Team Chat Category Plays to Microsoft’s Strengths.
As we pointed out in our last post, Microsoft’s entry into the team-chat space with Teams seems to bode well for category leadership relative to other options, such as those from Cisco, Facebook, or Slack. While it’s always possible that Microsoft gets “out-competed” by one of the other players, the following key Microsoft strengths seem to set up the Redmond team for great success:
Microsoft’s 6 Key Strengths
- Focus. Teams is a pivotal initiative for Microsoft. It represents Microsoft’s response to the Slack “threat”; a bet-the-company move reminiscent of its forays with IE in the ‘90s. While we have seen Microsoft some missteps innovating in communications (as is expected from technology innovators), this does not look like another “flash in the pan.” Teams is organizationally situated at the core of Office365 and of Microsoft itself, unlike some past efforts that have evolved from Microsoft Research or have involved ancillary/incubation product organizations.
- Microsoft gets the Enterprise. Microsoft has been a dominant force in enterprise infrastructure for the last 20 years, which gives it a huge leg up in this space over Google or Facebook. While enterprise CIOs like to talk about Google, when the rubber hits the road, enterprise technology leaders still overwhelmingly contract with Microsoft for enterprise workloads (e.g. Office vs. Google Docs). Microsoft remains the king of monetization in the enterprise, relative to most of the competitive field (except Cisco, and perhaps Slack), which gives it a huge advantage relative to the newer entrants aspiring to dominate market share in this category.
- End-user base. Microsoft also dominates Information Worker mind-share and tools, with Office already in use by 1.2 billion users worldwide. It is one thing for Amazon to dominate data center services via AWS from scratch, but a wholly different game – a much larger and very different one – to attempt to be the leader in the Information Worker productivity space. This is where Microsoft has a significant advantage relative to virtually every other competitor in the field, including Cisco, Google, and Slack. Similarly, as the next-generation interface for SharePoint (the original value proposition behind Teams), Teams stands to lay claim to the sizable portion of the SharePoint installed base in the enterprise.
- Expansive vision and User Experience chops to match. With Teams, Microsoft is building the interface of the future for the entire Office experience. This is virtually the broadest possible scope for Teams, encompassing documents, collaboration, voice, meeting rooms (through partners), and even potentially ERP (e.g. through Teams bots). These Microsoft assets are already well developed and independent multi-billion dollar businesses – not aspirational initiatives being built up from scratch. Microsoft also has the deepest user experience resources in the category. Microsoft’s mission statement even underscores that it is fundamentally a company focused on empowering end-users.This emphasis provides it with further head room versus the competition.
- Developer muscle. Microsoft is in many ways a developer-first company, and has excelled at cultivating a massive and fertile developer ecosystem. Though Slack & Atlassian have amassed a cult following with developers, Microsoft has the capability to first replicate, then surpass that bar set by this duo. As referenced in our initial post, the Graph API for Office 365 is a first-order citizen that is a core strategic initiative. Microsoft is pouring significant top-down corporate resources and attention into it (unlike past communications API attempts, for example). Of all the contenders we’ve covered, Microsoft has the developer ecosystem best positioned for adding rich end-user, as well as back-end IT experiences in the space.
- Office & UC Head start. With Teams, Microsoft can leverage all the fiscal and market share advantages of Skype for Business (relative to competitive plays) going for it, and more. With Skype for Business being an approximately $2B type business and Office being over a $200B business , Microsoft can be seen as having a >10X leadership advantage with Teams, relative to the already impressive advantage it already holds with Skype for Business.