Teams-O365 Decoupling: Leading Analysts Have Their Say

Microsoft’s bundling of Office with Teams at the start of the pandemic split opinion. It was hailed as an inspired business move or alleged as an uncompetitive assertion of market dominance.

Neither line of argument is mutually exclusive. Last week, the news that Teams had reached a staggering 300 million monthly active users (MAU) broke the day after the Financial Times reported that Microsoft had agreed to decouple Teams from its Office suite to avoid a formal EU Commission antitrust investigation.

The concession means that when prospective customers buy Office in the future, they will have the choice of whether to purchase Teams or not. The news has inevitably caused shockwaves within the UC and collaboration industry. However, with Teams such a behemoth solution, will its decoupling from Office ultimately matter?

“I think it absolutely matters,” Sean Spradling, Senior Analyst at Wanehouse, told UC Today. “I think it’s really important that we recognise when the pandemic hit that the meteoric rise of Teams was associated and connected with the idea of this bundle. We can’t necessarily decipher at this point how much of it was directly oriented around convenience versus the quality of the product that Microsoft has put together over time.”

“I think that’ll be a real measure of the objective quality of the Teams solution as it steps forward.”

Melissa Schwarz, Cloud Phone Expert at Schwarz Consulting, added to UC Today:

Once it’s decoupled, assuming that happens, Teams is going to have to stand on its own as a solution. People that would have just said, ‘Well, it’s included, so we’re just going to go with it,’ now have a decision they didn’t necessarily have to make before.”

“They may be looking at Teams and evaluating its actual merits as opposed to the fact that it’s included in Office,” Schwarz continued, “and so went with that because it was already there. I think it’ll be interesting to see how that impacts their growth going forward.”

Spradling added important caveats around the scale of any potential impact and the uncertainty of an exact outcome to any agreement, especially since this has been an ongoing issue for two-and-a-half years. EU regulators had been in discussions with Microsoft since rivals Slack filed an official complaint in 2020 claiming that Microsoft’s bundling of Office and Teams together was uncompetitive. However, this will potentially still signify a major business challenge for Microsoft.

Dan Root, Senior Analyst at Wainhouse, agreed with Schwarz and Spradling that this could be a pivotal moment for Microsoft. “I do think that there is a threat side of this to Teams,” he told UC Today, “in the sense of, ‘are you really good enough to still stay in all of these accounts that you were bundled once you decouple?’

Root also identifies the challenge around unit economics and whether Teams’ pricing will change due to the decoupling. “Once you start putting unit economics behind it that’s in line with some of the other players,” Root added, “now there’s a reason to go through and evaluate ‘Is this the best platform for me to align with, or should I be looking at Zoom or WebEx or RingCentral or something else down the line’.”

Can Crisis Breed Opportunity for Microsoft?

However, bundled offerings have become the norm since the pandemic. In an industry where innovation is constant, the pairing of Office and Teams has lost some novelty.

“That (Teams) product has come a long way in those in those couple of years,” Spradling expanded. “But at this point, everybody in the market has switched to a bundled approach. About 75 percent of the meeting users out there are, at this point, purchasing their meeting capability through some kind of a bundle. The remaining 25 percent is dwindling. It’s slowing, it’s not going to go to zero, but we know that bundles have taken the day certainly.”

Crisis can breed opportunity, however. Spradling highlighted the broader context of Microsoft’s roughly 450 million consumer and commercial Office users and their 300 MAU, relative to the estimated 715 million global knowledge workers (according to Wainhouse Research) representing potential future growth.

“At some point, you need to emphasise that these products aren’t exclusively connected in order to get towards those 715 million knowledge workers,” Spradling commented. “You’ve got to step outside of Office to continue growing. I think Google’s base of Workspace users (which Google has estimated at around three billion) is a valid target for Teams over time as long as that decoupling is performed.”

Root argued that if the unit pricing of Teams increases, reliability and innovation will have to improve in tandem to maintain that user base, never mind continue growth. “I think we all have probably said at one point or another, ‘Teams is good enough when good enough is the standard.’ But if you need to go above that, you do have to think about what platform is going to give me the most consistent, reliable connection and minimal packet loss.”

“With the history of antitrust,” we’ve also seen that Microsoft has found a way to turn some of those (challenges) to its advantage. There could be a strategy behind this that allows Teams to move out from behind Office as a total market offering(…) There’s a real possibility that it incenses innovation, which I’m excited about. We’ve been watching a lot of goat avatars, and that sort of thing comes out for a while from events, so it’ll be interesting to see what innovation is like.”

What is the Future of Big Tech Regulation?

Turning those challenges into advantages, as Spradling noted, can potentially catalyse innovation. However, Evan Kirstel, Social Media Strategist at BCStrategies, iterated his wish to UC Today to “zoom out to the big picture” of what decoupling Teams means politically.

“Bundling for these big tech giants is the competition killer,” Kirstel said, “This is how the future will look with not just Microsoft but Apple. You could also look at Amazon Prime as a kind of bundle. It places a stranglehold on the particular market they’re going after(…) It’s probably too late for Slack, for example, which was probably the biggest loser when it came to the approach of bundling.”

Kirstel argued that U.S regulators aren’t scrutinising the market dominance of big tech closely enough, especially compared to the EU Commission:

I think it requires a serious look, and despite a lot of talk about regulating big tech and not allowing non-competitive business practices, we just haven’t seen much.”

Spradling agreed, describing the U.S. as “quite a bit more laissez-faire than the EU” in anti-competitive practices and privacy. “We need to lead in the United States,” he continued, “where the personal-data-as-dollars monetisation model has really had an impact on things. I think I would love to see the United States government step up into some of these places and protect the consumer and protect the market.”

Root argued that the U.S. isn’t alone in lagging on privacy and antitrust issues. “Realistically, by the time this has gotten to the forefront, the Zoom and Microsoft (bundling) dynamic has already played out. The Microsoft users that were going to adopt this with their Office licensing has already really happened during Covid and coming out of Covid.”

Whether this news will be a defining moment not just for Microsoft but potentially prescient of big tech regulation at large remains to be seen.