Slack Attack: Microsoft Antitrust Complaint

Is Microsoft’s product bundling grounds for antitrust scrutiny?  If you were to ask Slack, they would say it is.  Of course, Slack is also a competitor and rival to Microsoft that has been doing everything it can to take market share from Microsoft.  It has a vested interest in doing whatever it can to improve their chances of making that happen.

Slack has also publicly challenged Microsoft to prove enterprise customers (or any Microsoft customers) are actually “using” the Teams solution and that Microsoft is not just counting “use” when an enterprise adopts Office 365, which Teams is bundled with.  Microsoft most recently said that they have 75 million daily users of Teams, a number that doubled since early March when COVID-19 took full effect.  Just last month, Slack reported that they have 122,000 paying customers.

Microsoft’s Teams collaboration solution is largely Slack’s biggest obstacle to ramping enterprise adoption of Slack’s chat and collaboration solution.  Yes, Google Cloud (Meet) and Zoom have competing offerings that enterprises have also adopted.  But if we are all being honest with ourselves (including Slack), the reason they are taking legal action against Microsoft is directly attributable to the fact that Microsoft is the overwhelming obstacle in the way of Slack achieving its goals.

On Wednesday, Slack made it known that they have decided to file a complaint against Microsoft with the European Commission, in which Slack is accusing Microsoft of using its market power to try to destroy Slack.   Slack’s general counsel, David Schellhase, also stated that Slack is “having conversations” with relevant U.S. authorities about Microsoft’s behavior with Teams.

Ultimately, Slack is claiming that Microsoft has illegally tethered (bundled) Microsoft Teams to Microsoft Office, which includes Outlook, Word, Excel and PowerPoint, through the Office 365 cloud subscription, knowing that it has a dominant (i.e., very sticky) position already established in enterprises.  It is this position that essentially forces Teams “use” and keeps Slack from getting a chance to play in the sandbox.  In fact, Slack seems to believe Microsoft’s decision to bundle is purposeful and a tactic that is part of a pattern of competitive behavior by Microsoft.

Even though European laws prohibit the complaint from being made public, Schellhase said that Slack is  seeking an order to have Teams removed from Office, making it a standalone product in which a “fair price” would be charged.  I always love the use of “fair” when it comes to pricing cloud subscriptions.  Customers need to make sure they have the right price, which is a market competitive price on top of it being “fair.”

So, what does Microsoft think of all of this?  In a recent statement, Microsoft said it looked forward to “providing additional information to the European Commission and answering any questions they may have.”  It does not sound like Microsoft is too concerned.  That very much aligns with what I believe is Microsoft’s overall view of Slack, “nothing to be concerned about.”

UpperEdge Take

In having the chance to work with many enterprises, I can tell you that although Slack has gained attention and has even been adopted (sometimes only by subsets of employees), Microsoft Teams remains the predominate choice.  I am more often seeing Google Cloud (Meet) and Zoom gaining interest and adoption then I am Slack.  At the end of the day, Microsoft Teams is winning in enterprises and although the bundling “tactic” certainly helps drive adoption, it is not the only reason Teams is being rolled out.

If the European Commission were to give this complaint legs and if they decided a formal investigation was warranted, I do not believe, when it is all said and done, that Slack will win this battle.

It will be a very hard argument to win.  In some ways, I could see this backfiring on Slack as it could very much seem like an act of desperation in the eyes of the enterprise executives they are prospecting.  Also, if Slack were to win this argument, there would be a significant number of enterprises that would be left paying even more money to Microsoft, having to pay for Teams separately and not getting the benefit of bundled pricing.

Slack is counting on this increased cost profile leading these enterprises to Slack’s offering.  What it could very well do is lead them further away from Slack since Slack could be seen as creating this mess for the enterprise.  In addition, there are other alternatives available (e.g., Google and Zoom), should a move away from Microsoft Teams be considered at that point.  And who is to say that Microsoft would not just deeply discount Teams as a standalone product?  Microsoft has the means and the ability to easily do that and would probably actually gain goodwill in the process.

This will certainly be something I will be keeping an eye on as it progresses and moves forward.  I do not expect to see Microsoft react in any way that would signal some level of real concern.  Why should they start now?  But if additional antitrust scrutiny or complaints start to come up, say around security functionality, then things might get real interesting.

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