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How workplace messaging could replace other missives
May 14th 2016 | SAN FRANCISCO
STEWART BUTTERFIELD, the boss of Slack, a messaging company, has been
wonderfully unlucky in certain ventures. In 2002 he and a band of colleagues
created an online-video game called Game Neverending . It never took off, but
the tools they used to design it turned into Flickr, the web s first popular
photo-sharing website. Yahoo bought it in 2005 for a reported $35m.
Four years later Mr Butterfield tried to create another online game, called
Glitch. It flopped as well. But Mr Butterfield and his team developed an
internal messaging system to collaborate on it, which became the basis for
Slack. In Silicon Valley, such a change in strategy is called a pivot ;
anywhere else it is called good fortune. Today Slack is one of the
fastest-rising startups around, with $540m in funding and a valuation of around
$3.8 billion. I guess the lesson should be, pursue your dream and hope it
fails, so you can do something else, says Cal Henderson, Slack s chief
technology officer.
It is rare for business software to arouse emotion besides annoyance. But some
positively gush about how Slack has simplified office communication. Instead of
individual e-mails arriving in a central inbox and requiring attention, Slack
structures textual conversations within threads (called channels ) where
groups within firms can update each other in real time. It is casual and
reflects how people actually communicate, eschewing e-mail s outdated
formalities, says Chris Becherer of Pandora, an online-music firm that uses
Slack.
Its other selling-point is efficiency. A survey of users, admittedly conducted
by the firm itself, suggests that team productivity increases by around a third
when they start using the software, primarily by reducing internal e-mail and
meetings. Slack has decided to open itself up to other apps, becoming a
platform by which employees can log into and use other software tools. Today it
has 2.7m daily active users, up from 1m last June. Around 800,000 of them are
paying subscribers; their firms pay around $80 or more a year for each employee
using the service. The firm has $75m in annual recurring revenue and is
breaking even, says Mr Butterfield.
Slack s rise points to three important changes in the workplace. First, people
are completing work across different devices from wherever they are, so they
need software that can work seamlessly on mobile devices. Messaging naturally
lends itself to this format. Second, communication is becoming more open. Just
as offices went from closed, hived-off rooms to open-plan, Slack is the virtual
equivalent, fostering a collaborative work environment, says Venkatesh Rao of
Ribbonfarm, a consultancy. Slack s default setting is to make conversations
public within a firm.
Third, software firms are trying to automate functions that used to be done by
people in order to make employees more productive. Slack has made a big push
into bots , algorithms that can automate menial tasks which used to be done by
humans. Slack offers bots that compile lunch orders and projects progress
reports, or generate analytics on demand. In the future employees will be able
to chat with software agents to get more done, working alongside bots as well
as their peers.
Mr Butterfield is not the typical leader of a striving startup. Called Dharma
by his hippie parents, he spent his early years on a commune with no running
water or electricity; he changed his name to Daniel Stewart when he was 12. A
self-professed introvert, which is fitting for a company that sells itself on
textual communication, he values efficiency and candour. After Yahoo bought
Flickr, he worked there for a few years. Everything was horrible, ugly, slow,
difficult to use and confusing, he says, frankly.
Dharma chameleon
In retrospect, Flickr was sold too soon. The sale marked the beginning of the
technology industry s resurgence after its crash in the early 2000s. Now Mr
Butterfield has a second chance. Investors do not want to see him sell Slack
too early. Earlier this year there were reports that Microsoft considered
bidding around $8 billion for the company. Mr Butterfield says that Slack has
never received a formal offer from anyone and is planning to go public. Last
year it started submitting itself to voluntary audits, in what appears to be
preparation for a public debut. But it seems even more likely that a large tech
giant will see the strategic value of Slack and try to snap it up first for an
even splashier sum.
Mr Butterfield says that Slack could achieve $10 billion in revenue if it signs
up 100m knowledge workers, of which there are around 850m worldwide. That is
far easier said than done. For one thing, Slack still needs to woo larger
companies outside the technology world. Currently it holds particular appeal
among workers at firms in the internet, media and advertising industries, and
among teams of software developers within larger firms. Conquering traditional
businesses may prove harder. Slack s yearly minimum of $80 per employee is
steep for companies with tens of thousands of workers.
For another, Slack has rising competition to fend off. Already, rival products
are taking aim at the market for workplace collaboration, including one,
Atlassian, from an Australian software company, which is called HipChat, and
bundled with its other services. There is also Symphony, a rival startup backed
by several banks that specialises in highly regulated industries such as
financial services, which require more compliance controls. Tech giants such as
Microsoft, Oracle and Facebook have collaborative work apps, but these are only
modestly successful.
Slack s greatest challenge may be people s own habits. To some, its endless
stream of chatter may be worse even than e-mail, because the barriers to
commenting rapidly are lower. The introverted Mr Butterfield should welcome the
chance to appeal to people who do not want constant interaction, even when it
comes in textual form.