Slack and Atlassian, the two leaders in the enterprise software market, are on a collision course, whether they like it or not.<
Slack has been the clear leader in media hype so far, as the company soaked up most of the positive PR throughout 2015.
However, Atlassian, owner of Slack’s biggest competitor, HipChat, went public last week, with its valuation soaring to $5.8 billion on the back of a first day pop of 32%. With ten years of solid profits behind it, Atalassian has reason to be confident.
The Australian company has so far denied any suggestion that it sees Slack as a rival.
In a recent interview, HipChat general manager Steve Goldmsith claimed there was enough space for both companies. "It’s not a finite pie that Slack and HipChat are going to carve up," Goldsmith said. "The space that we're both pursuing is corporate email, team communication . . . [It] is a huge space. There's plenty of room for both of us.”
On the other side of the lines, Slack CEO Stewart Butterfield has eschewed talking about the competition. He has compared Slack to a well-run hotel, saying that he’s focused on making sure users have the best experience possible. There’s always room for multiple hotels in any city, so why worry about the competition?
As the market for enterprise chat matures, it’s all but certain that the two platforms will start run up against each other.
So far, this notion has held true. While direct user numbers for HipChat aren’t publicly available, its parent company claims that the number of messages sent through the platform grew by 70% within a year. Meanwhile, Slack’s daily active users grew tenfold over the same period. Clearly, neither company has had trouble growing.
But as the market for enterprise chat matures, it’s all but certain that the two platforms will start run up against each other.
For one thing, the comparison to email doesn’t hold up under closer scrutiny. Nor does the hotel analogy. Neither corporate email nor hotels have strong network effects.
Email is a protocol, not a platform. Any email address is interoperable with any other. As a result, no single company has been able to build a successful network around email. Likewise, hotels lack network effects of any kind. Chat, however, seems like it could be different.
Because they’re run within self-contained platforms – not open protocols like email – both Slack and HipChat have the potential for strong network effects. So far these networks have been contained within a particular company.
The more people that use one platform at a particular company, the more likely other users at that company are to join. But there’s little spill over between different companies, so these platforms’ network effects are still highly localized.
That your company uses Slack doesn’t affect which platform any other company will choose. This dynamic makes Slack and HipChat different from most consumer-facing messaging platforms like Facebook’s Messenger or Tencent’s WeChat, which have strong spillover between, rather than just within, localized network clusters.
That’s why consumer messaging has typically been winner-take-all, with one platform dominating in each region, while enterprise chat has had room for multiple players. Without strong network effects between companies, the market could easily remain fragmented, with plenty of room for both Slack and its competitor.
Yet if the events of last week are any indication, this dynamic is about to change. On the same day, both enterprise chat platforms made big announcements about their development platforms.
Moves toward building a development platform, which mirror the playbook of enterprise software leader Salesforce, put the two messaging platforms on a collision course. Adding developers into the mix creates spillover network effects between different companies.
Slack announced that its teaming up with a who’s who of venture capitalists – Accel, Andreessen Horowitz, Kleiner Perkins, and Spark Capital, among others – to form an $80 million fund that will back Slack-based apps or Slack-first companies. Slack also launched the Slack App Directory, its answer to the App Store. The goal is to turn Slack into the development platform for enterprise software.
Meanwhile, Atlassian announced that its Atlassian Marketplace had hit $120 million in sales, with more than 15 developers having generated $1 million in sales each. The marketplace – which includes third-party apps for HipChat as well as the company’s other products, such as JIRA and Confluence – has been picking up speed, too. While it took three years for the marketplace to hit $100 million in sales, it took only three months for it to reach the next $20 million.
These moves toward building a development platform, which mirror the playbook of enterprise software leader Salesforce, put the two messaging platforms on a collision course. Adding developers into the mix creates spillover network effects between different companies.
The more users there are on one platform, the more likely a developer is going to decide to develop on that platform. While there may be room for many siloed messaging platforms, there’s typically room for only one, or at most two, top development platforms in any market.
\In either case, the rivalry is bound to become intensely competitive in the years ahead. (Think iOS vs. Android.) While it’s still far too early to declare a winner, the battle to be the monopoly in enterprise messaging has clearly begun.