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Taking Stock of Remote Work Players: Zoom, Slack, Microsoft, Google

Wednesday, December 09, 2020 02:46 PM | Neal Farmer

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Taking Stock of Remote Work Players: Zoom, Slack, Microsoft, Google

The coronavirus has changed almost every part our daily life now.

Masks are either required or strongly encouraged when going out in public whether it be a dinner with friends or just grabbing your morning coffee (if you're still doing either of those things). People have had to adapt to the global pandemic as new regulations have been enforced to keep themselves and others safe.

The virus hasn't just changed our social lives, it has also changed our work lives just as much. Millions have lost jobs as a result and are still looking for work. Many who have remained employed have worked from home from months. With millions working remotely, companies have had to change how communication between employees works.

Pizza and a conference room used to be all you needed to hold a meeting, but in 2020 with employees working remotely, technology has become the most-important part of most meetings.

State of the Industry Pre-COVID

Many communications platforms were already available given the fact that remote work is not a completely new concept brought on by the pandemic. Far before we knew what COVID-19 was, businesses were already using software to keep employees around the world in contact. The trend toward remote work had already started well before the pandemic. The biggest benefit for a business is that if someone can complete all their work from home or a coffee shop nearby, then the company doesn't have to pay rent on office space for 100% of it's employees.

If anything, coronavirus just accelerated a process of transitioning to more remote work and that can be seen with companies such as Twitter going completely remote at the start of the pandemic. Thus, with more firms going to this business model, communications platforms were in far higher demand than ever before. The result has been a few companies that dominated this business with the focus on text channels and video conferencing.

Slack and Zoom's Hot Start

Slack (WORK) and Zoom (ZM) garnered the most attention from investors early on as new platforms that would specifically gain from this trend. Each has a very different focus from the other with Slack primarily used for text communications while Zoom provides video calls. However, the pandemic has been great for ZM shareholders while Slack investors got most of their gains for the year when salesforce.com (CRM) offered to buy the company.

Zoom was profitable pre-pandemic and, after adding countless business, school and personal customers, has become more profitable this year. Slack meanwhile doesn't do much business with educational institutions or individual users, wasn't profitable before the pandemic and continues to lose money.

Zoom's ease of use, and a free tier that includes meetings of less than 40 minutes, really helped the company get a foot in the door, especially with educational users and other people who were making a first move into using video conferencing. Schools of all levels had to choose a software program that would allow teachers to hold class with their students remotely. This ease of use put it above competitors as 2020's first-time users didn't have an onsite IT person to help them get up and running with new software.

While Zoom has had a great 2020 compared to most companies, it is going to find growth harder to come by going forward. First, the market is pretty saturated at this point, 2020 forced nearly everyone online, creating massive new demand for these kinds of services. Another flood of customers likely isn't coming, which means Zoom and Slack, whether as an independent company or as a unit of salesforce, are going to have to win customers from the competition if they want to keep growing.

Those competitors, Microsoft and Google, are massive, have deep pockets and in most cases, an existing relationship with most businesses, making the road ahead for these upstarts look even more daunting.

Tech Giants Look to Take Over

Now Microsoft’s (MSFT) first foray into the business communications software market had a decent start but had some… troubles in the long term (*cough* Skype *cough*). However, Microsoft Teams is already proving that the tech giant has learned from previous failures. Teams is a much better program that is fully integrated with Microsoft Office. That last part is the absolute game changer. Most businesses are already very integrated with Microsoft software and the company is bundling Teams with a basic Office license meaning most companies can use it without adding to their costs.

Thus, Slack essentially becomes an extra bill to pay if a company is already using Microsoft technology. Teams has also copied Slack’s largest competitive advantage, which was its integrations with other applications.

The reason Zoom is now going to find itself in a similar situation is that Microsoft Teams also supports video conferencing and has a seamless integration with its text based communication services. Again the advantage of being bundled with an Office license results in Zoom becoming an extra bill for most businesses and not offering a significant advantage over just using Teams. Why have two separate software applications when you can just use one for both?

Google (GOOG) also provides its own communications services with Google Hangouts and Meet. These programs are also likely to eat into both Slack and Zoom’s market share with Zoom likely being hit the hardest in one of 2020's biggest growth areas. Google’s Chromebook for Education gives schools all the required hardware and software for remote classes using the Google Suite. Additionally, the cost to the school is a fraction of the cost of buying PCs and Zoom licensing. Chromebooks are becoming increasingly popular for students due to their light weight and low cost, while still providing a keyboard and desktop support.

Summary

Slack and Zoom were two of the biggest winners from the start of the pandemic as businesses were forced into working remotely. The initial rise in popularity has since been met with growing competition from some of the biggest companies in the world and should have investors cautious about the long term outlook for these "hot" stocks. There is no guarantee that Microsoft or Google will dominate these markets either, but the integrations with their own software provide a massive advantage over others.

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