For Slack to continue its growth trajectory, it had to move on from being a tool for discrete teams to one that could deal with substantially more users, and provide some security and governance as it connected to other departments, repositories and programs across the enterprise.
One of the main features that has fueled Slack’s rapid rise as a communications platform has been its ability to connect to other enterprise tools via bots or agents. These are smart tools that can act as a member of the team, gathering information, automating tasks and allowing access to programs outside of Slack without actually leaving the messaging application.
Developing one central workplace hub has been the holy grail of enterprise communications, one companies have been working to achieve for close to 20 years. Slack seems to have solved that problem, and done it inside a tool that people like to use.
The company has grown organically from zero to five million daily users in just three years. The problem is that only 1.5 million of those are paying customers, and for Slack to keep growing it needed to find a more consistent revenue stream that only large enterprise customers can provide.
Box CEO Aaron Levie, who knows a thing or two about developing enterprise markets driven by the freemium model, says he has been impressed with the approach Slack has taken. “They have had a methodical process of continuing to drive strategy up market. They started with individuals and small teams, and then departments and bigger teams, and now broader enterprises. It’s been a very thoughtful strategy,” Levie told TechCrunch.
By giving enterprises a management, security and governance framework in which to operate, it is laying the groundwork for a much more lucrative market, but customers of this size come with their own set of challenges. Dion Hinchcliffe, who is chief strategy officer at 7Summits, a startup that helps customers build online communities and someone who has been watching this market for many years, says this is an attempt by Slack to take on the complex issues involved in servicing larger organizations that had been missing in their original product.
“The enterprise-class version of Slack is a good start, although only a start, at entering a large and important new market. It’s a market that also requires meeting the specialized collaboration requirements — including the various technical and administrative needs — of today’s large organization,” Hinchcliffe said.
He’s right. It’s one thing to produce a tool for small teams, but as you scale up, the needs of the organizations and the underlying infrastructure requirements change dramatically. It requires an entirely different mindset, and it will be interesting to see if Slack can meet those kinds of requirements.
From a pure scaling standpoint, it sounds like it can. The company claims the new product has been designed to scale from 500-500,000 employees, and it cited several large reference customers at launch including Capital One, IBM and PayPal.
Alan Lepofsky, an analyst who covers the enterprise collaboration market for Constellation Research says what Slack is offering isn’t exactly earth-shattering from an industry perspective, but it is a big step forward for Slack.
“Slack’s enterprise-grade product is now an acceptable choice for large deployments. It provides the controls and security that [larger customers] need, while still allowing teams to feel like they’re operating in their own style and needs,” he said.
Slack isn’t operating alone in this space as it comes up against Microsoft Teams and Workplace by Facebook, among others, but it is clearly part of this new wave of enterprise communications tools that is picking up where players like Jive (which went public in 2011) and Yammer (which was sold to Microsoft in 2012 for $1.2 billion) have left off.
Regardless, Slack has taken its first steps from a small group tool to one that can be used across the enterprise at large. Now they have to prove that they can service these larger organizations and all that entails.