Slack and the New Frontiers of Collaboration

By Jon Arnold
14 Sep 2018

Sometimes a picture says 1,000 words, and at face value, that’s all I really need to say here.

Most people still associate Slack as being a messaging platform, and while that’s true, the main message from their Frontiers 2018 event last week in San Francisco was that you can “do practically anything in Slack.” I was one of a handful of analysts in attendance, and BCStrategies is the right place to share my takeaways.

This was actually the first of three Frontiers events over the next few months, so for most of our readers, my analysis here will largely be new for you. There’s a lot to talk about, and I’m going to distill things into three key takeaways.

1. Nothing Slack about Slack

The best part about attending industry events is being able to feel the overall vibe, and from start to finish, there was a palpable sense that this company is on a mission, and they seem to have that magic mix of passion, vision and momentum that’s more than just being a disruptive tech company. CEO Stewart Butterfield (and Flickr co-founder, btw) may not be the next Steve Jobs, but the vibe feels authentic, and there’s a sense they are at the right place at the right time to become something special.

They cited decent growth stats to show their momentum, such as having 8 million+ daily active users, and 3M+ paid users, including 65 of the Fortune 100 companies. This isn’t Facebook-type of critical mass, but in the collaboration space, it’s pretty respectable for a company that only started in 2014, especially for paid users.

Adding to that, the Kleiner Perkins 2018 Internet Trends Report shows a growing percentage of daily active users who are paid users. For Slack’s baseline year of 2014, it was 26%, and by 2017 it had climbed steadily to 34%. Based on their overall momentum, that level must certainly be higher now, and it’s a key validator for the freemium model that so many start-ups have embraced.

Following their latest Series H round of funding, they’ve taken in about $1.2 billion in capital, so the stakes are pretty high to ramp up the revenues. It’s also worth noting that Slack’s metrics are as of May 2018, so the momentum cited above may be a bit understated. When asked why the data wasn’t more current, I was told they have a quarterly reporting cycle, and it’s not time yet. That seems a bit lame in today’s world of instant everything, and one can only hope the upward trends will continue. Sure, I could be cynical and say they’ve hit a wall, and this wouldn’t be a good time to report that, but I don’t see any reason to believe that’s the case.

2. Slack is a platform – not an application

In terms of getting interest among BCStrategies followers, this is a key takeaway, especially for enterprises, both for buyers and end users, as well as channels trying to sell collaboration solutions to them. Slack didn’t start out this way, but like a lot of things that were invented-because-we-couldn’t-find-anything-out-there-that-did-the-job, it’s evolved into a full-fledged platform that’s very well suited for most collaboration needs. I’ve written often elsewhere about why and how Slack got on this track, but what matters is that they’re here now, and are very ready to scale.

They provided promising updates about Enterprise Grid, especially around security, compliance, upload speed, intelligent search, onboarding and administration. While it never has been positioned as a full-on alternative to the enterprise-grade UC offerings we’re so familiar with, the fact that you really can “do practically anything in Slack,” should get your attention, and it’s no doubt on the radar now for the likes of Microsoft, Cisco, Avaya, et al.

While we didn’t get much detail on just how well Enterprise Grid is performing, their customer roster validates that they’ve broken through in the major leagues, citing eBay, Overstock, Target, BBC, SAP, NYT, and Panasonic just to name a few. To be fair, my flight was delayed, so I missed the analyst-only briefing, and I haven’t received the presentations yet, so it’s possible this was discussed further. However, for the general sessions, Enterprise Grid seemed – to me, anyway - a secondary focus to the broader coming-out-we’ve-arrived theme of Frontiers.

Slack would probably like the general market to continue thinking of them as a messaging platform so they keep fine-tuning and building out their capabilities without drawing too much attention. However, I think they’re past that point now, and with so much funding, they are perfectly primed for rapid growth, both internally and by acquisition.

By most accounts, they are the dominant team-messaging player, and having recently siphoned up one of their main rivals, Atlassian, they’ll likely become a Mitel-style consolidator to lock this space down before the market gets it, and the inevitable IPO will quickly follow. Cue the stock market hysteria, and as long as the investors get happy exits, Slack has the makings of being the next Apple. My Kool Aid glass is now empty, so it’s best to ratchet this down a notch or two.

Nothing is for sure, of course, and things could turn out very differently if the Tier 1 collaboration players defend their territory to keep Slack on the fringes of enterprise users. Microsoft seems to have the most to lose, and as if they don’t have enough to worry about from interlopers like Google, Amazon and Facebook, their recent pivot to Teams is a loud signal that they can play Slack’s game too.

I don’t think the landed gentry cares much about how many SMBs Slack can land, or how many free users they accumulate – it’s Enterprise Grid they’ll be paying attention to. In that regard, Slack is more of an emerging threat than a bona fide competitor, but things are moving fast these days. In that regard, there are two important takeaways from Frontiers.

First is the ease of integration between Slack and all the applications workers would typically use to collaborate. Aside from seeing and hearing about this during the sessions, it also came out in the hallway discussions, and it seems to be a reason why some people have left mainstream vendors to join Slack. To me, that’s telling.

Unlike these vendors, Slack doesn’t build the applications – it’s simply a vendor-agnostic hub around which applications can be added as workers see fit. This isn’t a pre-packaged collaboration solution, and that’s the subtle difference. Slack is very much a product of the times, and they understand how user-centric things have become in a software-based world. I’ve long said that if UC was being developed from scratch today, it would look a lot like Slack. Bazinga.

Second, it was interesting to hear how adoption has been very organic with Slack. Most businesses – large and small – are trying to find the right collaboration solution, and Slack is just one of many out there for the taking. For this crowd, Slack emerged as the best, and once they standardized around that, people started collaborating more often. As per above, the user-centric experience seems key to driving these new behaviors, and that’s the Nirvana all the collaboration vendors are reaching for.

We certainly heard plenty about how sticky Slack has become and how people feel they collaborate better for using it. To wit: “If I’m not on Slack, I’ll be missing out on the conversations.” Have you ever heard Spark or Skype for Business users talk like this? In short, Slack – as a platform – has built adoption from the bottom-up, and that’s very different from the top-down, IT-driven model of the established vendors.

3. “This really is a movement”

That’s a pretty warm and fuzzy sentiment, but it’s more than just what’s in the air. Coming back to the right-place and right-time idea, we all know how the workplace is fundamentally changing, Millennials are having their moment, and that digital transformation is happening. All vendors know this, but Slack seems to have tapped into the “movement” better than most.

Their conference is aptly named Frontiers, and the mantra is clear – “people don’t get work done, teams do” – and this is the new way of working. Nobody is talking about email or telephony here, and these age-old standbys don’t seem conspicuously absent when hearing about how Slack users are getting things done at work.

Perhaps more telling is that this “movement” isn’t just a niche thing for digital natives. Slack is for everyone, and that may ultimately be their key to success. They rightly noted that 58% of users are in non-technical roles – marketing, customer service, product management, while only 42% are in technical roles like engineering. Furthermore, businesses of all sizes and types are using Slack, and they’re all over the globe. No borders here, and Slack seems to be as pluralistic as they come. Anecdotally, it was great to see such a strong showing of women, both onstage and in the audience, which to me is another indication that Slack is right for the times.

What could go wrong? Well, it really comes down to monetizing this “movement.” Investors have certainly bought into Slack’s potential, and just how the Mac became the hip alternative to the Big Blue PC, that seems to be the model unfolding here. Converting free users to paid is always a challenge, as is growing the ARPU once they start paying. Organic growth is great, but remember, end users aren’t the economic buyers, so there needs to be a bigger story.

Furthermore, as far as I know, Slack only sells direct, and I didn’t hear anything about a go-to-market roadmap or a program for channel partners. That will have to come at some point, and I don’t think investors will be too patient, especially if the established collaboration players push back effectively.

Much remains to be seen, but so far so good, and I think Slack will come to be seen as a bellwether for workplace collaboration in the digital age, and maybe just as importantly, the kind of company that can drive innovation and take things to the next level.

Along those lines, their commitment to being socially conscious is outstanding, which also helps make them the kind of company Gens Y and Z will develop an Apple-like loyalty to. Slack definitely merits following, and I’ll be checking back soon with another update. Until then, if you want to see more, I posted some photos along my initial thoughts just after the event here on my blog.

Parting shot – for those who stayed around for the end, Stewart Butterfield did the SNL close-out ritual of bringing the whole cast and crew onstage for a collective bow and thank-you to the audience. Nice touch – and very Canadian, eh.


 

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