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Slack builds an enterprise beachhead in digital teamwork

Phil Wainewright Profile picture for user pwainewright April 29, 2019
Last week's Frontiers conference and S-1 filing showed how much traction Slack is building among early adopters in the enterprise digital teamwork market

Stewart Butterfield CEO Slack at Frontiers 2019 by @philww
Stewart Butterfield opens Slack Frontiers

One of the most striking features of last week's Slack Frontiers conference — further borne out by the metrics published in its S-1 filing on Friday — was the evidence of how much traction the fast-growing collaboration vendor is building in the enterprise market. On the eve of filing to go public with a valuation said to be as high as $17 billion, Slack showed off large-scale customers such as software giant Oracle, described as "Slack's largest wall-to-wall user" with 139,000 users exchanging six million messages a day, and games maker Electronic Arts with 13,000 users and 390,000 messages per day.

Customers that spend more than $100,000 a year with Slack now make up 40% of its $400 million annual revenue, according to the S-1 filing, which discloses financials ahead of a planned listing on the New York Stock Exchange. Slack has 575 such customers as of the end of its financial year at 31st January, almost double the number a year before, a faster growth rate than its business as a whole. Not only is the raw number growing — existing customers at this level increased their spend 43% over the year prior, as usage spread within each organization.

The effort Slack is putting into appealing to enterprise buyers like these was evident from the product announcements at last week's event, building up security, adoption and functionality. Among the security announcements, storied financial powerhouse Lazard endorsed Slack's work to enable Enterprise Key Management (EKM) to keep the firm's messaging private. Slack unveiled new mobile security functions, and support for HIPAA-compliant use of protected health information in its messages.

'What matters is adoption'

But while security answers objections, it is positive benefits that sell the product — and widespread adoption within an organization is the key to realizing those benefits. As Gopi Parampalli, VP of IT at Electronic Arts, underlined in a keynote appearance:

Adoption is the only thing that matters ... If people don't use the technology, it really no longer matters whether you deliver it on time or on budget — what matters is adoption.

Particularly notable in this regard was a new feature, building on the recently announced integration with Microsoft Office 365, to entice email loyalists onto the Slack platform. Also due to be introduced for Google's G Suite, the email bridge is aimed at those workers in an organization — often older managers — who hold off from activating their invitation to join Slack. It allows co-workers to include them in Slack message threads, so that they receive those messages via email, and can respond via email. By engaging them in Slack conversations in their inbox, the thinking is that they will be more likely to go on to activate Slack, where they'll see more of the context in which those conversations have taken place.

Appealing to enterprise users

There was plenty more new functionality designed to appeal to enterprise users. Closer integration with calendars in Google and Outlook is promised, along with related crowd-pleasing enhancements to the integration between Slack and Zoom, the fast-growing online video conferencing platform fresh from its own highly successful IPO.

Shared channels will make it possible to bring external organizations into Slack workplaces within an Enterprise Grid to collaborate as a single team. For example, high-speed cloud platform Fastly already uses shared channels as a premium feature to provide real-time support to its largest customers.

A new integrated navigation and search interface will make it easier to locate channels, files, and people in large Slack instances. Search is powered by Slack's Work Graph, which tracks the people, channels and topics each user and their collaborators are most connected to.

Also new is a lightweight workflow automation tool called Workflow Builder, a drag-and-drop, low-code application builder that allows users to easily combine triggers and steps to automate repetitive processes. This can be used to create self-service forms, surveys or welcome messages, for example. The new native workflow capability complements third-party tools such as Workato that already provide workflow automation to connect multiple applications into Slack.

My take

The rise of connected digital technology is radically changing the way people work. That opens up huge opportunity for a new generation of vendors to provide a framework for those new working patterns — but they have to move fast, because this new world won't wait. Slack has plenty of rivals, including Microsoft's own Teams collaboration platform.

What is notable about this latest raft of announcements is that they tick off important items on the enterprise wishlist, from security to email integration. Adding workflow and deepening search help fill gaps in Slack's ability to act as what I've described as the core collaborative canvas for enterprise teamwork. This all shows that Slack understands what it has to do to claim leadership in the increasingly important category of digital teamwork and work management.

The time is past when Slack might have been dismissed as a passing fad sweeping through software development and marketing teams. A growing number of customers are now committed to enterprise-wide deployments at enormous scale, and they're clearly seeing value in those deployments. With effective teamwork at the heart of success in digital transformation, Slack is building a presence in a huge and growing market.

For now though, those 595 customers spending over $100k per year are just a tiny beachhead in the enterprise landscape. There's some significance that they are skewed towards technology and media businesses, since these are the earliest industries to have succumbed to the transition to digital. This is the right place to get established, but if you see where I'm heading with this, you'll recognize that there's a lot more that Slack has to do before crossing the chasm to broader mainstream adoption.

The biggest challenge will be educating the market to make effective use of its platform. There's no established playbook for successful digital teamwork across the enterprise, so it's up to vendors and their customers to figure it out. Slack seems to be well aware of this, and a big part of the agenda at Frontiers was built around sharing user stories about adoption and success. We'll follow up with some of those stories in our coverage from the event over the next few days.

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