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Teams Anti-Competitive Behavior and the Slack Complaint
A recent report in the Financial Times (behind a firewall, so here’s a summary that can be accessed without payment) says that the European Union is preparing to introduce new anti-trust charges against Microsoft due to anti-competitive practices around the way it bundles and sells Teams.
The origin goes back to a 2020 complaint filed by Slack against Microsoft where Slack accused Microsoft of “illegal and anti-competitive practice of abusing its market dominance to extinguish competition in breach of European Union competition law. Microsoft has illegally tied its Teams product into its market-dominant Office productivity suite, force installing it for millions, blocking its removal, and hiding the true cost to enterprise customers.”
European antitrust proceedings take their own time to develop. Eventually, in July 2023, the European Union decided to open an antitrust investigation based on the Slack complaint. Microsoft responded by unbundling Teams from Office 365 for new customer purchases within the European Economic Area (EEA). On April 1, 2024, Microsoft announced the unbundling of Teams from Office 365 worldwide. Like the EEA move, the decision only affects new customers, who must buy separate Teams Enterprise licenses ($5.25/month in the U.S.) if they wish to use Teams.
Microsoft’s move to unbundle Teams doesn’t appear to have assuaged the European Union. There’s an obvious reason why. According to Microsoft, Teams has 320 million monthly active users. Microsoft cited the number in their FY24 Q1 results in October 2023 and hasn’t updated it since (Jeff Teper repeated the figure at the recent Microsoft 365 conference). I imagine that even if growth is slowing, some increase has happened in the two quarters since.
The Competition Between Slack and Teams
When Slack filed its complaint, it competed fiercely with Teams. Then the Covid pandemic came along, and Microsoft poured resources into teleconferencing (in particular) to help people cope with working from home. The result was a massive growth in Teams usage, leaving Slack in its dust as Microsoft focused more on Zoom than its original competitor. Based on official Microsoft numbers, Teams is used by 80% of the 400 million Office 365 paid seats, so there’s not much room for a competitor to take share. According to DemandSage.com, Slack has 65 million monthly active users, or around 20% of the Teams number.
Unbundling Teams from Office 365 won’t create a more level playing field, especially in the lucrative market for enterprise customers. These organizations value the integration of Teams with other Office 365 workloads like SharePoint Online, OneDrive for Business, Exchange Online, and Planner. Many will consider using Teams with Copilot for Microsoft 365 or Teams Premium to gain advantage of the additional functionality enabled by those licenses.
It’s hard to see how Slack could create a cogent argument for a customer to use its technology instead of Teams alongside the rest of Office 365, especially as the monthly cost for Slack is higher than the Teams Enterprise License. The monthly cost of the Slack Business plan is almost equivalent to Teams Enterprise plus Teams Premium (Figure 1).
Given the choice between buying the market leader that’s integrated with the rest of Office 365 versus bringing in a third-party product that’s not integrated, what decision do you think a rational CIO will make?
No Ability to Move Away from Teams
Another problem is that the task of moving an organization from Teams to move to Slack or another platform is horrendously complicated. I’ve long said that Teams is the most difficult of any Office 365 workload to backup. It’s even harder to restore, and that task has not become easier over the years. Extracting chats and channel conversations might be possible, but then things become difficult with shared files stored in user OneDrive accounts like Loop components, Teams meeting recordings, compliance records, call logs, and so on.
There’s also the small matter of the thousands of apps developers have built for Teams and the data used by those apps. People who have done a tenant-to-tenant migration involving Teams know about the difficulties involved in migrating to the same platform. Moving to a different platform sets a whole new benchmark for problems when a workload that’s heavily integrated with a platform is involved.
Seeking a Remedy for Teams Anti-Competitive Behavior
According to the Financial Times, European Union officials are concerned that unbundling is insufficient to enable fair competition. I’m no expert in European anti-trust law, but if no technical remedy exists because the European Union discounts the unbundling of Teams, then the likely outcome (if charges are proven) appears to be a fine. The European Union can levy fines of up to 10% of a company’s worldwide revenues, so there’s lots of latitude to impose a very big fine.
One thing’s for sure. Microsoft and the European Union will go through a long, complicated, and difficult negotiation to establish if they can construct a remedy that satisfies all parties. It will be interesting to see how this situation evolves.
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