Microsoft -- a general, horizontal Swiss army knife," Gotta said. "I would focus on really specific business scenarios."
If Slack had enough job-specific features that were not in Teams, then it might make sense for large enterprises to use Microsoft's product and Slack, Gotta said.
For now, Microsoft has weaknesses that Slack could exploit. For example, Office 365 users unfamiliar with its other collaboration applications might find Teams difficult to use. "If you're not a user of Skype for Business, Planner, OneDrive, OneNote, etc., then Microsoft Teams could feel overly complicated," said Alan Lepofsky, an analyst at Constellation Research Inc.
For those potential customers, Slack has covered the basics with its Enterprise Grid. The product includes compliance with regulations governing the healthcare and financial industries, as well as data encryption and integration technology for connecting to applications that provide electronic discovery and prevent data loss.
Slack Enterprise Grid also has administrative tools for setting corporate policies that would govern all workspaces employees use to send messages and share documents, links and video.
While important, those features will only get Slack through the office door of enterprise tech buyers. Once inside, the conversation is sure to include not just Office 365, but also Cisco's Spark and Microsoft's Skype for Business -- unified communications (UC) and collaboration applications that include many of the features in Enterprise Grid.
Competing with the larger UC platforms of the established vendors will require more partnerships. "I would expect other UC vendors, like Avaya and Mitel, to rush to figure out a way to tie Slack into their platforms," Lazar said.
Since its first product launch in 2013, Slack has grown to 5 million users, according to the company. The speed with which it has grown is behind the company's high valuation.
But to become an actual multibillion-dollar business, Slack will need large enterprise deals. And for that, it will have to find a way to navigate a market in which Microsoft remains a dominating force.
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