New Survey Doesn't Bode Well for Slack

Freshly public Slack (WORK) has been taking the enterprise messaging world by storm in recent years, growing within organizations primarily thanks to word-of-mouth advertising and referrals from happy users. That type of popularity doesn't go unnoticed, though. Software giant Microsoft (MSFT 2.15%) had reportedly considered acquiring Slack years ago for as much as $8 billion. The tech titan instead decided to simply build a "Slack killer" internally, an app called Microsoft Teams that shamelessly replicated Slack. The similarities are uncanny.

Teams didn't quite derail Slack's growth following its 2016 launch, but that dynamic could be changing.

Teams looks nearly identical to Slack. Image source: Microsoft.

Survey says

Recode reports that Slack is very much at risk of getting crushed by Microsoft Teams, much like how Facebook has been eating Snap's lunch by copying its most popular features. The report points to a new survey from market researcher ETR, which asked hundreds of IT decision makers about their spending plans and budgets, and the results don't bode well for Slack. Spending intentions for Slack in the second half of the year are "decelerating significantly" relative to a year ago, according to the survey, while spending plans for Microsoft Teams are holding steady.

Image source: Slack.

When it comes to larger organizations -- which ETR refers to as Giant Public and Private (GPP) organizations -- the disparity is even more stark, with spending intentions for Microsoft Teams accelerating. Approximately 20% of GPP respondents said they were planning to either decrease spending on Slack or outright replace the messaging service altogether. That result has nearly tripled over the past year, according to the survey. GPP adoption of Slack is slowing heading into the second half of 2019, and about 20% of GPP respondents are preparing to adopt Microsoft Teams for the first time.

The most commonly cited reason for wanting to ditch Slack for Teams is "Compatibility with our organization's existing IT skills." It should come as no surprise that Teams enjoys deep levels of integration across Office 365 and Microsoft's plethora of other IT offerings. Slack also integrates with Office 365, adding more integrations such as Outlook and file previews earlier this year, but Teams will still inevitably work even more seamlessly with the ubiquitous productivity suite.

Bundling vs. pure play

Microsoft's most potent weapon here is bundling, as Teams is included in Office 365 at little to no extra cost, depending on the Office 365 deployment. There are a handful of different enterprise plans, and Teams is included on Microsoft's popular E1, E3, and E5 plans. Many organizations already subscribe to those plans for core productivity apps like Word and Excel, so it makes little sense to pay extra for a stand-alone Slack subscription.

Data sources: Microsoft and Slack.

Slack may still be better than Teams, but the difference may not warrant the extra cost. "It got to the point where Teams was tolerable as a Slack alternative," one ETR survey respondent told Recode. "If they're fundamentally close, nearly free is compelling enough to make the switch."

With Slack shares trading around 40 times sales, the stock could potentially get punished if its growth prospects get called into question.