LDN - Business

Messaging startup Slack launches new product to power big businesses

[February 01, 2017] By Heather Somerville

SAN FRANCISCO (Reuters) - Slack Technologies Inc, a Silicon Valley messaging and collaboration software company, is making a strong push to expand its business by selling technology to some of the largest corporations in the country.

Slack on Tuesday unveiled a new product designed for big companies such as International Business Machines Corp, Capital One Financial Corp and PayPal Holdings Inc. The Slack Enterprise Grid is set up for companies with hundreds of thousands of employees and strict compliance requirements.

The development marks a striking evolution for a four-year-old messaging platform that started out as a tool used by a handful of entrepreneurs and was quickly adopted by media companies and startups.

Slack is a platform where employees can send messages, collaborate, organize and share files. The technology also integrates with a wide variety of business software - such as Salesforce.com Inc and Skype - so employees can do all their work within Slack.

The technology had been designed for teams or small groups of employees. But with additional security and regulatory approvals, Slack can sell its enterprise product to big financial and health care companies, said Noah Weiss, who heads Slack's search, learning, and intelligence group. IBM, Capital One and PayPal have been using it for months.

Andrew Braccia, a partner at Accel Partners who provided Slack's first venture investment, said Slack's big-business strategy is "just a very natural progression of the company."

"It worked for 50 people, and it scaled up to working for thousands if not tens of thousands of people," Braccia said.

The new product provides another line of revenue for Slack, which was valued at $3.8 billion at its last private financing round a year ago. The company has raised more than $500 million from venture capitalists.

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Leah Jones, Head of Engineering at Slack, presents during the business messaging company's event in San Francisco, California, U.S. January 31, 2017. REUTERS/Beck Diefenbach

Slack is projecting about $150 million in annual revenue, Weiss said, based on its most recent monthly revenue. Its customers include 38,000 paying companies.

Slack started as a messaging system that co-founder and CEO Stewart Butterfield used to collaborate with colleagues as they built a gaming company, Glitch, which never took off.

But Slack faces formidable competition in Microsoft Corp, which last year unveiled its Teams workplace collaboration service, and Facebook Inc, which launched Workplace by Facebook. And there are ample other technology companies, from Atlassian Corporation Plc to Alphabet Inc's Google, which offer similar services.

A recent survey by Spiceworks, a network of IT professionals, found that Microsoft Teams will surpass Slack in popularity among businesses. About 27 percent of large businesses are already using or plan to use Teams within two years, compared with 18 percent using Slack.

Since most big companies already use Microsoft, it is easier and cheaper to stick with Microsoft's chat option, said Spiceworks analyst Peter Tsai.

"Essentially they (Slack) are competing against a free product," Tsai said

(Reporting by Heather Somerville; Editing by Lisa Shumaker)

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