VC and podcaster David Sacks has revealed a new AI chat app called Glue that fixes “Slack channel fatigue,” he says.
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One of the primary reasons that Slack joined forces with Salesforce in 2021 in a $28 billion deal was to give the communications company the clout to compete with Microsoft. For years, company co-founder Stewart Butterfield railed against Microsoft bundling Teams with Office 365, calling it anticompetitive and saying at one point that Microsoft was “unhealthily obsessed with killing Slack.”
The company went so far as to file a complaint against Microsoft with the European Union in 2020.
This morning, Microsoft announced it was finally unbundling Teams from Office 365 in the future, although current customers could continue to use the bundled license.
Butterfield stepped down from Slack at the end of 2022, but he seemed less concerned about Microsoft after he became part of the CRM giant, telling TechCrunch’s Connie Loizos in 2021 that Teams seemed to be more focused on meeting software like Zoom than Slack, and he wasn’t aware of the status of the complaint his company filed before becoming part of Salesforce.
Salesforce, for its part, didn’t have any comment on the unbundling announcement, but Microsoft’s bundling strategy seems to have worked quite well, with the company reporting it has over 320 million users worldwide. Compare that with Slack, which has 32 million users or 10% of Microsoft’s total. It’s hard to know what exactly that means given the differences in how the two companies count their users, but it’s clear that Microsoft has opened up a significant lead.
Maybe Butterfield was right, but it’s probably too late to matter. “While Microsoft is unbundling Teams simply to avoid an antitrust mess, it’s good for Salesforce/Slack for sure, but in many ways it may be a Pyrrhic victory,” Alan Pelz-Sharpe, founder and principal analyst at Deep Analysis, told TechCrunch. The market has matured to the point that many larger firms have made their choice, and since swapping out solutions isn’t a trivial matter, unbundling Teams is unlikely to have an appreciable impact on market share.
Microsoft’s announcement seemingly allows them to have their cake and eat it too, keeping their existing customers under the existing Office 365 bundling agreement, while charging future customers for using the product, and presumably giving the company an argument with regulators that they’ve unbundled Teams and are not in violation of any anticompetition rules.
In fact, Holger Mueller, an analyst at Constellation Research, says that this could be the first occurrence where an anticompetitive regulation helps the vendor’s business. “Microsoft has simply sold Teams to enough companies with its existing Office accounts and now no longer needs the energy and power of the enterprise license agreement,” Mueller said.
What’s more, rather than aiding Slack, he sees this as helping Microsoft to get Teams into more accounts where companies weren’t buying Office 365 licenses. Redmond can now sell standalone Teams licenses into non-Microsoft shops much more easily, all while building goodwill with regulators, and still sticking it to Slack in the stand-alone market battle.
That is probably not the outcome that Butterfield envisioned when he started complaining about Microsoft all those years ago, but the regulatory outcome doesn’t always come out in the way you expect, especially when the market shifts so dramatically in the intervening years — or Microsoft’s bundling strategy simply worked.
Microsoft has introduced new versions of Microsoft 365 and Office 365 subscription services that exclude its business collaboration chat offering Teams following scrutiny from the European Union regulator and complaints from rival Slack.
The move — which some analysts say is unlikely to change the commercial growth trajectory of Office 365 — follows Microsoft agreeing to sell Office 365 suite sans Microsoft Teams offering in the EU and Switzerland last year. At the time, the software giant said it was making the changes to address the concerns raised by the European Commission.
“Globally consistent licensing helps ensure clarity for customers and streamline decision making and negotiations,” the company wrote in a blog post Monday. The company introduced Teams as a complementary offering to the Office 365 suite in 2016. It has amassed over 320 million users.
Microsoft said it is also introducing a new standalone Teams offering for enterprise customers outside the EU and Switzerland.
Though Microsoft has long allowed businesses to pay separately for Teams, it has also offered the service bundled in the widely popular Office 365 suite. The latter has upset some competitors with some asserting that the tech giant was leveraging its position in an unjust manner to gain a competitive edge.
Slack, owned by Salesforce, has termed Microsoft’s actions “illegal” in the past, alleging that the Windows-maker forced installation of Teams to customers through its market-dominant productivity suite and hid the true cost of the chat and video service.
Microsoft didn’t address these concerns in its blog, but said as part of the change, it is offering flexibility to its existing customers, allowing them to maintain their current bundled package that includes Teams, Office and other products. These customers can choose to renew their current deal, update it or select a new offer that better suits their needs.
For new customers, Microsoft has introduced standalone pricing for Teams at $5.25 per user per month. Additionally, Office packages without Teams will be available at prices ranging from $7.75 to $54.75, depending on the specific package and features included.
The new Microsoft suite offering with Teams (Image: Microsoft)
Microsoft is also introducing a new variant of Microsoft 365 Business that excludes Teams. Image Credits: Microsoft
In a note seen by TechCrunch, Morgan Stanley analysts estimated that Microsoft’s Monday decision is “unlikely to change the O365 commercial growth trajectory, as more consolidation (not less) seems to be the direction of travel for CIO’s due to macro pressures and technological progress like GenAI driving stronger gains for the broader suites and deeper data sets.”
“Further, providing more choice for purchasing Teams clearly illustrates its compelling value, at just $5.25 per user per month for New Microsoft Teams Enterprise (standalone), which compares to Slack Pro at $7.25/mo and Slack Business+ at $12.50/mo. The price reduction in the Enterprise Suites without Teams is only $2.25, yet the Standalone cost is $5.25. For new customers, this equates to a pricing increase. Using Teams in F1 SKU’s costs only $0.50 per user per month and using Teams in Business SKU’s cost only $1.25-$2.25 per user per month,” wrote the analysts.
Image credits: Morgan Stanley
The story was updated with details from Microsoft’s official blog and Morgan Stanley’s comment.
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