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No Slack being cut by Microsoft Teams

Forward-looking data for Slack in 2H predicts slowing growth among the largest enterprises

ETR Research | Thomas DelVecchio  

| June 26, 2019

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The polling phase of 2H19 Technology Spending Intentions Survey (TSIS) isn't over yet, but with already ~900 CIOs and other high-level enterprise IT decision makers having already participated in the last two weeks - including nearly the entire Fortune 100 and nearly ~40% of the F500 - there are some obvious forward-looking trends that have emerged that clearly benefit one company, at the detriment of another company. One such case, that seems rather contrarian to both Sand Hill and Wall Street consensus is the Slack data for 2H - which paints a picture of slowing growth among the largest organizations in the world, as Microsoft Teams accelerates among these same biggest of IT buyers.

Thus far, among All respondents within the Productivity Applications sector (N=581) of ETR’s 2H19 Technology Spending Intentions Survey (TSIS)… forward-looking 2H enterprise spending intentions* for Slack are decelerating significantly versus this time last year (2H18), and versus just three months ago (APR19) – while Microsoft Teams continue to lead the sector.

  • Slack’s 2H19 Net score currently stands at 28%, which represents a drop of -45% versus 2H18 and a drop of -26% versus just three months ago.
  • Inversely, Microsoft Teams boasts a 2H19 Net score of 67%, which is essentially identical to three months ago and 8% better than where it stood for 2H18.

Among respondents employed by Giant Public & Private organizations** (GPP), this negative phenomenon of 2H deceleration for Slack does not improve (vs. All respondents) – while Microsoft Teams spending intentions are even higher on an absolute basis - and the acceleration year over year actually intensifies amongst these bigger buyers of IT.

  • Slack’s forward-looking 2H19 Net score among Giant Public & Private organizations currently stands at 26%, which represents a drop of -53% versus 2H18 and a drop of -41% versus just three months ago.
  • Inversely, Microsoft Teams boasts a 2H19 Net score among Giant Public & Private organizations of 71%, which is essentially identical to three months ago and 20% better than where it stood for 2H18.

128 Giant Public and Private organizations indicated a 2H spending intention for Microsoft Teams. One third of those (42) are also Slack customers – and among these shared customers, Slack has a 2H Net score of -2.4%.

  • Since July 2018, the number of Giant Public & Private customers shared by Microsoft Teams and Slack has grown 68%, and simultaneously over the past year, Slack’s Net score in these shared accounts has dropped from 56% to -2.4%.

When examining what has changed in respondents’ Slack spending intentions versus one year ago and three months ago, it becomes apparent that 'Decrease' and 'Replacing' indications have risen versus simply just an increase in those indicating a 'Flat' spend, which is common of companies that have become pervasive quickly and/or subscription-based companies. Simultaneously, Adoption rates are slowing into 2H19. This is true among All respondents and Giant Public and Private organization respondents.

  • Nearly 1 out of every 5 Slack respondents employed by Giant Public & Private organizations indicated they are either Decreasing spend on Slack -6% or worse in 2H/1H or that they intend to Replace Slack in 2H19. This has nearly tripled in the last 12 months.

Adoption rates of Slack by Giant Public and Private organizations are slowing into 2H19 – less than half of what they once were just 12 months ago.

  • Inversely, Microsoft Teams leads the space, as nearly 1 out of every 5 Giant Public and Private organizations that responded on Teams indicated it will be a 'brand new' Adoption for them in 2H19.

59% of Giant Public and Private organizations in the study indicated they currently utilize or plan to adopt Microsoft Teams in 2H19. This represents the highest marketshare in the space and an acceleration of 28% versus this time last year.

  • Slack stands at 33% marketshare among these largest of IT buyers – which is essentially flat versus three months ago and year over year.

68 respondents thus far, have indicated their organizations plan to Adopt Microsoft Teams in 2H19 – while 8 respondents indicated their organizations plan to Replace Slack in 2H19.

  • The most common singular reason as to WHY is the same for either adopting Teams or replacing Slack… “Compatibility with our organization’s existing IT skills.”

As to the concern that the survey might somehow mistakenly be including spend on Office 365 with Microsoft Teams, because Teams is 'included' with O365 or that the survey methodlogy is flawed or that the sample size is not large enough to be representative...

It is very unlikely that respondents are mistakenly responding on O365 rather than Teams (or responding on both), as we include Microsoft 21 times in the survey based on specific sectors of its offerings and branding of products (e.g. Microsoft Azure in Cloud, Microsoft Teams in Productivty Applications, Microsoft In Servers and Infrastructure, “Github (Microsoft)” in Infrastructure, Microsoft Service Fabric in Cloud, etc. In many cases we include items such as “Cloudera (including Hortonworks)” so as to avoid confusion. In this case, “Microsoft Teams” was included in the Productivity Applications sectors (a specific webpage) along with other collaboration tools like Slack. Therefore, it is highly unlikely users confused “Microsoft Teams” with O365. Yes, respondents could have been thinking of their Increase in spend on Teams as a derivative their larger O365 deployments - but to frank – that’s a moot point, as that does nothing to assuage respondents indicating their plans to decrease or replace Slack specifically. In fact, respondents indicating Teams at a higher and better rate due to high attach rates through O365 is part of the larger thesis as to why this is occuring to Slack. The survey's standardized webpage specifically for the Productivity Applications sector (each sector has its own specific webpage), and the only item that ever changes is the timeframes being comp’ed against one another (2H19/1H19, 2019/2018, 2H18/1H18, etc.).

403 respondents in the total survey (out of 1068 total respondents) qualify for the classification of GPP or Giant Public and Private organizations (G2000 + Forbes Private 225 + U.S. Federal Gov). Of those 403 respondents that qualify for GPP classification, 246 completed the Productivity Applications sector of the survey. 389 total respondents cited Teams and 215 cited Slack (regardless of option selected). 147 GPP respondents cited Teams and 88 cited Slack (regardless of option selected).

Considering the GPP is essentially ~2240 total orgnaizations (G2000 + Forbes private 225 + 15 federal agencies), the 403 GPP respondents that participated in the survey represent almost 18% of the entire GPP. Almost the entire F100 participate in this study and over a third and closer to half of the F500 participated as well. Further, the CIO community is populated to mimic the industry vertical weighting of the S&P Index, but also adds nonprofits, gov and education. Hence, our work is arguably as representative as it gets in terms of global IT demand & trends.

* Net spending intentions score or ‘Net score’ = [% of the vendor’s customers indicating Adoption or Increase] – [% of the vendor’s customers indicating Decrease or Replacing]

** Giant Public & Private organizations (GPP) = Global 2000 + Forbes Private 225 + U.S. Federal Government

Super omnia notitia. -TD