With Slack’s Buzzy IPO, Email Takes Another Hit

Slack Technologies Inc.’s highflying trading debut Thursday reflects the rapid growth of cloud-enabled workplace collaboration tools, which are driving a shift from individual to group productivity, according to chief information officers, tech-firm executives and analysts.

It also shows how much office workers have come to hate email, they added.

Vijay Sankaran, CIO at TD Ameritrade Holding Corp., said tools like Slack are becoming more important as companies increasingly work with business teams spread around the globe—something that is difficult to do with email alone.

“I just finished a one-hour Q&A session with my virtual organization on Slack,” Mr. Sankaran said. “There’s no way I could have effectively conducted this virtual dialogue before.”

Slack’s success can be attributed to why it came to be in the first place: “a solution to a business problem, too many emails,” said Kara Longo Korte, director of product management at TetraVX, a cloud-based software firm that combines voicemail, office calendars and other communications tools into a common interface.

Stock in the 10-year-old collaboration software maker surged above $41 at the height of its initial public offering on the New York Stock Exchange, which had listed a reference price of $26 on Wednesday. It closed at $38.62, giving the newly public company a fully diluted valuation of about $23.2 billion.

Stewart Butterfield, Slack’s co-founder and chief executive, told The Wall Street Journal that he wasn’t “trying to tear down the system” in opting for a direct listing—an unusual IPO that floats a company’s existing private shares onto a public exchange without an investment bank setting a price, among other unique features.

But that is pretty much what Slack has done in the enterprise collaboration market, said Tom Hadfield, chief executive of Mio, a software maker that helps companies integrate different messaging platforms.

“Slack has succeeded where incumbents have failed, because they understood that messaging could become a hub for collaboration in the enterprise,” Mr. Hadfield said.

As a startup, Slack blindsided many tech giants in the collaboration space, he said, by breaking down silos in the workplace and pulling enterprise data from hundreds of apps into a single, real-time messaging tool.
 

“Enterprise cloud communications companies are stealing the show as the most exciting IPOs of 2019,” said Praful Shah, chief strategy officer at RingCentral, a cloud-based phone systems provider.

Earlier this year, Zoom Video Communications Inc. more than doubled its share price during its stock-market debut.

In a research note in January, investment advisory firm Stifel Nicolaus & Co. said that “enterprise CIOs have finally begun to migrate mission critical workloads to the cloud and we believe communications are now front and center with the rise of videoconferencing, mobility, and team chat/collaboration.”

The global market for enterprise collaboration is estimated to have grown 12% last year to $2.4 billion and it is on pace to reach $3.2 billion by 2021, according to International Data Corp.

Within that market, Slack has about 10 million daily active users, including 95,000 paying customers, according to the company’s first-quarter report. It declined to comment on this week’s IPO.

By comparison, Microsoft Corp. says its Teams collaboration tool is being used by more than 500,000 organizations, including most of the Fortune 100, for workplace messaging, meetings and other services.

Facebook Inc.’s Workplace, which entered the market in late 2016, has about two million paid users, including more than 150 companies with over 10,000 users each, the company said.

Cisco Systems Inc., an early enterprise-collaboration vendor, said it hosts more than 130 million meeting attendees every month and 360 million meetings a year on Webex, its collaboration tool.

“What we’re seeing now is enterprises wanting to bring context and intelligence into the equation,” said Amy Chang, senior vice president of Cisco’s collaboration technology group. “Chat alone is nice, video alone is nice, but what moves the needle is having it all integrated and simple,” she said.

Much of the growth in the collaboration market is being fueled by the spread of cloud computing, said Larry Cannell, research director for collaboration and content strategies at Gartner Inc.

“The speed to market and availability of these products are a far cry from where we were just a few years ago,” Mr. Cannell said. “Vendors are able to innovate quicker and iterate more often.”

Mr. Cannell said Slack’s main appeal for CIOs is that it moves office communications away from an individual worker’s inbox and into a broader channel. That dovetails with a trend to tap expertise across business divisions and foster group productivity, he said.