Windows growth has slowed as Microsoft's mobile platform goals have faded and the PC market has matured. As a result, Microsoft had to look for new revenue outside of its operating system.
In 2017, as part of that effort to grow, Microsoft announced a new subscription product called Microsoft 365, which brings together Windows, focused on the company's suite of Office 365 productivity suites and business tools in a single package.
The introduction of Microsoft 365 presaged the reorganization of the company that, to quote CNBC, "rebuilt the company around the cloud instead of Windows". This seems reasonable; If Windows is not going to return to growth, other services have to continue adding front-line revenue. Therefore, the evolution of Microsoft towards a company focused on services and the cloud will continue.
In the search for a new, non-Windows top line, Microsoft bet that it could expand its "commercial cloud" revenue to a $ 20 billion rate by the end of its 2018 fiscal year. The goal was exceeded, reaching the mark of $ 20 billion long before the date equivalent to the mid-summer calendar of this year.
One such product, the equipment, is a component of Office 365 and part of what Microsoft CEO Satya Nadella called a "growth opportunity" that is "much bigger than anything [his company has] achieved. "
Today we will explore Microsoft's current actions in a part of the cloud productivity space through the lens of the equipment.
The product of the Microsoft teams is a communication tool often compared to Slack . TechCrunch, for example, recently called the software service "Microsoft's Slack competitor." ComputerWorld, in a story earlier this year, wrote that "Microsoft [ed] [the] heats up on Slack" when it announced the new features of the equipment. 19659002] It goes on and on, allowing us to comfortably support Microsoft teams like Redmond's response to Slack, a company famous for its rapid growth, its impressive mental capacity and its independent status of any major technology company. That last fact remains true despite the acquisition interest that is rumored by Microsoft itself, along with virtually all major companies in the sector that can name.
Seeing how Microsoft invests in its own tool that competes with Slack is not surprising. There is a large market for the product, and Redmond is reluctant to allow any rival service to cut its productivity revenue.
Therefore, if there is an active productivity tool in the market and Microsoft is not going to buy it, you could also build your own. As expected, the company has been working hard to achieve it.
Joining a large company when you are comparatively small can be arduous.
The news that the teams could launch a free version was news. The teams also gained guest access in February, their introduction to Cortana's integration turned it into dominant technology publications, and this week Microsoft announced new "retention policies" for the teams.
All that and Microsoft bought equipment from a friend this year in the form of Chalkup, a collaboration company focused on the world of education.
In summary, Teams is adding new features as it builds its organization chart and expands access. All good things, without a doubt. However, it was not so long ago that Microsoft spent a large amount of money to buy a different and different collaboration tool. What happened to him?
Microsoft bought Yammer in 2012 for $ 1.2 billion, building what TechCrunch called, at that time, its "Social Enterprise Strategy". And while the Yammer-Microsoft agreement was "Great news" for the company and its investors, it also marked the beginning of the "difficult part" for the new acquisition.
Joining a large company when you are a comparatively small company can be arduous. And if it does when the largest company experiences a massive change in leadership (Microsoft hired a new CEO two years after the agreement with Yammer) and a change of business model (Microsoft bought Nokia in 2014, also two years after the agreement with Yammer, before closing that strategic idea years later), is probably even harder to integrate.
Externally, that difficulty showed itself. After Microsoft's agreement, Yammer's search volume grew before stalling and then falling. The product was finally turned on free for Office 365 customers at the beginning of 2016, four years after its purchase. Office 365 launched a half decade earlier, which makes the time a bit long.
But all that is the past, and, in particular, Microsoft is putting more emphasis on Yammer today than in recent years. That may seem strange, given what we just said about the teams.
To go deeper into that, Crunchbase News called Microsoft's Seth Patton, who explained what the company thought. According to the veteran of the 15-year-old company that now works on Office 365, Microsoft has two separate views for Teams and Yammer. The equipment is designed for what Patton calls internal loop communication: things for equipment, smaller companies and the like; Yammer, on the other hand, is better for external loop communication: less tactical decisions and more communications throughout the company.
The division between the Slack products and Teams and the Yammers and Convos of the world is not hokum or mere corporate discourse. . I have worked in newsrooms that use the combination of tools to allow simple direct messaging between individuals (Slack) and subprocess communications throughout the team (Yammer). It takes a little time to get used to it, but it can flow well if you need that level of discussion between the parties.
Even more interesting than the fact that Yammer is not dead is that Microsoft is actively investing in it. According to Patton, Microsoft bosses "doubled" in Yammer as the teams entered the market at the end of 2016. This gave Yammer about a year of redoubled investment and attention.
Taking all of that together, Microsoft is investing in two communications products at the same time, which are integrated into its productivity package. So, why the big push now?
Slack: the software's favorite rocket
Undoubtedly, you are familiar with Slack's arc of growth. It has been an almost chronic narrative in technology during the last years. And I do not mean that in a pejorative sense. (I'm as guilty as any other person.)
But, in case you have a life, here are some highlights: Slack reached an ARR of $ 50 million in December 2015. In October 2016, Slack reached the ARR of $ 100 million mark. Then, the company surpassed $ 200 million last September. That is very fast, and investors realized, bathing the company with cash and constantly rising valuations.
One way to acquire it, after all, is to excel by worrying the largest companies in the market through growth.
Feeding the continuous growth of Slack is a foray into the scope of the largest companies. The firm launched Slack Enterprise Grid last January, bringing enterprise-level management tools to Slack's product. With Enterprise Grid, Slack can move on after larger accounts. (Until then, IBM has more than 200,000 active users in Slack using Enterprise Grid.)
That rapid growth has made Slack an acquisition target. One way to be acquired, after all, is to excel by worrying the largest companies in the market through growth. It is difficult to do so, since the established income numbers are so large that, well, you have to grow fast to become interesting.
An even bigger scrap
As we know, Slack has rejected the acquisition offers. As a result, we are seeing Microsoft, the dominant player in the world of productivity, try to slow down Slack in an effort not to lose future users and future dollars. Hell, even Google is in the race. Its Slack competitor was launched for early users in February. Facebook is also playing around the edges. It's fun to watch.
But productivity is Microsoft's cash cow. For Google, it's a great parallel project, but nothing compared to its advertising revenue. That puts Microsoft and Slack more at odds in the corporate chat fight.
(In mid-March, Microsoft announced that 200,000 organizations now use Teams, compared to 125,000 in September 2017. That's 60 percent growth in a more or less rapid growth rate)
What we will learn in the coming years is whether Microsoft's huge business channel can be leveraged enough to slow Slack's growth, or if Slack's momentum can capture a piece of the productivity market and hold on to it.
It's a startup against a platform company, a pretty classic battle. But with the greatest technology, the richest and most powerful ever, it is a business case more relevant than we might think at first sight. More when one draws blood or Slack becomes public.