The communication platform market competition got a little smaller Thursday after Atlassian announced Slack, largely considered the old guard of the market, had acquired the intellectual property (IP) of its chat tools.
"We'll be exiting our direct participation in the communication space with this partnership," said Atlassian CEO Mike Cannon-Brookes, during the company's Q4 2018 earnings call Thursday. And one less competitor leaves the door open for Slack to swoop in on Atlassian's enterprise customers.
Atlassian's HipChat and Stride will be dismantled and replaced with Slack. Customers will have the option to migrate as the HipChat Cloud and Stride will be discontinued in early 2019.
When Atlassian was considering its planning for fiscal year 2019, the company "concluded that although the [communication] market remains large, the additional investment required to compete effectively is unlikely to generate returns that are comparable to those of [its] other products," said Cannon-Brookes.
"Atlassian had a lot to lose by devoting engineering and sales resources to a sub-par chat tool" rather than focusing on their main product suite, Carrie Basham Young, CEO and founder of Talk Social to Me, told CIO Dive in an email. The partnership, as a result, will allow the two "nimble" companies to offer "solid solutions for those not married to Microsoft products."
A match made in software heaven
The partnership was a mutual decision because both companies needed it, Art Schoeller, vice president and principal analyst at Forrester, told CIO Dive. HipChat needed to get on the cloud and embrace modernization and while Stride did just that, it "was too late to get there."
Slack is broadening its horizons to attract larger corporate customers as it's working to "[cement] its position as the hub for all kinds of work," said April Underwood, chief product officer at Slack, in an emailed statement to CIO Dive. Ultimately, Slack wants to be "an open platform that serves as one interface where an entire company's tools, knowledge and human capital come together."
From the outside, the partnership appeared to be a competitive attack on Microsoft, but "it's more of a sharp jab in the ribs."
Carrie Basham Young
CEO and founder of Talk Social to Me
For example, in May, the company announced that its platform would be opened up to other workplace software integrations, one of which included Atlassian's Jira.
It already has more than 1,500 applications in its directory with 94% of Slack users working with apps and integrations. Underwood told Fortune that because the company had no intention of creating augmentative services like sales tracking, having a widened apps directory will help complete Slack's existing performance portfolio.
"Atlassian's tools, including Jira, Trello, and Bitbucket have already been installed by hundreds of thousands of Slack teams," said Underwood in the statement. The partnership is indicative of the shift in enterprise IT as "people are building their own technology stack with the highly specialized, interoperable tools that best suit their needs," she said.
Where the market stands
By 2021, the communication platform market is expected to reach about $49.5 billion because companies want to have more efficient conversation, document sharing and tasks and projects.
Choosing a platform all boils down to how every employee, including those on the frontline, need and prefer to communicate. Consumer internet portals like AOL, MSN and Yahoo offered their own version of instant message beyond email. But that was before the cloud.
Eventually those services evolved into social networking services on Facebook and Twitter. By about 2010, team messaging began to pop up through Facebook Messenger and WhatsApp, according to Forrester.
As workplace communication continues to evolve, some users who are comfortable with Atlassian products will be sad to see Stride and HipChat go, "but a dollar late, dollar short," said Schoeller.
To the enterprise or bust
Slack rounding out its customer base just got easier. Atlassian boasts more than 125,000 customers, almost double Slack's 70,000. To put that in perspective, Microsoft Teams is used by 200,000 organizations as of March.
Slack is most popular in small and medium-sized businesses, yet it does have an impressive enterprise customer base. In October last year, Slack partnered with Oracle to integrate its software into Oracle's enterprise software, and about 30,000 Oracle employees were already using the platform.
In January, Slack added Target, BBC, Liberty Mutual Group, Workday and E*Trade as customers. The additions brought its enterprise platform, Enterprise Grid, up to more than 150 organizations.
At the time of the announcement, analysts warned that the company needed its value proposition readily defined or it could face losing customers who become "okay enough with the Google and Microsoft solutions," according to a Reuters report.
"It's mostly a Microsoft Teams versus Slack battle at this time with some [Workplace by Facebook] thrown in."
vice president and principal analyst at Forrester
The partnership will have little impact on Slack's existing customers, according to Schoeller. Customers who use Atlassian's chat tools may be tempted to transition to Teams or Workplace by Facebook if the migration to Slack isn't seamless, he said.
However, the move from Atlassian's platforms to Slack's may hit some snags when it comes to negotiating enterprise agreements, licensing fees, navigating the integrations of toolsets and deciding what to do about the cloud, according to Basham Young.
If Atlassian customers were using the communication platforms on on-premise servers, companies will have to decide how to navigate to the cloud to use Slack. So before Atlassian pulls the plug on Stride and HipChat, Basham Young recommends companies conduct "user discovery" and find out where and how the platforms are used by employees. After the review is done, companies can decide if Slack will measure up to their needs.
Slack versus Microsoft
By Microsoft's standards, the partnership is not something that will rattle its bones, but for Slack, this is an entryway to more enterprise customers, and that's Microsoft's turf. "It's mostly a Microsoft Teams versus Slack battle at this time with some [Workplace by Facebook] thrown in," said Schoeller.
The "Office 365 bundling of Teams is a very difficult proposition to fight against," Schoeller said. It's adoption rate is growing and its ability to fill in the gaps is largely unmatched. The partnership, Schoeller says, is two parties "joining forces to try to fight" the "Redmond Monster."
From the outside, the partnership appeared to be a competitive attack on Microsoft, but "it's more of a sharp jab in the ribs," said Basham Young.
Still, "Microsoft has doubled down in the past 12 months on Yammer and Teams," said Basham Young, "both from a development and manpower perspective."
But Teams has its own shortcomings. For example, Microsoft is belittling Skype for Business as it pushes for Teams and it's "causing heartburn" for customers, according to Schoeller. Customers reliant on Skype for Business are facing a difficult change, though for Microsoft, it's the right move. Full-voice and video capabilities isn't something Slack has totally conquered, but Stride is good with it.
While Microsoft is "ready to do all-out battle for the end user collaboration experience," according to Basham Young, "Slack is a real threat to Microsoft" because users love Slack. Microsoft, in turn, has to try replicating a Slack-like experience "with less corporate agility."