As Microsoft spins off Teams, it might not have the impact on Slack you think

One of the main reasons why Slack joined forces with Salesforce in 2021 in a $28 billion deal was to give the communications company leverage to compete with Microsoft. For years, company co-founder Stewart Butterfield has opposed Microsoft’s bundling of Teams with Office 365, calling it anti-competitive and at one point saying Microsoft was “unhealthily obsessed with killing Slack.”

The company even filed a complaint against Microsoft with the European Union in 2020. This morning, Microsoft announced that it will finally unbundle Teams from Office 365 in the future, although current customers can continue to use bundled licenses.

Butterfield resigned from Slack in late 2022, but after becoming part of the CRM giant, he seemed to care less about Microsoft, telling TechCrunch’s Connie Loizos in 2021 that Teams seemed more focused on conferencing software like Zoom than Slack, which he Before becoming part of Salesforce, he didn’t know the status of the complaints his company had filed.

Salesforce had no comment on the spin-off announcement, but it’s worth pointing out that Microsoft’s bundling strategy appears to be a good fit for the company, which reports it has more than 320 million users worldwide. It’s hard to know exactly what that means given the differences in how the two companies count users, but it’s clear that Microsoft has a significant lead. By comparison, Slack has 32 million users, accounting for 10% of Microsoft’s total users.

Maybe Butterfield is right, but it may be too late. Alan Pelz-Sharpe, founder and principal analyst at Deep Analysis, told TechCrunch: “While it’s certainly a good thing for Salesforce/Slack that Microsoft is spinning off Teams simply to avoid antitrust chaos, in many ways it could be A Pyrrhic victory.” The market has matured to the point that many large companies have already made the choice, and since switching solutions is not a trivial matter, spinning off Teams is unlikely to have a noticeable impact on market share.

Microsoft’s announcement appears to allow them to have their cake and eat it too, keeping existing customers stuck with existing Office 365 bundles while charging future customers to use the product and potentially allowing the company to argue with regulators that they have canceled Teams bundling arguments and does not violate any anti-competitive rules.

In fact, Constellation Research analyst Holger Mueller said this may be the first time anti-competitive regulation benefits a supplier’s business. “Microsoft simply sold Teams to enough companies with Office accounts that now it no longer needs the energy and power of an enterprise licensing agreement,” Mueller said.

More importantly, he believes this isn’t helping Slack, but helping Microsoft get Teams into more accounts where companies haven’t purchased Office 365 licenses. Redmond can now more easily sell standalone Teams licenses to non-Microsoft stores while building good relationships with regulators and sticking with Slack in the battle for the standalone market.

This may not be the outcome Butterfield envisioned when he started complaining about Microsoft years ago, but regulatory outcomes don’t always turn out the way you expect, especially when the market changes so dramatically in the next few years — or Microsoft’s bundling strategy works.