Slack Technologies Business Model Analysis - Case Study Example

Slack Technologies Business Model Analysis Name Institution Course Date Slack Technologies Business Model Analysis Introduction Slack Technologies Inc. is a computer software startup company formed in 2009. The San Francisco-based company has since grown to become a force to reckon with in the internet and technology industry. Flickr founder Stewart Butterfield is the brain behind Slack Technologies that is currently valued at over $2 billion despite having been around for barely six years (Kiss 2016). Being a startup company, the fact that Slack Technologies has been promising has made the company receive funding from different sources to the tune of over $430 million. The major financiers of Slack Technologies include Google Ventures, Accel Partners, DST Global Solutions, KPCR and Horizon Ventures among others. In the first quarter of 2016, the company generated revenue totaling $64 million, which marks a significant growth compared to the previous year (Manjoo 2015). Slack currently has more than 2.7 million users (McCracken 2015). This report analyzes Slack Technologies in light of product and service, value proposition, platform characteristics, market/industry analysis, and how disruptive Slack Technologies has been in the last 6 years of its existence. The report will also assess its protection strategy and how Slack uses intellectual property to protect and license its intellectual property. Product/Services Slack Technologies is an internet and messaging provider. The company’s Slack product is a platform that enables group communication in a single place. The company’s platform enables users to provide real-time messaging, searching and archiving services. Although Slack Technologies no longer provide IRC backend, the company still provides users with a significant number of IRC-like features that include chat rooms that are arranged according to topics (Kiss 2016). The company has been able to meet the needs of its customers in the market by providing users with quality products and services. In this respect, assessment of Slack indicates that the company provides users with contents that are searchable, which includes files, people and conversations. Additionally, Slack provides a variety of third-party services, as well as various community-built integration services that includes Google Drive, Box, Zendesk, Dropbox, IBM Bluemix, GitHub, Heroku and Trello among others (McCracken 2015). Value Proportion Creating a substantive value proportion is critical to the success of a company. This is particularly so for technology-based companies. Value proportion denotes why a company should buy a company product instead of those of the competitor. In this respect, value proportion communicates the reason why a service or product delivers value to a consumer (Manjoo 2015). Slack’s success in the internet and communication industry is linked to its unique value proportion (UVP) that has given the company a competitive edge over rivals in the industry. Slack’s value proportion is derived from the fact that it provides an app that allows users to have internal communication and collaboration (McCracken 2015). The app allows users to have direct communication in a very transparent manner across the workplace. Value Proportion: Collaboration As indicated above, the first value proportion provided by Slack has to do with collaboration. Collaboration has become an important element that users of apps tend to look at when considering the appropriate app to use. For this reason, Slack provides an app that allows users to have a team communication in a single place. At the same time, Slack app allows ease of working on files and documents, such as word, excel, Photoshop, Google docs, PDF and JPG among others (Kiss 2016). This makes Slack a preferred app for use by most users. The other value proportion has to do with the fact that Slack apps allow users to make comments directly on whichever file. This way, others are able to see the comments exactly as they appear on the right files without distorting the meaning (Manjoo 2015). Besides, Slack app ensures that Google documents remain updated to the newest version once shared. Value Proportion: Search Slack’s value proposition is also found on the search. In this respect, Slack makes it not just easier but also faster for users to search as the contents of every file are indexed for users to share. Slack also provides search value proposition considering that the product allows for instant search for contents that are available in different files, including word, PDF and Google docs (Manjoo 2015). Additionally, Slack also provides value for customers with regards to its search considering that the product allows for all conversations to be search with ease. Value Proportion: Chat Value proportion provided by Slack can also be seen with its chat. In this respect, Slack allows users to have a one-on-one chat with each other in a manner similar to Messenger or WhatsApp. Unlike other chat platforms that do not allow for privacy, Slack provides a chat platform that keeps the privacy of those chatting with each other. This implies that the chats cannot be seen by third-parties other than the individuals chatting with each other. Other than keeping the privacy of individuals chatting with each other, Slack also maintains the group privacy (McCracken 2015). For instance, with Slack, the private group chat is maintained for communication on a particular matter within a company or department. Additionally, Slack allows any person to subscribe to any channel of their choice where they can share ideas and information. Value Proportion: Notification Slack’s value proportion is also provided through notification. Slack allows users to receive notifications from other services through its platform. Such notifications include but not limited to new documents from Google Drive, new posts from RSS feed and new survey responses (McCracken 2015). Additionally, Slack allows users to assign notifications to private groups and channels, a value that its main competitors do not offer. Value Proportion: Additional Functions Slack’s value proposition also emerges from the fact that Slack provides additional functions that most of its competitors does not provide. The additional functions include customized emojis, reminder messages, automated replies and the fact that Slack reminds the user when sending a message to another person in different timezone, thus ensuring that those who are asleep are not disturbed (Kiss 2016). Revenue Model Slack advertises that its services are absolutely free. However, one may wonder how the company generates money. Critical analysis of the company’s revenue model indicates that Slack make money by charging monthly fee that is listed on the company’s pricing page which ranges from $6.67 to $12.50 (Loeb 2015). Besides, the company intends to introduce another enterprise package that it hopes to use to generate revenue. Competitive Strategies Slack’s unmatched growth over the last few years has been linked to the effective strategies that the company has adopted since it was founded. In particular, Slack has been able to win the heart of the users by differentiating itself from competitors in the market. Slack not only provides users with real-time messaging, searching and archiving services, but also differentiate by providing users with a platform for team communication in a single place (Manjoo 2015). The company also offers its services free with revenue generated by charging monthly fee listed on its page. Additionally, Slack has ensured that users receive consistently quality products and services. Market/Industry Analysis The App industry is one of the fastest growing industries today. Estimates indicate that the app market will be double its current size by 2020 to $101 billion (McCracken 2015). The growth is expected to be driven by increased usage of App coupled with the increased adoption of smartphone and other modern technology gadgets, such as computers. The mobile App in particular is expected to experience a huge growth in the next coming years. App Annie (2016) survey estimates that the mobile App market will expand by about 24% in 2016 to reach $51 billion in gross revenue. Although the largest growth in App market is expected to occur in markets, such as the United States, China and Japan, App Annie (2016) report also indicates that countries, such as India, Mexico, Indonesia and Argentina will grow at faster pace as well. The report also project that China will surpass the U.S. in terms of total revenue generated from app stores in 2016. Source: App Annie (2016). Porters Five Forces Intensity of Rivalry The competitive rivalry is medium to high. As much as the market is crowded with a lot of collaboration and social communication systems, Slack has only about two-to-three major competitors. The first major competitor of Slack is Microsoft and Office 365. The other is Jive with its product Lync for free. The third major competitor is Google that compete with Slack with its Google for Work. Other competitors include salesforce.com (Chatter), Redbooth, Skype, Sqwiggle, HipChat, Facebook for Work and Podio (McCracken 2015). The high competition is also created by the fact that brand loyalty is significant, and the fact that there is low user switching cost involved. Threat of New Entry The threat of new entry is medium. The industry experiences moderate threat of new companies entering the market because as much as the industry requires relatively little capital to enter, the high technological innovation and knowhow required to enter the industry create barrier to new firms. Besides, the major players have created significant barrier with their strong brands in the industry. Threat of Substitution The threat of substitution is high. There are many alternative products that act as direct substitutes for Slack team communication. Some of these alternatives include email, social media and mobile phones that people can use for group communication or chats. These services are provided free by competitors. Other substitutes include Bitrix24, Hall, HipChat, Pie, eXo Platform, Yammer, Microsoft Lync, Fuze and Skype among others (McCracken 2015). Supplier Power Supplier power is weak. The suppliers in the industry are internet service providers (ISPs) that provide users with internet connectivity. However, there are a lot of ISPs that reduces the power of suppliers to bargain over prices. Besides, access to internet is growing all over the world, which results in low supplier power. Buyer Power Buyer power is medium to high. The fact that there are many substitute services in the market, such as Skype, Sqwiggle and HipChat gives buyers a lot of powers to bargain over prices. Besides, switching cost from one provider to another is low. Although Slack has a number of features that differentiate it from rivals, the majority of competitors provide similar core services. Extent of Disruption Caused by Slack Slack Technologies just launched its collaboration tool but is already causing ripple effect in the industry. The company just launched its search and business messaging tool in August 2013 and within 24 hours of its launch, Slack’s beta version, more than 8,000 companies had created accounts with Slack (McCracken 2015). Presently, more than 500,000 people use Slack on a daily basis, 60,000 team users. The company reveals that it currently has more than 135,000 people that pay for its Slack, which generate to the company about $12 million in revenue every year (McCracken 2015). At the same time, the company has users that send over 300 million messages to one another every month with the average Slack user getting connected for at least nine hours daily. This makes Slack the fasted growing business app. Source: McCracken (2015). With the growth of Slack, a number of companies’ enterprise growth could be disrupted in the coming years. The first enterprise provider that could be disrupted by Slack is Blackberry. Slack is likely to snatch Blackberry some of its users with its approach to social networking that involves team communication. Slack could also disrupt the enterprise growth of Microsoft Slack currently threatens the survival of Microsoft’s Office 365 (Manjoo 2015). Facebook is another company that could be disrupted by the growth of Slack due to its first mover advantage. Others companies that could be disrupted include Yammer and email service providers, such as Yahoo and Google. Protection Strategy Start-up companies usually face the risk of their intellectual property right breaches by malicious individuals and competitors. Therefore, to ensure that its products are protected, Slack Technologies has ensured that its software and brand is protected by intellectual property. Slack protects its software using IP by granting Slack users personal, non-sublicensable and non-exclusive right to use Slack’s object code of any of its Software (Slack 2015). This ensures that any right that is not granted is reserved. Conclusion Slack happens to be a start-up business that happens to have been around for barely six years now but the company has grown to become a giant in the technology industry. The success of Slack is linked to its effective marketing strategies that have focused on differentiating from competitors and ensuring that users receive consistently quality products and services. The growth of Slack currently threatens a number of former leaders in the business communication market, such as Blackberry, Microsoft, Google and Facebook among others. However, Slack should ensure that it maintains being innovative to achieve a sustainable competitive advantage. References App Annie 2016, App forecast: Over $100 billion in revenue by 2020, viewed 29 September 2016 https://www.appannie.com/insights/market-data/app-annie-releases-inaugural-mobile-app-forecast/ Kiss, J 2016, Beyond email: could startup Slack change the way you work? The Guardian 25 March, viewed 29 September 2016 https://www.theguardian.com/technology/2016/mar/25/slack-butterfield-emoji-chat-nasa-harvard-silicon-valley Loeb, S 2015, How does Slack make money? Viewed 9 September 2016 http://vator.tv/news/2015-07-03-how-does-slack-make-money Manjoo, F 2015, Slack, the office messaging app that may finally sink email. The New York Times 11 March, viewed 29 September 2016 http://www.nytimes.com/2015/03/12/technology/slack-the-office-messaging-app-that-may-finally-sink-email.html?_r=0 McCracken, H 2015, With 500,000 users, Slack Says it's the fastest-growing business app ever, viewed 29 September 2016 https://www.fastcompany.com/3042326/tech-forecast/with-500000-users-slack-says-its-the-fastest-growing-business-app-ever Slack 2015, Policy archives, viewed 29 September 2016 https://slack.com/policy-archives/terms-of-service/2015-01-01 Read More