Here’s something you probably didn’t think you’d see in 2015: Collaboration software became cool. Confounded by labyrinthine email threads, employees turned to messaging platforms such as Slack and Atlassian’s Hipchat to conduct online conversations and share content with colleagues, partners and clients.
“These tools allows persistent group chat, which is really important to corporate teams,” says Adam Preset, a Gartner analyst who researches cloud collaboration tools. They provide the “one place you go and look for what’s happening, which is very different from email where if you miss one person in a CC that person is out of the loop.”
The numbers tell the tale for both companies. Since launching in mid-2013, Slack now has more than 2 million daily active users, 570,000 of which are paid. Its platform integrates with 150 applications. Slack has also banked a whopping $340 million in funding, boosting its valuation to $3 billion and cementing its status as a super “unicorn” among the venture capital elite.
In contrast, Atlassian has honed its approach to the enterprise over 13 years, racking up more than 50,000 paying customers for its products, which run both in the cloud and on-premises. The company recently completed its initial public offering, with the stock climbing 32% percent to $27.78 after pricing at $21 a share.
Aside from its new-kids-on-the-block status, what sets them apart from collaboration powerhouses such as Microsoft, IBM and Cisco Systems is that both companies eschew enterprise sales teams, relying instead on word-of-mouth marketing and peer networking. The tack is resonating with customers tired of full-court presses from vendors.
What customers say about Atlassian and Slack
Perhaps no company exemplifies the modern digital work environment more than advertising firm R/GA, which uses an array of from Slack, Atlassian, Google and Microsoft to communicate and collaborate. R/GA CTO Nick Coronges is particularly passionate about Slack, which he says has reduced the firm’s reliance on internal email, particularly for “silly stuff that doesn’t make sense to be persisted.” More than 1,400 R/GA employees populate Slack channels to share anything from software code to business projects, as well as more niche forums for machine learning and retail.
Among the reasons why Coronges chose Slack is its capability to enable secure, private channels between client teams and third-parties, including clients’ IT and creative teams. Integration with multiple applications is essential for R/GA’s business processes. R/GA software developers funnel code they’ve created in the GitHub repository into Slack. “When somebody deploys code or makes a change, rather than message the group about the change, everyone in the channel can see it,” Coronges says.
R/GA has also connected its Atlassian Jira and Confluence applications to track incidents and documents within Slack. Validating the importance of building out a platform ecosystem, Slack last week announced $80 million investment fund for developers who are building apps that integrate with its software.
Coronges says that while software developers live in Slack, non-technical workers have also embraced the platform. The last thing he wanted to do was create more unwelcome noise by adding another tool to the corporate kit. “I’m very sensitive to the fact that if you roll out another tool you want to be confident that it’s going to work and that adoption is going to be good,” he says. “Slack is doing a really good job as positioning itself as a No. 1 or No. 2 tool to the business.”
Atlassian has built up enough credibility among the enterprise — 85 of the Fortune 500 are using it — that CIOs are influencing their peers to use its software, often selling them on its superior support for continuous delivery and integration as part of the burgeoning DevOps movement. “The key thing for any DevOps movement is reducing the amount of friction between the various functions and because Jira is so tightly integrated it’s almost second nature to the way that the engineers and [quality assurance] testers work,” says Splunk CIO Declan Morris.
He says the entire Splunk’s product suite was well embedded in the company’s business processes when he joined the company in 2013. Splunk has integrated Jira with its Salesforce.com software to make issue resolution more efficient. “That allows us to better serve the customer,” Morris says.
Global Health Exchange sunsetted software from Oracle, Microsoft and others to standardize on Atlassian’s platforms, says Jee Grover, director of global technology services. The company, which processes hospitals’ surgical supply orders, uses Jira, Confluence and Hipchat to track customer issues, plan IT projects and develop software. But it’s not just an IT tool for GHX. Human resources uses it to onboard employees, while the sales team can pore over customer contracts in the software. The tight integration between the products ensures that projects and tasks don’t fall through the cracks. “Our software had grown outdated and our skill set [to run it] had gotten stale,” Grover says. “We needed more efficiencies.”
Slack, Atlassian capitalize on consumerization
Customers are clearly excited about Slack and Atlassian, something both vendors say has been the keys to their success. In a corporate collaboration software market dominated by Microsoft, Cisco Systems and a handful of others, these companies count on collegial word-of-mouth, spreading from, say IT to sales and marketing, or vice versa. Like Box and several other young companies, Slack and Atlassian are riding the crest of the consumerization wave.
Atlassian President Jay Simons notes that as recently as five years ago, most workplace technology was deployed top-down from the CIO, who decreed “you shall use this.” Today end-users are choosing technologies, leaving CIOs scrambling to catch up. “Our business model is predicated on users choosing us,” Simons says. “We can’t convince customers to buy our software because we have no vehicle to do that.”
He’s speaking literally. Atlassian doesn’t have a sales team. That means Atlassian can sell its software for a fraction of the cost incumbents charge because it doesn’t have to pay sales and marketing to get the product on the street. Instead it invests those dollars in research and development. At this stage in Atlassian’s lifecycle, CIOs have become so smitten with the company’s products and model that they tell their peers about it. So while Atlassian adoption literally started at the bottom, it’s risen to the top over time.
Why enterprises love Slack
Slack CMO Bill Macaitis says that the company’s “account managers” assist customers with using Slack, including resolving questions around provisioning, security and uptime as they arise. Slack takes this approach because its executives have had negative experiences buying enterprise software – the scenario in which sales people woo you with steak dinners and then disappear once the deal is signed. Its success metrics are predicated on net promoter scores and customer satisfaction rather than revenues, he says.
Perhaps it’s not surprising that Slack can so easily turn a blind eye to traditional enterprise software practices. CEO Stewart Butterfield has no enterprise software experience. That counts for something in in an era of software that is driven largely by consumerization. Ironically, it’s the CIOs who may change that paradigm. Corporate consumption of Slack has grown so rampant in 2015, that CIOs are calling the company to get a handle on its use within their enterprise.
“CIOs are coming to us and saying, ‘we see that this is being used inside our organization and we want better consolidated controls for permissions, and billing and sign-on,” says Slack CTO Cal Henderson. CIOs will soon get their wish, as Slack will launch an enterprise product in 2016. The corporate version will include a management console, allowing administrators to control identity management, single sign-on and provisioning. It will also allow Slack channels, typically walled gardens within which teams operate, to connect other channels within an organization, he says.
Count Behrooz Najafi, vice president of IT at biopharmaceutical manufacturer Medivation, among those interested in a hardened version of Slack. Although Medivation uses Microsoft SharePoint for collaboration, he has used Slack as a consumer and found the user experience, particularly the search and auto-archive capabilities, appealing. But for enterprise adoption, he says CIOs working in regulated industries would require the capability to control the communications within Slack. “That’s what it will take for more CIOs to take it seriously,” Najafi says.
Can Slack and Atlassian compete long-term?
Najafi also knows that so many previous email killers have burned bright only to fade away. Waning interest in Tumblr and the harsh criticism of Twitter have him skeptical about Slack’s staying power. “Long term, we’ll see where they are in four to five years,” he says. “Email is the only thing that has survived.”
As popular as Atlassian and Slack have proven in the media, Silicon Valley and, for Atlassian, the stock market, the platforms account for but slivers of the $41 billion unified communications and collaboration market Gartner tallies, according to Preset, the Gartner analyst. He also says it will be challenging for the company’s to become the go-to collaboration platforms of choice for enterprise CIOs who have historically standardized on Microsoft or some other vendor. Trying to “find a one-size-fits-all collaboration platform is in tension with consumerization,” he says.
This article was written by Clint Boulton from CIO and was legally licensed through the NewsCred publisher network.