Even as Slack and Microsoft are slugging it out, Google could emerge as a surprise winner
Slack Technologies has filed an antitrust complaint against Microsoft in the European Union alleging that the latter is unfairly bundling its Teams product with the broader Office suite. “Microsoft has illegally tied its Teams product into its market-dominant Office productivity suite, force installing it for millions, blocking its removal, and hiding the true cost to enterprise customers,” alleges Slack’s official complaint.
While antitrust complaints are not new to Microsoft, there has been a running feud with Slack since the launch of Teams. When Microsoft first announced Teams in 2016, Slack took out an ad mocking the company and saying it welcomed competition. In April, Microsoft said Teams has grown to 75 million daily active users, compared to the 12.5 million that Slack reported in March. Slack’s popular chat and collaboration software has become embedded in the daily routines of millions of employees at thousands of companies around the world, though the new WFH norms necessitated due to the COVID19 pandemic has tilted the scales recently in favour of Microsoft Teams.
Analysing the Complaint
The prime contention of Slack’s complaint alleges Microsoft’s anti-competitive behaviour in bundling Teams as part of the Office Suite which includes Outlook, Word, Excel and PowerPoint. David Schellhase, Slack’s general counsel, said the company sought an order to remove Teams from Office, make it a stand-alone product and charge a “fair price.” Schellhase insisted the company “simply wants fair competition and a level playing field,” called Teams a “weak, copycat product,” and accused Microsoft of illegally leveraging “its power from one market to another” with its software bundles.
The Slack-Microsoft confrontation has eerie similarities to the Internet browser competition in the 1990s. The browser wars between Microsoft and Netscape Communications led to a landmark federal antitrust case against Microsoft in the United States that found the company repeatedly violated the nation’s antitrust laws. Europe also ruled against Microsoft. Only time will tell whether the Slack-Microsoft battle could have similar conclusion.
Unfortunately Slack is still unprofitable and this makes it tough for them to survive a prolonged war against Microsoft, which is firmly profitable, generates most of its revenue from other businesses, and can continue to offer Teams for free at “zero or negative margins.” On the brighter side, if Slack’s complaints trigger antitrust actions against Microsoft and force it to unbundle Teams from Office 365, there could emerge “allegedly” a more level playing field.
Without the ruling it looks difficult how Slack could really compete in the true business sense with Microsoft. After all, Microsoft has bundled a variety of productivity apps with its Office suite for decades, and it chose to bundle Teams free to Office 365 customers when it launched back in 2016. This bundling, alongside tight Office integration, has made it hard for Slack to convince businesses that are already paying for Office to pay extra to get Slack.
The Google Googly
Notwithstanding the ruling, Slack could soon face another tech giant on this same domain with Google set to replicate Microsoft’s tactic. G Suite, which includes regular Gmail users, passed 2 billion active users earlier in 2020, and G Suite’s new boss, Javier Soltero, had said at the time that “changing the way people work is something we are uniquely positioned to do.”
Google has already shown signs it is moving toward catching up with Zoom, Microsoft Teams, and Slack. Google made Meet free earlier in 2020 to try to compete with Zoom’s sudden popularity once WFH norms set in. It has started integrating the videoconferencing app deeply into Gmail and Google Calendar. The next step toward true Slack and Teams competition is Google’s early work toward integrating Google Chat, Rooms, and Meet into Gmail. This would not arrive until later in 2020, but it is clearly a big priority at Google.
While this implies both Microsoft and Google posing similar threats to Slack, the latter seems to have identified Microsoft as its Enemy No 1. Slack however does not have a convincing answer to the looming threat of Google, and why Google’s bundling approach is less of a threat than Microsoft’s. “Google and Microsoft are different,” feels Schellhase.
“Microsoft has a dominant position with the Office productivity suite and all of the ancillary software. There’s no law against having a dominant position, but there are laws about how companies that have dominant market share have to behave. One thing they cannot do is tie a new independent product to the dominant product that they’ve got,” adds Schellhase. With WFH norms looking like being there for the indefinite future, it will be interesting to see whether the tech David (Slack) will slay the digital Goliath (Microsoft). Or whether Google will take advantage of this epic battle to establish its hegemony.