26 Billion Reasons Why Microsoft Must Beat Slack To The Future of Productivity

In an alternate universe, Microsoft wouldn’t have to compete with Slack—because it would own it. In March, TechCrunch reported that Microsoft applications and services chief Qi Lu had pitched his bosses the idea of paying up to $8 billion to acquire the messaging phenom. CEO Satya Nadella and cofounder Bill Gates reportedly nixed the idea, with Gates arguing that Microsoft should instead focus on turning Skype—its voice, video, and messaging service—into a formidable Slack rival.

It’s easy to understand why Lu might covet the highly polished workplace chat-room service. Less than three years old, Slack already has 3 million daily active users, and more importantly, Slacksters spend an average of 10 hours connected to the service each weekday, two hours of it in active use—time they could be using Microsoft Outlook for email. However, it’s clear why Nadella and Gates might have been cold to the proposal. Microsoft has tried to make a Slack-like service work several times: It bought Skype in 2011 for $8.5 billion and Yammer, another office-collaboration tool, in 2012 for $1.2 billion. Neither deal proved transformative.

Microsoft hasn’t lost its will to make big bets through acquisitions: In June, it ponied up $26 billion for LinkedIn, a company whose vast storehouse of data on businesspeople and their connections to each other could help fuel Nadella’s vision of big data, bots, and conversational interfaces.

Still, the company has a lot at stake as Slack commands an increasing share of attention. The company that invented the productivity-software suite has 1.2 billion Office users, and is working mightily to move them from the old PC-centric, pay-once-use-forever version, to Office 365, a pay-as-you-go service with lots of cloud and mobile features. Office, and all that information that the world’s knowledge workers store in it, play critical roles in Microsoft’s data-and-bots strategy.

Skype, then, doesn’t need to be a Slack killer—and it’s unlikely the stodgy program ever will be—so much as a tool to assure Office’s ongoing relevance in an era in which productivity is about a lot more than sitting in a word-processing, spreadsheet, or email program. This shift is one that Slack is helping to ignite.

Microsoft outlined its ambitious vision in April at Build, its annual developer conference. Chatbots try to anticipate what a person needs and then perform those tasks on their behalf. For example, if Microsoft’s Siri-esque assistant, Cortana, notices that you are discussing a business trip within Skype, it can proactively block out time on your schedule in Outlook, negotiate with a hotel bot to book a room, and alert a local friend about your upcoming visit. In other words, Microsoft wants its products to collaborate to do the routine, sometimes-time-wasting stuff for users, freeing them up for the kind of creative work that automated software can’t tackle.

This vision of the future of productivity will sound familiar to any Slack user: Intelligent software bots have been a key component of the excitement around Slack for more than a year. There are dozens of them available to help users accomplish such quotidian tasks as filing expenses and ordering lunch. Microsoft, following Slack’s lead, has released tools to help developers create bots and opened an online store where customers can find them. Slack, though, has gone further by announcing an $80 million fund to bootstrap the creation of bots and other integrations that leverage its platform. The move reflects cofounder and CEO Stewart Butterfield’s mantra that Slack should work with other companies’ essential business tools rather than try to replace them—a notion that Microsoft CEO Nadella has also embraced for his company’s products. (In fact, bots built with Microsoft’s Toolkit can operate inside Slack.)

But Slack is moving more quickly. In May, it announced Sign in With Slack, a service that lets users of other productivity tools—such as the popular document-editing program Quip—log in using their Slack identity. The new offering has the potential to make Slack the preferred, easiest way to get to work. Sign in With Slack aspires to do for the company what Connect did for Facebook: spread the service’s dominance across the Internet and make Slack into the Facebook of internal collaboration.

Microsoft may yet conclude that an $8 billion Slack buyout would have been the bargain of the decade. But as Slack adds such Skype-like features as voice and video—apparently, not everything you do within Slack will be offered by a third party—the more it has to be careful about not becoming a bloated mess that users hate. While the future of work moves away from the all-encompassing software suite that Office pioneered in the 1990s, the happiest scenario for users might be if the two companies continue to coexist, letting their products intermingle in new ways that enable people to be more productive than ever.

Correction: Due to an editing error, an earlier version of this story misstated the amount of time Slack users spend in the service.

A version of this article appeared in the July/August issue of Fast Company magazine.