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Contributed on January 11, 2017

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Beyond SMB: Slack eyes the enterprise

Since its launch in early 2014, cloud-based team collaboration vendor Slack has notched up more than 4 million users and $100 million in annually recurring revenues, and has sparked a frenzy of excitement in the tech media. But the company is now keen to break into the enterprise, and compete on a level with major enterprise software vendors.

Top takeaways

Slack is changing the face of the collaboration software market

For the last two decades, there has been no shortage of choice when it comes to collaboration tools, and yet email has typically prevailed. However, in less than three years, Slack has changed the way its customers work in a team collaboration context, achieving astonishing levels of adoption, particularly among small-to-medium businesses. With messaging at its core, Slack’s support for integrating third-party collaboration tools, business applications and operational systems into its channel-based interface has helped it to become quickly embedded within customer organisations, and to rapidly gain traction and convert free users to paid subscribers at an impressive rate.

Slack must think holistically to make real inroads into enterprises

An Enterprise version of Slack is expected to finally become available very soon. It’s been re-architected from the ground up, and knits together the various team instances of the product across an organisation, providing additional security and scalability, as well as centralised management and enterprise-wide search, and will formally mark the beginning of the company’s transition from viral start-up to serious enterprise contender.

However, there is much to get right for Slack to succeed; the company is still in the process of building out its sales and marketing organisation, and needs to have the right support and implementation strategy (and partnerships) in place to meet the complex needs of large enterprises.

Can Slack live up to the hype?

Since its public launch in February 2014, team collaboration vendor Slack has taken the collaboration software marketplace by storm. Slack gained half a million users in the first 12 months, and has gone on to grow this to 2.3 million in March 2016 (when we published the results of our survey looking into Slack’s adoption success). The latest published figures show that San Francisco-based Slack now has more than four million daily active users.

This new figure is impressive in itself, but when you consider that a third of these users are also paying to use Slack, across 33,000 paying teams, it is apparent that the company has found an incredibly successful formula. In the summer of 2016, Slack passed $100 million in annually recurring revenues, and was valued at $3.8 billion during its most recent venture funding round in April 2016 (bringing its total funding to date to $540 million). The company’s employee headcount has grown from 16 in February 2014 to over 650 now, with seven offices in the US, Canada, the UK, Ireland and Australia.

It’s an exercise in very rapidly growing numbers, and this, of course, has not gone unnoticed by its competitors in the enterprise collaboration space which may have initially dismissed Slack, but are now very much keeping an eye on its progress and trying to get their heads around this opportunity. Slack’s founder and CEO Stewart Butterfield admitted back in early 2015 that he had already entertained a number of acquisition offers; he didn’t name names, but Microsoft was reportedly considering an offer – although the software giant has since decided to build its own version with Microsoft Teams, as has IBM with IBM Watson Workspace.

One of the most interesting things about Slack’s story is that it is very much a viral success; Slack has been specifically designed for – and promoted to – focused teams, and has grown through pockets of adoption in organisations of all sizes (though with particular success in small and medium-sized businesses), often under the radar of IT teams. It’s not the first time this has happened of course; we saw a similar trend with Yammer a few years ago, though that journey came to a grinding halt following Yammer’s acquisition by Microsoft.

So, can Slack make the transition from tech media darling to respectable enterprise technology player? It’s a big ask, but Slack is certainly giving it a go.

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