Specialist
Former Senior Account Executive at Slack Technologies Inc
Agenda
- Slack’s (NYSE: WORK) operating environment – 12-24-month demand outlook for workplace collaboration solutions and potential churn risk
- Potential synergies with Salesforce (NASDAQ: CRM)
- Competitive dynamics relative to Microsoft (NASDAQ: MSFT) Teams and Alphabet’s (NASDAQ: GOOGL) Google
- Outlook for 2021 and beyond – pricing outlook, non-tech department expansion prospects, product innovation and downside risks
Questions
1.
Could we start with an industry-wide overview of workplace collaboration software? What key trends or drivers do you think investors should be monitoring?
2.
To what extent has the pandemic accelerated the generational and digitisation drivers you referenced? How might the WFH tailwind stack up for Slack relative to other aspects in the overall workplace collaboration suite, such as the phenomenal growth for Zoom?
3.
How do you picture the net new normal working environment? Does work-from-anywhere essentially mean that Slack’s demand environment is sustainably higher-level?
4.
Which specific segments or verticals might revert to the pre-coronavirus work set-up, with an associated softening in demand? SMB might be one, where it’s more of a immediate necessity to go remote vs a long-term need, relative to a corporate office.
5.
What are your overall key takeaways from Salesforce’s acquisition of Slack?
6.
How does the transaction impact Salesforce’s growth opportunities? Do you think Slack provides Salesforce with alternative revenue avenues?
7.
You referenced Slack being used by 65% of the Fortune 100. Will Salesforce facilitating introductions to functions or departments mean Slack’s initial growth will often be building out existing logos? How do you expect Slack to balance land-and-expand growth vs Salesforce being able to facilitate a better new logo wins?
8.
What challenges might be most difficult for Slack and Salesforce to overcome as they join together?
9.
Slack has historically touted a USD 28bn-plus market opportunity. How do you think that TAM breaks down by enterprise vs SMB? You noted the learning curve is much flatter for certain pockets vs others, and I would assume Salesforce will be facilitating a lot more streamlined growth in the enterprise portion.
10.
What proportion of Slack’s total user base do you think are tech users vs business users? Will business users be the crux of the opportunity?
11.
Is there a disparity in engagement between Slack’s tech and business users? Are tech users likely to be significantly more engaged on the platform on a daily basis, even in the sense they’re using a more diversified number of integrations, for example?
12.
Could you frame Slack’s competitive landscape and the company’s differentiation? The oversimplified market breakdown would be a duopoly of Slack and Teams, at least as the players that are trying to double down on the breadth of integrations. Salesforce has its own collaboration products, whether it’s Chatter or Quip, and I think we could even tie in Google Suite on the SMB side.
13.
What long-lasting advantages does Slack have over Teams, and vice versa?
14.
To what extent can Salesforce meaningfully bolster the breadth of Slack’s product and integrations?
15.
How do Slack’s security features stack up? Symphony is a messaging app that many financial firms are inclined to use. Is that due to a security aspect, in the sense it’s embedded? What key security developments might be necessary for more highly regulated industries to buy into work-from-anywhere solutions?
16.
How sticky are workface collaboration products? What are the industry switching costs in dollars and time required, relating to turning down one and implementing the other plus retraining? Do you think switching costs will be a way to maintain market share, to a certain extent?
17.
Are there further threats to Slack’s positioning that you expect it to work through in the next few years?
18.
You referenced Salesforce’s capability to improve and refine Slack’s go-to-market. Could the reverse be argued, in that Slack may evolve to become the platform for Customer 360 for Salesforce and so what Slack as a platform offers becomes more complex?
19.
Do you think Slack’s management team – whether CEO and Co-founder Stewart Butterfield or others – add or subtract to the Salesforce deal in any way?
20.
Salesforce noted a revenue target of USD 4bn for Slack over the next five years at its 2020 investor day, representing a 38% CAGR. What key factors will play into that growth story? What would help it succeed, and which areas with a higher execution risk could potentially cause it to fall short?
21.
How should we frame barriers to entry for collaboration tools? We have Zoom being used as a verb – I don’t know if Slack is there yet, but it seems Slack and Teams have just grown in brand affinity. To what extent can new players successfully enter? Might the innovation phase only last for the next couple of years?
22.
Should we frame Slack as isolated from the overall UCaaS tech stack? You referenced Zoom competing with Teams, which makes sense to me. We can even tie in RingCentral and 8x8 – omnichannel players with voice, video and chat, where chat is the least influential driver of product quality. How might Slack need to round out its offering if this is the longer-term competitor set, and if voice and video are the key drivers?
23.
What scale of target might be feasible to round out Slack’s voice and video capabilities? Might this be players akin to RingCentral or 8x8 – perhaps less so RingCentral, given its nearly USD 40bn market cap?
24.
What is your assessment of Discord and its potential trajectory here vs Slack? It’s largely a B2C app, and its user engagement took off through utilisation by gamers. It seems like there’s a potential pivot to B2B.
25.
You indicated that attempts at a wall-to-wall adoption are probably a multi-year process. How should we think about that initial sales cycle, and the process of getting an initial contract signed? Is that likely to be a 12-18-month process for a typical enterprise customer?
26.
Is there a subset of CIOs across the industry who perceived the viral adoption – where managers are bringing on their own tools for their workspace – as a negative, given it’s not standardised or regulated? Is there a material likelihood of growing to a certain amount of departments within an organisation before the CIO does it wall-to-wall, and rips-and-replaces because it’s not something they had signed off on?
27.
Do you think rip-and-replaces will happen less frequently for Slack now it’s under the Salesforce umbrella?
28.
How should we frame Salesforce’s ability to streamline Slack’s sales process? To what extent are the sales motions varied due to dealing with different decision-makers? Would any rationalisation of Slack’s sales force be detrimental to adoption, in that Salesforce’s team may initially face challenges selling it themselves?
29.
You discussed the differentiation in selling to non-tech functions. To what extent do the product use cases differ materially by industry vertical or department? Would you expect a product nuance where it sells one Slack product to an HR vertical with a specified set of integrations, relative to a different set of integrations in the tech department? How might those dynamics facilitate a more streamlined sales motion?
30.
Do you think Slack is effective at these customisable implementations? Is there room to improve here?
31.
What are your thoughts on Slack’s longer-term pricing power? Obviously, Microsoft is giving Teams away for free, and Office 365 users have been this overarching, potentially existential issue. Do you expect price compression for this type of product set, particularly given Salesforce might find success bundling it in? Does that compress the price and thus the ARPU that’s achievable for Slack?
32.
How would you size Slack Connect’s product opportunity? How should we gauge its relative strengths?
33.
Should we perceive Slack Connect as having stickiness factor so much as ARPU expansion, to the extent that it’s an e-mail replacement that has become a necessity for everyday workflow?
34.
What M&A avenues might Salesforce pursue as it continues down its path for Digital 360, having discussed voice and video? It seems Slack is a segue relative to its historical M&A approach. Could Salesforce potentially target new workplace collaboration companies, whether Monday.com, DocuSign, Smartsheet or Asana?
35.
Are there any further core topics we haven’t had a chance to touch on yet, particularly relating to key metrics we should be tracking as the landscape evolves?
36.
Do you think there’s enough white space to keep net dollar retention fairly stable for the next 5-10 years, driven by those free to paid and wall-to-wall adoption opportunities you outlined?
