Last September, the software company Atlassian launched a new workplace chat app called Stride, aimed squarely at taking on the similar app Slack. “We’ve been thrilled by the excitement we’ve seen from the tens of thousands of teams who have adopted it as their communication platform,” the company gushed in a March blog post.
Now, less than a year after the launch, Atlassian is pulling the plug on the product, along with its earlier workplace chat app HipChat. Atlassian said it will discontinue the two products by Feb. 15, 2019, and exit the communications business.
To top it off, it is transferring the intellectual property for Stride and HipChat to Slack, as part of a deal the companies described as a “partnership.” Slack will migrate Atlassian’s users to its product. Atlassian also made an “equity investment” in Slack that Slack calls “small, but symbolically important.” The companies didn’t disclose the terms of the deal.
The deal seems confirms what millions of office workers already know: Slack has become the dominant tool for workplace messaging. The company boasts more active users than Microsoft’s competing Teams product, including many who are surprisingly passionate about it.
Slack started eating into HipChat’s market share in 2014, says Wade Foster, CEO of Zapier, which offers tools that enable users to connect different cloud-hosted applications. According to Zapier’s data, the number of people linking Slack to other applications passed the number of people doing the same with HipChat by the end of 2014. The number of people using HipChat with Zapier soon declined, while the number using Slack skyrocketed.
It’s also an admission of defeat from Atlassian. “They gave up on a third-place product to focus on being first elsewhere with developers. Must have been a very hard choice,” says Ross Mayfield, the founder of Pingpad, a startup building a collaboration tool for Slack and other workplace chat platforms.
The deal still could have big upsides for Atlassian, says Jonathan Allan Kees, a senior analyst at Summit Insights Group. The two companies will cross-promote each other’s products, which could bring Atlassian new customers for products including its bug-tracking application JIRA. “Communications is a very busy space in terms of peers, and this will allow Atlassian to focus on its core products, which are growing,” Kees says. Indeed, investors pushed Atlassian’s stock up 15% in after-hours trading, after the deal was announced.
Atlassian and Slack have long worked together to ensure integration between their products. IDC analyst Wayne Kurtzman says the companies have long been frenemies, but says the competition is coming to an end with two winners. “The deep Slack integration keeps Atlassian products in the center of the workflow,” Kurtzman says. “Both companies should enjoy increased profitability and customer satisfaction.”
Not all of Atlassian’s customers are happy. In a post on Atlassian’s message board, one customer complained that his company can’t use Slack or other products based in the cloud. Slack doesn’t offer a version of its product that can be run “on-premises” in customers’ own data centers. Atlassian spokesperson Kelsey Castellow says the company will support on-premises customers until their licenses expire, then help them move to other programs. Pingpad’s Mayfield says HipChat’s failure shows that the demand for on-premises is likely declining as more businesses shift to cloud-hosted services.
For Slack, the deal means one less competitor and helps nudge Atlassian’s customers to its own products, instead of Microsoft’s. Last March, Microsoft announced that Teams, which is included with the company’s Office 365 cloud-based service, was used by more than 200,000 organizations. That’s well behind the 500,000 organizations Slack cited in May, but Teams had only been around for a year at the time of the announcement.