Slack Has Blossomed Rapidly, but is Threatened by a Major Obstacle

G. Willsky

Summary Bullets:

• Slack has been quite busy lately enhancing its platform, forging alliances and strengthening internal operations. However, a major obstacle threatens to derail those efforts.

• Slack must determine a way to convert the vast majority of its customers from free plans to paid plans.

Slack comes from humble beginnings as an internal communication tool at a small company. Since then, the platform has evolved into one of the most prominent in the market. A flurry of recent activity including feature rollouts, deal making, management changes, and judicial action has propelled Slack by great lengths in a brief period of time. However, the company is challenged by a scarcity of customers on paid plans.

In August 2013 a company called Tiny Speck made its in-house messaging tool widely available, naming it “Slack” while switching the company name to Slack Technologies (“Slack” stands for “Searchable Log of All Conversation and Knowledge”). Slack offers an email alternative leveraging repositories called “channels”. Channels are intended to eliminate the proliferation of email chains that often sprouts when team members launch separate but related discussions. Channels centralize people, information, and the tools they need to collaborate thus making teams more productive.

Currently, Slack boasts 12 million+ daily users across 750,000 organizations globally (and Slack Technologies now goes by just “Slack”). A recent array of feature enhancements holds promise to elevate those totals. Among the more critical changes are strengthened platform security, APIs enabling developers to create Slack-compatible apps and communication with external organizations from within Slack.

Slack is not restricting itself to organic enhancements. In July, Slack acquired Rimeto, a provider of tools used to create employee directories driven by detailed criteria stretching beyond the conventional name, title, and organization. In June, Slack signed an agreement expanding its relationship with AWS as its preferred cloud provider while enlisting AWS as a Slack customer. In December 2015, the “Slack Fund” was created. The fund is an $80 million investment pool earmarked for developers and small companies to create apps for Slack.

Not all of Slack’s interactions with other companies have gone smoothly. In July Slack filed a complaint with the European Commission alleging Microsoft is unfairly leveraging power from one market in another by bundling Microsoft Teams with Microsoft Office. The commission was to assess Slack’s complaint to determine whether a formal investigation was merited. The Commission’s review still appears to be pending. Should Slack ultimately prevail, the competitive playing field with Microsoft will be far more level.

Slack has made internal appointments that should strengthen the company and therefore the Slack platform. A chief security officer has been tasked with protecting Slack’s internal data and that of customers, while a chief people officer holds accountability for smoothing operations while employees work remotely during COVID-19 and as some eventually migrate back to the office.

While Slack has rode a wave to new heights on the shoulders of platform enhancements, relationships with other companies and fresh blood in the management ranks, the company faces a crucial obstacle. Specifically, the vast majority of Slack’s customer base is on a free plan (estimated at 83%). Most companies in this situation would pare their free plan to incent customers to upgrade, but the opposite approach is best. Rather than punish customers, reward them while simultaneously enticing them with the potential for greater benefits.

Slack should employ a “good, better, best” approach. Offering a feature-rich free plan receiving modest improvements alongside paid plans enjoying more robust enhancements would prove to be a win-win for Slack and its customers. But Slack must highlight price and feature differences between plans much more prominently while supplying a gentle push for customers to upgrade. Plus, Slack must proactively notify customers as plan adjustments are made. Collectively, these actions should swell the ranks of Slack customers on paid plans and place the company on a more stable path.

 

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