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Slack: Break up the Microsoft Teams bundle and let us interoperate

In an antitrust complaint filed Wednesday with the European Union, Slack argued that Microsoft is unfairly bundling Microsoft Teams with Office 365 and demanded that other enterprise software companies should be granted greater access to its APIs.

Slack: Break up the Microsoft Teams bundle and let us interoperate

Slack wants the European Commission to separate Teams from the Office 365 bundle and require Microsoft to charge a price for Teams.

Photo: Michael Nagle/Bloomberg via Getty Images

Microsoft's refusal to let other enterprise software products and services integrate with Microsoft Teams, a very common practice in modern enterprise software, is a key part of Slack's European Union antitrust complaint against Microsoft, its lawyers said Wednesday.

Slack claimed that Microsoft is "abusing its market dominance to extinguish competition in breach of European Union competition law" in a press release outlining the complaint, pointing to the huge market share Microsoft enjoys for its Office 365 productivity suite in Europe. "Slack threatens Microsoft's hold on business email, the cornerstone of Office, which means Slack threatens Microsoft's lock on enterprise software," said Jonathan Prince, vice president of communications and policy at Slack.

Usage of Microsoft Teams has skyrocketed over the last six months, thanks in large part to the abrupt shift to working from home brought on by the pandemic. Slack has also grown during this period, but as of April, Microsoft said 75 million people are using Teams every day, while Slack counted 13 million "daily concurrent users" as recently as March.

Slack wants the European Commission to separate Teams from the Office 365 bundle and require Microsoft to charge a price for Teams, said David Schellhase, general counsel, during a press conference. It also plans to highlight what it called Microsoft's refusal to allow third-party software to interoperate with Teams, he said.

Slack, Box, Dropbox, Google and countless other enterprise software companies have made integration between their products a top priority, arguing that users want the freedom to integrate with different tools while still choosing the "best of breed" products that make the most sense for their businesses. But Microsoft has not agreed to provide the same level of API access to Teams that is otherwise common in the market, Schellhase said.

"Their public APIs are just enough to create a minimum product, but it's not enough to create the experience our joint customers want," Schellhase said.

For a significant chunk of users, Microsoft Teams is a forced migration from Skype for Business, a video calling and chat app that was still widely used until recently. Microsoft decided in 2017 to focus exclusively on Teams as its main communication and collaboration product, announcing plans to retire the online version of Skype for Business by the middle of 2021 and requiring all new Office 365 users to adopt Teams as of last September.

But Slack's lawyers argued that Microsoft is abusing its position in the office productivity market in bundling Teams for free alongside paid subscriptions to Office 365, an argument reminiscent of the U.S. antitrust case filed against Microsoft more than two decades ago. They also said, without providing the specific numbers they said were shared with the European Commission, that Microsoft's market power in other key areas of enterprise software — such as Microsoft Exchange for email and Microsoft Active Directory for employee identity management — incentivizes existing customers to choose newer products like Teams, especially if it's free.

"When you're looking at the impact of competition, of the tying behavior between Teams and Office and the related applications embedded in Office 365 and Microsoft 365, one must, as the European Commission surely will, take in account the wide picture of the market power of Microsoft in the enterprise software market," said Trevor Soames, a European intellectual property attorney representing Slack. "The whole thing is interconnected."

For its part, Microsoft said in a statement:

"We created Teams to combine the ability to collaborate with the ability to connect via video, because that's what people want. With Covid-19, the market has embraced Teams in record numbers while Slack suffered from its absence of video-conferencing. We're committed to offering customers not only the best of new innovation, but a wide variety of choice in how they purchase and use the product. We look forward to providing additional information to the European Commission and answering any questions they may have."
Regardless of the merits of Slack's case, it's odd that Microsoft's official statement overlooks the fact that Slack does offer videoconferencing in its main product. Few would argue that service is Slack's best feature: Even Slack CEO Stewart Butterfield told Protocol earlier this year that Slack itself uses Zoom for internal videoconferencing, and Slack recently signed a deal with AWS to replace that internal video technology with AWS' Chime, but it's still there.
 Tom Krazit

Tom Krazit ( @tomkrazit) is Protocol's enterprise editor, covering cloud computing and enterprise technology out of the Pacific Northwest. He has written and edited stories about the technology industry for almost two decades for publications such as IDG, CNET, paidContent, and GeekWire, and served as executive editor of Gigaom and Structure.

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Protocol | China

Everything you need to know about the Yuanxin Technology IPO

Image: Yuanxin

Yuanxin Technology doesn't hide its ambition. In the first line of its prospectus, the company says its mission is to be the "first choice for patients' healthcare and medication needs in China." But the road to winning the crowded China health tech race is a long one for this Tencent- and Sequoia-backed startup, even with a recent valuation of $4 billion, according to Chinese publication Lieyunwang. Here's everything you need to know about Yuanxin Technology's forthcoming IPO on the Hong Kong Stock Exchange.

What does Yuanxin do?

There are many ways startups can crack open the health care market in China, and Yuanxin has focused on one: prescription drugs. According to its prospectus, sales of prescription drugs outside hospitals account for only 23% of the total healthcare market in China, whereas that number is 70.2% in the United States.

Yuanxin started with physical stores. Since 2015, it has opened 217 pharmacies immediately outside Chinese hospitals. "A pharmacy has to be on the main road where a patient exits the hospital. It needs to be highly accessible," Yuanxin founder He Tao told Chinese media in August. Then, patients are encouraged to refill their prescriptions on Yuanxin's online platforms and to follow up with telehealth services instead of returning to a hospital.

From there, Yuanxin has built a large product portfolio that offers online doctor visits, pharmacies and private insurance plans. It also works with enterprise clients, designing office automation and prescription management systems for hospitals and selling digital ads for big pharma.

Yuanxin's Financials

Yuanxin's annual revenues have been steadily growing from $127 million in 2018 to $365 million in 2019 and $561 million in 2020. In each of those three years, over 97% of revenue came from "out-of-hospital comprehensive patient services," which include the company's physical pharmacies and telehealth services. More specifically, approximately 83% of its retail sales derived from prescription drugs.

But the company hasn't made a profit. Yuanxin's annual losses grew from $17 million in 2018 to $26 million in 2019 and $48 million in 2020. The losses are moderate considering the ever-growing revenues, but cast doubt on whether the company can become profitable any time soon. Apart from the cost of drug supplies, the biggest spend is marketing and sales.

What's next for Yuanxin

There are still abundant opportunities in the prescription drug market. In 2020, China's National Medical Products Administration started to explore lifting the ban on selling prescription drugs online. Although it's unclear when the change will take place, it looks like more purely-online platforms will be able to write prescriptions in the future. With its established market presence, Yuanxin is likely one of the players that can benefit greatly from such a policy change.

The enterprise and health insurance businesses of Yuanxin are still fairly small (accounting for less than 3% of annual revenue), but this is where the company sees an opportunity for future growth. Yuanxin is particularly hoping to power its growth with data and artificial intelligence. It boasts a database of 14 million prescriptions accumulated over years, and the company says the data can be used in many ways: designing private insurance plans, training doctors and offering chronic disease management services. The company says it currently employs 509 people on its R&D team, including 437 software engineers and 22 data engineers and scientists.

What Could Go Wrong?

The COVID-19 pandemic has helped sell the story of digital health care, but Yuanxin isn't the only company benefiting from this opportunity. 2020 has seen a slew of Chinese health tech companies rise. They either completed their IPO process before Yuanxin (like JD, Alibaba and Ping An's healthcare subsidiaries) or are close to it (WeDoctor and DXY). In this crowded sector, Yuanxin faces competition from both companies with Big Tech parent companies behind them and startups that have their own specialized advantages.

Like each of its competitors, Yuanxin needs to be careful with how it processes patient data — some of the most sensitive personal data online. Recent Chinese legislation around personal data has made it clear that it will be increasingly difficult to monetize user data. In the prospectus, Yuanxin elaborately explained how it anonymizes data and prevents data from being leaked or hacked, but it also admitted that it cannot foresee what future policies will be introduced.

Who Gets Rich

  • Yuanxin's founder and CEO He Tao and SVP He Weizhuang own 29.82% of the company's shares through a jointly controlled company. (It's unclear whether He Tao and He Weizhuang are related.)
  • Tencent owns 19.55% of the shares.
  • Sequoia owns 16.21% of the shares.
  • Other major investors include Qiming, Starquest Capital and Kunling, which respectively own 7.12%, 6.51% and 5.32% of the shares.

What People Are Saying

  • "The demands of patients, hospitals, insurance companies, pharmacies and pharmaceutical companies are all different. How to meet each individual demand and find a core profit model is the key to Yuanxin Technology's future growth." — Xu Yuchen, insurance industry analyst and member of China Association of Actuaries, in Chinese publication Lanjinger.
  • "The window of opportunity caused by the pandemic, as well as the high valuations of those companies that have gone public, brings hope to other medical services companies…[But] the window of opportunity is closing and the potential of Internet healthcare is yet to be explored with new ideas. Therefore, traditional, asset-heavy healthcare companies need to take this opportunity and go public as soon as possible." —Wang Hang, founder and CEO of online healthcare platform Haodf, in state media China.com.

Zeyi Yang
Zeyi Yang is a reporter with Protocol | China. Previously, he worked as a reporting fellow for the digital magazine Rest of World, covering the intersection of technology and culture in China and neighboring countries. He has also contributed to the South China Morning Post, Nikkei Asia, Columbia Journalism Review, among other publications. In his spare time, Zeyi co-founded a Mandarin podcast that tells LGBTQ stories in China. He has been playing Pokemon for 14 years and has a weird favorite pick.
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From Home to Hybrid: Asana’s COO Shares Back-to-Office Advice on Productivity

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Protocol | Workplace

How to make remote work work

Hofy made an early bet that COVID-19 would have a long-term impact on workplaces. The company recently raised $15.2 million for its remote workforce equipment management solution.

Hofy recently raised $15.2 million for its remote workforce equipment management service.

Photo: Jannis Brandt/Unsplash

It's your new employee's first day of remote work, but their laptop hasn't shown up yet. Not a good look.

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Protocol | Policy

Tech giants want to hire Afghan refugees. The system’s in the way.

Amazon, Facebook and Uber have all committed to hiring and training Afghan evacuees. But executing on that promise is another story.

"They're authorized to work, but their authorization has an expiration date."

Photo: Andrew Caballero-Reynolds/AFP via Getty Images

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But nearly two months since U.S. evacuations from Kabul ended and one month since the companies' public commitments, efforts to follow through with those promised jobs remain stalled. That, experts say, is partly to do with the fact that the vast majority of Afghan arrivals are still being held at military bases, partly to do with their legal classification and partly to do with a refugee resettlement system that was systematically dismantled by the Trump administration.

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N26's monster $900 million funding round announced Monday underlined the German startup's momentum in the digital banking market.

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Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Signal at (510)731-8429.

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