LICENSED FOR DISTRIBUTION

SWOT: Slack, Worldwide

Published: 06 October 2017 ID: G00337229

Analyst(s):

Summary

Slack is the leader in the fast-growing workstream collaboration market. Technology product management leaders responsible for WSC, cloud office and unified communications should understand Slack's capabilities, and how they can incorporate it or build a competitive offering.

Analysis

This document was revised on 16 October 2017. The document you are viewing is the corrected version. For more information, see the Corrections page on gartner.com.

SWOT Analysis

Slack offers a workstream collaboration (WSC) solution, which, at its core, enables chat-driven collaboration for teams. The solution has broadened to enable communication and collaboration at multiple levels within an organization — within teams; between teams, groups, functions and workspaces; across an entire organization; and more recently, between different organizations. Slack also incorporates multiple communications channels such as messaging, voice and video.

As an early mover in 2013, Slack was instrumental in promoting the WSC market, which is growing at a compound annual growth rate (CAGR) of 96% between 2016 and 2021 (see "Forecast Snapshot: Workstream Collaboration Worldwide, 2017" ). The high growth has attracted web behemoths, such as Microsoft and Google, to enter the fray with competitive offerings. Other vendors, such as Facebook and Amazon, will potentially enter the market in the future. With an annual recurring revenue (ARR) of over $200 million, Slack has the largest share of the WSC market.

To maintain its competitive advantage, Slack is constantly adding new features and capabilities while fine-tuning existing ones, as shown in Table 1. It continues to augment its capabilities in the areas of security, administration and compliance, which reduce or remove potential barriers to adoption by enterprises. The company is also highly data-centric. Its "Search, Learning and Intelligence" initiative leverages the data being captured on the platform to optimize the user experience. In our view, the initiative could offer Slack the potential to develop monetizable products, such as a work graph.

Slack has two main product categories:

  • Slack for Teams provides a single workspace in a small, medium or large business. The three service tiers include Free, Standard ($6.67 per user per month) and Plus ($12.50 per user per month).

  • Enterprise Grid supports multiple interconnected workspaces across a large enterprise and comes with more advanced administrative, security and support features.

The core capabilities and features are available with all its products, while the premium-grade capabilities are only available with successive tiers of paid-for Slack.

Table 1.   Slack's Core and Premium Capabilities

Core Features and Capabilities

Premium Features and Capabilities
(Available With Standard and/or Plus and/or Enterprise Grid)

Contextually relevant and segmented communications , including persistent chat, direct messaging, as well as voice and video calls within and between teams.

Synchronized communication and collaboration across multiple devices and platforms.

Integration with third-party apps , legacy enterprise software, and custom-built apps and chatbots for Slack.

Customizable notifications and advanced search across Slack's real estate.

Administration and policy — Custom user groups, provisioning, active directory sync, (unlimited workspaces)*

Identity, privacy and security — Oath, two-factor authentication, single sign-on, (support for DLP, e-discovery and offline backup)*

Data compliance — Policies around message retention and exports; (compliance with industry regulations such as HIPAA and FINRA)*

Advanced communications — (Channels for panorganizational announcements);* internal shared channels (between workspaces);* external shared channels (with customers and other third parties); conference calls and screen sharing

Search and intelligence — Searching for people, channels and files; (organizationwide search);* channel recommendations and message highlights; surfacing of the most relevant information based on user profile and past behavior

Support Guaranteed SLAs, 24/7 support with predefined response times; (designated account and customer success teams)*

Note: All features marked with * are only available as part of Enterprise Grid.
DLP = data loss prevention; FINRA = Financial Industry Regulatory Authority; HIPAA = Health Insurance Portability and Accountability Act

Source: Gartner (October 2017)

Slack complements its efforts for its free-version user base (acquired via social media or through word-of-mouth recommendations) with more traditional B2B marketing. It is also expanding its direct enterprise sales team. The company is growing its ecosystem of third-party software developers/vendors that build integrations with Slack or develop custom plug-ins for the platform. Its aim is both to increase the value of the platform, and to act as an indirect sales and marketing channel.

Figure 1 provides a graphical, proportionate representation of Slack's strength, weakness, opportunity and threat (SWOT) characteristics, based on Gartner's SWOT rating model. The key inferences are as follows:

  • The strength and opportunity boxes are the largest. Slack's strengths — including customer centricity, high brand equity, well-defined vision and roadmap, and strong integration with third-party enterprise software — have helped it become the leader in the market. Upsell opportunities with existing accounts, new customer acquisition driven by enterprises' digital transformation and international expansion will fuel its growth. The company can also adapt its business model to generate revenue from data mined on its platform, for example, by launching a work graph.

  • The weakness and threat boxes are slightly smaller. However, some of the issues we highlight — such as U.S.-only data centers; limited payment options; and nascent enterprise-grade sales, marketing and support capabilities — can limit enterprise adoption of Slack and constrain international expansion. In addition, the company will face strong competition from other enterprise software vendors, particularly "best of suite" vendors. Its current pricing strategy, especially with Enterprise Grid, will come under pressure, and slower enterprise digital transformation could impact growth.

Figure 2 summarizes Slack's individual SWOT characteristics.

Figure 1. Graphical Representation of SWOT: Slack, Worldwide
Research image courtesy of Gartner, Inc.

Source: Gartner (October 2017)

Figure 2. SWOT: Slack, Worldwide
Research image courtesy of Gartner, Inc.

AI = artificial intelligence; iSaaS = integration software as a service; ML = machine learning; UX = user experience

Source: Gartner (October 2017)

Strengths

Strong Vision and Strategy Result in Focused Initiatives and a Robust Roadmap

Slack's vision is to become the default enterprise "operating system" — or a centralized hub that aggregates, synthesizes and provides visibility into all enterprise team-related workflows. This hub could become a rich repository for enterprisewide team collaboration data. In the near term, Slack aims to grow its presence in enterprises using both a bottom-up approach (starting from teams and growing into workspaces and user groups) and a top-down approach (starting from central IT and reaching teams with its Grid offer).

The company plans to become more valuable for its customers by integrating with users' existing enterprise software. Slack also brings users a broad range of new software from third parties, which they can access directly from the Slack environment. The company is continuously innovating, particularly in the areas of ML and AI (as described in the Opportunities section), to bring richer capabilities to its users.

Customer Centricity Leads to Simplicity in UI and UX

From the outset, Slack has placed user experience at the center of everything it does. As a result, it has a very engaged user base that uses the product for more than two hours daily. More than two-thirds of weekly active users are daily active users, making Slack's usage comparable to the most popular social networks. Slack has established a feedback loop with customers via a feedback button on the app. Also, through its Twitter presence, the company encourages customers to provide feedback on how it can improve features of the app. It continues to iterate the software rapidly based on customer feedback, fine-tuning existing features and adding new capabilities, which has led to a 97% customer satisfaction (CSAT) score.

Slack's focus on simplicity and ease of use has lowered the barrier to adoption for new users. These features have been key for the solution, which relies on word of mouth to grow inside an organization. In addition, advanced search capabilities (such as modifiers and customizable notifications) augment the overall user experience in the app.

However, users who are not used to Internet Relay Chat (IRC) conventions still have a learning curve before they become familiar with how the app works. Also, first-time users may not discover many of the cool features without a training program, access to an appointed Slack evangelist or the Slack help desk.

Integration With a Broad Range of Enterprise Software and Strong Ecosystem of Third- Party Apps, Extensions, Chatbots and Plug-Ins

Slack is adopting a two-pronged approach to become the unmatched aggregator and synthesizer of enterprise software:

  • App integration: The company has, so far, integrated over 300 popular enterprise apps, and over 1,000 apps overall including net-new products built on top of Slack for specific uses cases (see Platform Play below). These are available to users within the Slack environment. The popular enterprise software includes widely adopted solutions such as Salesforce, Twitter, Google Drive, Cisco WebEx and Dropbox. This improves productivity and efficiency as users don't have to switch across multiple apps to check progress or take actions. In fact, through the introduction of message unfurls and buttons, users can take actions in other apps without leaving the Slack environment. Users can discover these apps from Slack's App Directory and download them. There are still a few big enterprise software names currently missing in the App Directory, particularly apps within the Microsoft Office 365 suite (although there is integration with OneDrive and Flow). Lack of support for applications such as SharePoint could jeopardize adoption, particularly in large enterprises.

  • Platform play: Slack has opened APIs to enable software developers to build new products (apps, product extensions and chatbots) specifically for the Slack platform. About 700 of these are available on Slack's App Directory today. The platform APIs are also being used by enterprises to develop custom plug-ins and integrations with their legacy software. Slack offers SaaS vendors technical and commercial incentives to work in its ecosystem, so it can establish its platform as an enterprise OS. Slack currently does not charge for either its APIs or for a presence in the App Directory, which acts as a discovery and distribution channel. The Slack Fund, which is an $80 million fund to write seed-stage investments for up to $250,000, provides investments in startups that are developing interesting applications on top of the Slack platform. Over 30 investments have been made to date, in products that range from sales tools to meeting software to software development kits for the ecosystem.

Strong Brand Equity and First-Mover Advantage

Slack's management team has a strong entrepreneurial track record. It was able to leverage its clout to drive market awareness of the product using both traditional media and digital media (in particular, social networking sites such as Twitter). The company entered the market at the right time, with numerous chat alternatives to email, but none of them fit-for-purpose.

As competitors start putting price pressure on the company, the first-mover advantage will play in Slack's favor. Once a platform is adopted and there is a significant level of user engagement, it becomes harder to displace. Replacement is not only harder because of the human element (people become used to software), but also because the amount of corporate data being stored in the platform. Going forward, the battleground will be for new customers who haven't decided on their preferred workstream collaboration solution, with a particular emphasis on corporate-mandated cloud office solutions. Slack will also need to market its solution for more specific business use cases to differentiate from cloud-office vendors with broadly horizontal platforms that can be perceived as "good enough."

Weaknesses

U.S.-Only Data Centers With No Support for Hybrid Cloud or On-Premises Deployments

Currently, Slack operates its platform on the Amazon Web Services' (AWS) infrastructure located in the U.S. To date, this model has worked well when addressing digital native businesses, small and midsize businesses (SMBs), and digital business units (BUs), and product development teams within large enterprises. As the company seeks to grow geographically, data residency will make in-country data centers necessary, particularly in markets with strict data regulations such as Germany. While traditional enterprises are starting their journey into the cloud, many (particularly in verticals such as financial services and the public sector) are not ready to move to public cloud for sensitive corporate data applications.

Immature Enterprise-Grade Go-To-Market Strategy

Slack's freemium-driven approach was effective in attracting early adopters and may still work with digital native businesses. However, the company will need to double down on B2B marketing, sales and service initiatives in order to address budget owners in traditional enterprises. It will need to take a bottom-up approach with its Slack for Teams product, which targets specific functions in an organization, and a top-down approach for Enterprise Grid, which is aimed at the CIO and central IT organization. The latter faces a significant price hurdle in the shape of Microsoft's Office 365 bundled with Teams. In each case, Slack will need a consultative selling approach to demonstrate ROI for the solution by leveraging customer case studies that describe tangible business outcomes.

Slack is growing its direct enterprise sales team, and it has set up a customer success team to help customers get the most out of their Slack deployment. However, the company may need to partner with professional and managed service providers, or more established and influential SaaS partners to develop stronger value propositions for a business buyer.

The company also needs to address the location of payment processing. Currently, Slack accepts credit card payments in U.S. dollars, British pounds, euros, and Japanese yen for self-service customers who purchase online. All payment processing in dollars is done in the U.S. For qualified customers, Slack offers the ability to pay invoices via automated clearinghouse (ACH), Single Euro Payments Area (SEPA), wire or check in the aforementioned currencies. All credit card and invoice payments in British pounds and euros are processed and deposited directly within local accounts.

Going forward, it will need to support more payment options for enterprise customers.

No In-Built Task Management, and Challenging Navigation of Chat Streams, Channels, Workspaces and Notifications as Adoption Expands

Most users observe a significant reduction in the volume of emails they receive as a result of using Slack. However, given the lack of task management in Slack, users risk spending time discussing issues without assigning tasks to individuals to address them. Teams are often deeply involved in coordinating and working with content. Slack's lack of built-in rich content handling means some teams will choose to work on content collaboration platforms such as Box and Dropbox natively, even though there are plug-ins for Slack. Additionally, due to fear of missing out, users may constantly monitor or participate in various channels at the expense of getting actual work done. These issues worsen as Slack grows to incorporate more teams, channels and workspaces. While skilled users will mute channels or use notification features to prioritize their alerts, not all users will have the maturity to make these decisions themselves.

To address the "constant discussion, no action" issue, Slack is including more messaging buttons, message menus and app unfurls that allow users to take action, such as provide approvals from within the app. In addition, the customer success team will help with change management and user training.

Opportunities

Progressing Rapidly to Reach Mainstream Adoption

Slack has experienced phenomenal growth over the past three years, from 1 million daily active customers in 2015 to 6 million daily active users as of September 2017. One-third of the active users (or roughly 50,000 teams) are paying customers. However, Slack has barely scratched the surface in terms of enterprise adoption. It can continue to grow within existing accounts, through new customer acquisitions and from international expansion.

  • Expansion within existing accounts:

    • Slack adoption often starts with engineering and product development teams, and grows through word of mouth or social media. The company can accelerate this process by identifying and nurturing evangelists in existing accounts.

    • Many of Slack's digital native and SMB customers grow fast and adopt Slack corporatewide. As these companies scale, so do their user numbers. Slack will need to provide the right infrastructure to support this scale and the plethora of enterprise software these companies need.

  • New customer acquisition:

    • Digital transformation is a key theme for many traditional enterprises. The digital business unit (if it exists) already benefits from greater software procurement flexibility. But increasingly, even central IT is using adaptive sourcing for best-of-breed software from innovative vendors (as opposed to best of suite from established vendors). Slack will need to build business cases centered on agility and productivity to demonstrate tangible ROI.

    • The continued emergence and growth in new digital businesses, and the arrival of millennials who seek consumerlike tools in the workplace are further opportunities for growth.

  • Global expansion:

    • Fifty-five percent of Slack's paying customers are located outside of the U.S., despite limited international efforts to date. The company has created localized versions of the app (to support three additional languages besides English) and to charge in local currency. It is also working on overcoming barriers to adoption such as end-to-end payment processing and data residency issues.

Leveraging the Power of AI and ML and Launching a Work Graph

Slack has a very strong focus on data and analytics, and the nature of the platform (strong user engagement and significant information sharing) means it is developing a remarkable data repository. The company realizes this, and it is already mining some of this data as part of its Search, Learning and Intelligence initiative, which runs parallel to core product development. It is developing analytics, AI and ML capabilities in-house, and it is leveraging open-source tools and APIs when available. Slack is already using data-driven insights internally to augment product features, optimize processes, simplify search and discovery, and create new experiences for users. Some of the initial use cases that Slack has implemented or plans to implement include:

  • More relevant and personalized search results based on user profile, context and activities

  • Personalized and contextually relevant channel and app recommendations

  • Surfacing the most relevant contacts, channels, apps and files based on past behavior

  • More accurate and useful message highlights — a daily digest of the most relevant activities

  • Improved chatbot functionality, such as automatic calendar checking and meeting scheduling

Organizations can use the insights to understand how their employees collaborate and how information flows in their organizations to help make corporate decisions.

Large amounts of data and interactions are being generated in Slack. When coupled with strong user engagement (users spend, on average, two hours on Slack daily), this opens an opportunity for the company to create a work graph. The concept is more similar to the social graph on Facebook than to Microsoft Graph in Office 365. A work graph can provide visibility into how individuals, technology and workflows are connected within an enterprise. The work graph has the potential to transform B2B sales, marketing and customer engagement. Chatbots, which ingest data from the work graph, will take the experience to another level by automating and augmenting the ways brands can engage with enterprise customers in real time and in a more personalized and contextually relevant manner. However, the key to any graph is its scale and the diversity of data outside of the core team's work. A work graph needs to provide insight beyond the core team to secondary and tertiary network connections, which will require Slack to work closely with partners and handle different types of group collaborative work.

Expanding the Partner Ecosystem to Include iSaaS Vendors, and Professional and Managed Service Companies

Enterprises with strong in-house software development capabilities can use Slack's open platform APIs to either extend the capabilities of the app, or integrate Slack with their existing enterprise apps and business processes. However, not all enterprises have in-house software development capabilities. Therefore, the company needs to extend its partner ecosystem beyond SaaS vendors to include iSaaS vendors, as well as professional and managed service providers.

  • iSaaS vendors help automate integration tasks. They can provide enterprise software developers with easy-to-use tools for common integration tasks for select enterprise software that can be found in the Slack App Directory.

  • Professional and managed service providers offer business consulting services to help traditional businesses understand digital transformation in a more holistic way. They can build tailored solutions that combine their technology with Slack APIs to fit the needs of a particular workload, expertise level or industry. They can also provide expertise in specific areas, such as back-end development support or localization.

Adapting its Business Model to Uncover New Revenue Opportunities

Currently, Slack does not charge for the value-added services it offers to customers, developers and partners. This is understandable, as it more focused on building its ecosystem and driving value for its platform. However, in the future, Slack has the opportunity to charge for:

  • The APIs on its platform on a per-usage basis (volume of API calls)

  • Presence in its App Directory on a commission basis (this can be between 5% and 20% of the value of the app)

  • A planned identity-as-a-service feature. This will allow users to register or log into other apps and services by clicking the Slack icon and using their Slack credentials. The feature could be charged on a per-transaction basis.

  • Access to the work graph. The anonymized data can be charged on either a per-employee or per-organization basis.

Threats

Strong Competition From Established and Emerging Software Vendors

Given the attractiveness of the WSC market and the relatively low barriers to entry, Slack is facing competition from a broad range of players, which include:

  • Pure-play WSC vendors, such as Atlassian Hipchat, Glip and AeroFS.

  • Unified communications (UC) and UC as a service (UCaaS) vendors, such as Mitel, Cisco and Avaya, are offering in-meeting workstream collaboration as part of their bundled UCaaS offering.

  • Hyperscale web players, such as Facebook, with its Workplace offerings. Please note, Workplace does not currently qualify as a WSC solution according to Gartner's definition; however, it could evolve to be more of a WSC solution.

  • Cloud office vendors, such as Google and Microsoft, are offering WSC (Hangout Chat and Microsoft Teams, respectively) as part of their cloud office suite. Microsoft has already announced integration of its UCaaS suite of applications (Skype for Business Online) with collaboration (Microsoft Teams). Teams will become an everyday client for many end users, making it easy to create WSC spaces for group work. There will be an automatic software upgrade path, wherein most current users of Office 365 or Skype for Business Online will have access to these services via a Microsoft Teams UI. This will rationalize the number of clients, which currently creates confusion for users, and provide better continuity of experience across Microsoft's suite of cloud enterprise software. Displacing Microsoft Teams or selling additional licenses for collaboration software to enterprises with a large installed base of Office 365 or Skype for Business Online will be very challenging for Slack.

While Slack has the first-mover advantage and is the current leader, the market is still in the early stages of development and is quite fragmented. Slack's strongest competition is likely to come from well-established cloud office vendors and, to a lesser extent, from UC and content collaboration vendors, which are likely to provide the product as part of a bundled offering. Many of these companies are well-funded and have the ability to subsidize a complementary service in order to protect or drive more value for their core product or service. Some may even consider acquiring Slack in order to rapidly develop the WSC element of their portfolio. The bundled cloud office and UC vendors also have significant sales, marketing and support resources to aggressively promote their WSC offering to enterprises. Many have an existing enterprise customer base that they can upsell or cross-sell to.

Lower-Cost Rival Approaches Challenge Slack's Pricing Strategy

Slack's pricing raises competitive issues for a number of reasons:

  • While Slack offers a free tier, its paid tiers are at a significant premium compared to competitors, which are slashing prices or even offering their solutions for free.

  • Slack for Teams has a more complex structure than competitors' offerings with a redundant middle tier, rather than a simpler, free basic tier and a paid-for enterprise-grade tier.

  • Enterprise Grid pricing is high, and it does not represent discretionary spend. Slack needs very strong business cases to help IT justify spending that amount of money on its solution versus Microsoft Teams, which is free as part of Office 365.

  • Slack considers Teams and Grid as two separate products aimed at different budget owners. Therefore, there is not much focus on a potential upgrade path from Team to Grid. This is a missed opportunity for the company, as it reduces its ability to leverage existing relationships with product development to influence decision makers in central IT.

Slower-Than-Expected Transformation of Enterprise IT Buying Behavior

Slack's future growth is largely based on the premise that a shift in IT buying behavior among enterprises of all sizes will increasingly favor "best of breed" software as opposed to "best of suite," as is currently the case. While this shift might happen in some businesses, the reality is that many enterprises have barely started their digital journey and are still quite resistant to change. Enterprises have a tendency to go with the "tried and tested" option from well-established vendors rather than experiment with completely new solutions from unknown suppliers. The shift in mindset and culture in traditional enterprises that is required to turbo-boost Slack's growth may still be a few years away.

In addition, Slack's position conflicts with that of web giants such as Google, Microsoft and Amazon who are actively promoting best-of-suite propositions, as they look to lock customers into their ecosystem. In other words, this will not be an easy battle to fight.

Recommendations for Partners and/or Competitors

Recommendations for Slack's partners (SaaS companies, professional and managed service companies):

  • SaaS vendors can leverage Slack as a discovery and distribution mechanism to reach enterprise customers:

    • SaaS vendors with existing enterprise software can build integrations with Slack, which will allow users to access these services directly from the collaboration app. The platform's strong user engagement should lead to greater use of such software, and, in turn, opportunities to sell more seats into that company.

    • Other SaaS vendors can build new applications, extensions, chatbots and plug-ins specifically for the Slack platform. The App Directory is a great mechanism for users to discover, test and use new apps, extensions and chatbots. It is currently much less crowded than consumer app stores and even some of the enterprise app stores.

    • The "search, intelligence and learning" layer surfaces the most relevant apps and chatbots based on the user's profile, behavior, interactions and context. So even if the App Directory were to get crowded or the user did not browse the directory, the apps can still be seen by the most relevant users.

  • Professional and managed service providers can extend the reach and capabilities of Slack:

    • While Slack is setting up a customer success team, it will need to partner with professional and managed service companies in order to keep costs manageable. It can also leverage the influence and existing relationships of these partners within enterprises for business development purposes.

    • Partners can provide business consulting services to help traditional businesses understand how Slack can assist them in achieving their digital transformation outcomes. They can build practice areas around the transformational impact from high performing teams and articulate business scenarios around teams as the building block for the digital workplace.

    • Professional and managed service providers can also offer integration services with legacy enterprise software, and incorporate Slack into existing workflows and business processes.

    • They can build custom solutions that combine their technology with Slack APIs to fit the needs of a particular workload, expertise level or industry.

    • Those with local and regional market expertise can extend Slack's solutions into new geographies by localizing the service surround. For example, they can include documentation in local languages and in-person technical support.

Recommendations for Slack's competitors:

  • Pure-play WSC vendors will struggle to compete against Slack globally. Therefore, they should choose geographical markets where they can provide localized services or develop specialized solutions aimed at specific application scenarios, business functions or vertical industries.

  • Cloud office vendors and web giants can leverage their scale and spending power to compete aggressively on price. Essentially, they can subsidize the WSC solution in order to drive more value for their core products and services, or to encourage customers to buy best of suite rather than best of breed. They can also leverage their established relationships within enterprises to upsell and cross-sell WSC to their existing customers. They will also be able to compete through their more advanced enterprise-grade sales, marketing and service capabilities. Some may consider acquiring Slack as a shortcut to building their own WSC proposition. The acquisition would offer a substantial user base, in addition to some very innovative capabilities.

  • UC/UCaaS vendors have the opportunity to use WSC to compensate for the decline in the legacy part of their portfolio. However, instead of bundling a "me-too" collaboration app, which is under par, they should develop a differentiated solution and make it the default UI or main client of their UC proposition.

Implication for Slack

With more than 70% market share, ARR growth of more than 100% and 6 million daily active users, Slack has a leading position in the WSC market. The company achieved this through:

  • A well-defined vision and strategy, and continuous innovation

  • A strong focus on customer centricity, leading to ease of use

  • A Search, Learning and Intelligence initiative that runs parallel to core product development

  • An unparalleled number of integrations with popular enterprise software and a strong ecosystem of developers building innovative apps and chatbots

Slack will have many opportunities to maintain its growth path — by expanding within existing accounts, through new customer acquisitions and via international expansion. However, its growth may be limited if it can't show business value to the broader set of corporate buyers and influencers, and because of:

  • Low-cost or completely free competitive offerings from well-established vendors

  • Slow enterprise digital transformation

  • Nascent enterprise sales, marketing and support capabilities

  • Unavailability of an on-premises or non-U.S.-centric cloud offer

Slack will need to generate the necessary network effects that will establish it as the default platform for workstream collaboration. It will need to expand its partner ecosystem to also include iSaaS vendors, and professional and management services companies. Slack also has opportunities to adapt its business model to generate new revenue streams, for example by:

  • Monetizing its platform APIs

  • Charging SaaS vendors an admin fee for presence in the app directory

  • Monetizing the insights derived from the data captured on its platform

However, Slack's pricing of its core product could be problematic in a highly competitive environment. It may want to consider further simplifying its pricing and removing redundant price tiers. It may also need to rethink the upgrade path from its Teams solution to its Grid solution.

Company Overview

Slack Technologies operates Slack, a platform that enables team communications in one place. The platform provides a range of capabilities, including real-time and contextual group chats and direct messaging, voice and video calls, file storage and sharing, integration with various enterprise apps, and message archiving and searching. These capabilities are available at a team, line of business and pan-organizational level, and, more recently, between organizations. The app is available in four languages: English, French, German and Spanish. The company was founded in 2013 and is based in San Francisco, California with seven sales and marketing offices worldwide. It currently has nearly 800 employees. It crossed $200 million in ARR earlier in 2017, representing 100% annual growth. The app hosts more than 6 million active users on a daily basis and 9 million active users on a weekly basis. It has more than 50,000 paying teams; roughly 30% of daily active users are paying customers. Fifty-five percent of Slack's paid seats are outside the U.S., and 43% of the F100 have paid teams on Slack. The company's users come from a diverse set of industries, including software/technology, retail, media, telecommunications, pharma and biotech, financial services, government, healthcare and hospitals, and professional services. Slack Technologies raised $250 million in funding in September 2017, boosting its valuation to $5.1 billion, up from $3.2 billion in April 2016. Since its inception, the company has raised a total of $841 million.

Methodology

This research was developed to support the "Build and Market Digital Offerings Primer for 2017." The company analyzed in this SWOT was selected because Slack holds a commanding share of the high-growth WSC market. According to "Forecast Snapshot: Workstream Collaboration Worldwide, 2017," end-user spending on WSC is expected to grow at a CAGR of 96% from 2016 onward, to reach $4.931 billion by 2021. Slack is a first mover, and it is, by far, the market leader with an estimated 70% of market share. It grew its paid user base by 3.5 times in the past 12 months to reach 1.8 million users. The app currently hosts more than 6 million active users on a daily basis — a 100% increase from May 2016. Reaching a $5.1 billion valuation in just four years, Slack is considered as one of Silicon Valley's most successful unicorns.

Gartner secured the information for this SWOT from multiple sources, including:

  • Slack vendor briefings

  • Discussions with other WSC vendors

  • End-user inquiries

  • Attendance at various industry tradeshows and events

In addition, Gartner has been actively tracking the WSC market for over three years, as well as the broader enterprise communications market, and understands how the market and Slack have evolved during this period.

The Gartner vendor SWOT analysis is designed for the use of providers, as well as individuals in strategic planning, marketing and competitive analysis roles as a supplement to their planning processes. Its primary value is as an independent analysis of the provider's competitive situation. The SWOT analysis provides a unique independent view of the strengths, weaknesses, opportunities and threats for a specific part of a provider's business in a specific market and geography.