Microsoft is moving away from Skype to better compete with Slack

Thomson Reuters

Microsoft's Teams application will be replacing Skype for Business as the company’s primary teamwork software, Microsoft said on Monday, in its latest effort to defend against the threat of upstart Slack in the workplace collaboration software market.

The company announced new Skype voice and video technology that adds advanced calling capabilities to Teams, the instant messaging tool for professionals that is bundled in Microsoft Office 365.

"Microsoft Teams will evolve as the core communications client," said Ron Markezich, Microsoft’s corporate vice president of Office 365, in a press briefing. "We will make Microsoft Teams the hero and primary experience for all voice, video and meetings."

With Skype for Business and Yammer, Microsoft has made it possible for years for professionals to work together online, but since the arrival of Slack in 2014 the workplace collaboration market has become more competitive.

 From 2015 to 2016, the market grew by 13.6%, and it is expected to be worth more than $22 billion by 2021, according to IDC, the market research firm. Microsoft remains the leader with 36.8% market share, but since 2014, Slack has shown fast growth and claims 5.3% of the market, according to IDC.

"With Slack entering into classic Microsoft territory, this is a bit of pride and a bit of opportunity," said Johnny Won, founder of Hyperstop, a tech consultancy firm.

Microsoft plans to continue supporting Skype for Business, especially for companies that run the software on their own data centers, but Microsoft expects its subscription-based Office 365 users to migrate to Teams over time as more communication features are added.

"We think the vast majority of our customers will go toward Microsoft Teams as that hub for teamwork," Markezich said in an interview.

Microsoft launched Teams, a Slack look-alike software, in March, and says it has been adopted by 125,000 organizations. Slack, by comparison, says it is used by 50,000 paying groups. Microsoft did not say how many organizations use Skype for Business.

"There is no question that Microsoft is making a very big push with Teams," said Mary Hanzberg, executive vice president of investments at AnalyzeWallStreet.com, an investment advisory service. "The pressure Slack faces is something that every tech startup has to deal with."

Microsoft announced the decision to replace Skype for Business with Teams during the keynote of its Ignition conference in Orlando, Florida.

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