Slack Reports Strong Enterprise Growth Alongside Office 365 and Teams

CEO claims many Office 365 customers ditch bundled Teams for Slack.

Jeffrey Schwartz

December 6, 2019

4 Min Read
Colleague fist bump

Despite the growth of Microsoft Teams, the chat, communications and collaborations tool bundled with Office 365 is not curbing implementations of Slack, the company’s CEO said defiantly this week.


Slack’s Stewart Butterfield

In fact, CEO Stewart Butterfield indicated that Slack is becoming a preferred alternative to Microsoft Teams even among the largest shops that run their businesses with Office 365. Speaking on this week’s FY Q3 2020 earnings call Wednesday evening, when the company reported better than expected revenues, Butterfield claimed that 70% of Slack’s largest enterprise customers are Office 365 shops as well.

“In general, we continue to see tremendous adoption across customers of the Office suite,” Butterfield said during the call. “They choose Slack despite having a better alternative that is marketed as free. They choose Slack because it scales to the complexity and breadth of their enterprise because it is open integrated with all the software they use across their business. And because of the careful attention we pay to user experience which creates deep loyal and committed fans.”

Butterfield didn’t ignore the fact that Microsoft last month revealed that 20 million people now use Teams, underscoring that’s to be expected given the fact that the company is migrating customers there from Skype for Business. It’s same pattern, he said, that occurred when Microsoft shifted Lync users to Skype for Business.

“Now that the Skype for Business users are being force-migrated to Teams, it’s reasonable to expect more of the same,” Butterfield said. “Unless they hit a snag, we expect them to announce 50 million in the next six months, and then 100 million within the next year. Although Microsoft markets teams as a Slack competitor, and there’s no doubt this causes confusion in the marketplace, in practice, these are different tools for different purposes and our customers achieve markedly different results.”

Butterfield claimed customer engagement with Teams is otherwise relatively weak, compared with that of Slack. “Slack represents a new category of software and regardless of which app opens when you click on a calendar reminder for a video call, if you need to work closely with colleagues in an environment that can integrate deeply with all the software use, there’s a clear choice and our customers know it. Just as you can expect more Skype for business users forced over to teams. You can expect more of these customer wins from us as well.”

Slack, which went public earlier this year, reported a 60% surge in revenues for the third quarter, totaling $168 million, markedly higher than the $156 million that was expected. The number of large enterprises spending more than $1 million per year in annual subscriptions is now 50, up from 30 last year. Slack also said the company signed 101 new customers spending more than $101 in subscriptions, bringing the total to 821.

The company is still in the red, posting…

…a loss of $0.02 per share. But Slack now has a total of 105,000 paying customers, a 30% year-over-year increase and raised its outlook for the current quarter to $172 million with fiscal year 2020 revenue expected to fall in the range of $621 million to $623 million.

Slack has historically offered its platform directly to customers but looking to broaden its reach the company launched a new services partner program last month, Butterfield noted on the call.

“As the market continues to adapt to new ways of working, we are seeing unprecedented growth in the demand for services that enable customers to leverage Slack to drive organization-wide transformation,” said Richard Hasslacher, Slack’s head of global channel and alliances, in a statement. “We are expanding our focus to partner with a new wave of companies that extend and supplement our services capabilities across all industries.

Among the first partners Slack announced were Onix, Cprime and Robots & Pencils in the Americas; Rainmaker and Adaptavist in the U.K.; and ABeam Consulting and Ricksoft in Japan.

About the Author(s)

Jeffrey Schwartz

Jeffrey Schwartz has covered the IT industry for nearly three decades, most recently as editor-in-chief of Redmond magazine and executive editor of Redmond Channel Partner. Prior to that, he held various editing and writing roles at CommunicationsWeek, InternetWeek and VARBusiness (now CRN) magazines, among other publications.

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