What’s Ahead for Slack Now That It’s Gone Public?

COMPANY ANALYSIS: Slack had an impressive debut on the New York Stock Exchange, but now the work begins to continue its growth in the face of stiff competition.

Slack

The long-awaited debut of Slack as publicly traded company finally arrived on June 20, 2019. The company eschewed the commonly used initial public offering (IPO) route in favor of a direct listing. This method is significantly cheaper than an IPO and avoids any share dilution, but the company raises no money, which is why most businesses go public.

This makes sense for Slack, because its valuation was already through the roof. The stock closed at around $38/share, giving it a market cap of about $20 billion on a revenue base of about $400 million, which is impressive given the company is still losing money.

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To give an idea of how favorably the SaaS model is for communications, Hewlett-Packard Enterprise has the same market cap as Slack but with revenues of $30 billion. That’s quite a disparity, and it shows how lofty expectations are.

Now that Slack has gone through its non-IPO, what lies ahead for the company? Below are some key questions that will be answered during the next few years that will ultimately determine the future of the project-management software company.

Do We Really Need an Application Like Slack?

This is an interesting question, because users’ feedback on Slack is a bit mixed. Most admit that no tool has done a better job of integrating work into life, no matter where you are or time of day, but is that a good thing? For many workers, Slack has added to the clutter of work, because it’s yet another tool to check.

I’ve experienced this in which people send me messages through Slack (or similar tool) and then send an email to tell me they sent a message through Slack. Also, without rules in place, users are free to send content through e-mail, Slack or any other number of tools. Now when I need to go find a message, I first have to remember what platform in which it was sent. Following are some comments from workers about Slack.

Here’s a quote from a user on Slack that sums it up nicely: “I think Slack has been very effective at making companies integrate work more seamlessly into the lives of their employees … I’m not sure that’s good for the worker, but it’s good for business.” It would be in Slack’s best interest to develop some best practices around usage to ensure users do not get Slack fatigue.

Can Slack Be the One Application to Rule Them All?

This is the biggest difference between Slack and Zoom, Ring Central, Vonage and all the other SaaS-based communications services. Most of the apps position themselves as best-in-class, task-specific tools. Slack has much bigger ambitions, because it wants to replace email as the thing we work in all day long.

In its S1 Securities & Exchange Commission filing, it stated:
“The most helpful explanation of Slack is often that it replaces the use of email inside the organization,” and “We were frustrated with email. It created fragmented silos of inaccessible information.”  The latter statement is certainly true. There’s no person I know that loves email. In fact, in all my years of work, I’ve only known one person that had the discipline to keep an empty inbox so there’s clearly a need for some kind of change in that tool.

Slack has done a great job of third-party integration, because it understands that while it wants to be the tool people use daily, there are still other apps. Jira, Zoom, Hangouts, Twitter, GitHub and many other apps are now integrated into Slack, making it easier to stay in it all day yet still access information from other apps.

The strategy appears to be working. One user told me that other than Twitter, Slack was the most used app on the phone. He then went on to tell me that Twitter was something he used during idle times, meaning Slack was actually the top productivity tool. The same person then told me that there are days he spends too much time managing Slack messages and needs to stay late to get the rest of the work done.

Slack’s challenge is to find a way to help streamline usage, perhaps through some AI engine that helps prioritize things so it doesn’t become the nuisance that e-mail has become.

Slack should also work on making the product easier to use with a broader range of users. Developers and IT people love the slash commands it uses, but general workers do not and find products like Microsoft Teams and Cisco Teams easier to use.

Is Slack’s Position Defensible?

Given Slack’s aspirations for eyeball dominance, this is an interesting question. Slack is a useful tool with a strong prosumer user base, but most of its market consists of small- to medium-size businesses and the developers inside large enterprises. Also, the competition is stiff and almost scary, with Cisco Systems, Microsoft, Google, Facebook, Amazon and others all eyeing the market.

The big guys have something that Slack doesn’t, and that’s adjacent products to converge with their product. The market is converging, and the technology should make the experience of calling, meeting and messaging easier. With Slack, you can kind of do that, but the user typically winds up being the integration point.

For example, Cisco has a roadmap to bring Webex Teams, Meetings and Calling together, and Microsoft has brought calling to its Teams product. It will be interesting to see if Slack is able to keep its edge. Also, companies like Cisco and Microsoft have massive corporate contracts with large enterprises, and using their tools involves nothing more than turning on a license key.

Might Someone Acquire Slack?

There have been rumors that both Microsoft and Amazon took a run at buying Slack. Being a public company, the CEO and board must do what’s in the best interest of shareholders, and if an insane offer comes in, or growth slows, someone could buy them. Then who might that be? Both Microsoft and Cisco are off the table, because they are well down the path to launching their own products.

It could be Amazon, because Slack would make a great tool to offer up to all the developers who use AWS services. Oracle is another interesting contender, because the company has been desperate to get into enterprise communications in the past but has not had much success. At this valuation, they’re likely off the radar of possible suitors, but who knows?

After months of speculation and intrigue, Slack is finally a public company. In some ways, this might be a “be careful what you wish for” situation for Slack’s CEO, Stewart Butterfield, because every aspect of the business is under a microscope. Given the jump in stock price on opening day, there’s a lot of excitement around Slack, but it now needs to execute crisply while holding off five 800-pound gorillas.

Zeus Kerravala is an eWEEK regular contributor and the founder and principal analyst with ZK Research. He spent 10 years at Yankee Group and prior to that held a number of corporate IT positions.