Is Microsoft Team Displacing Zoom in 2022?

Microsoft Teams has Beaten Zoom in 2022

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Hey Guys,

I recent did an earnings report on Zoom’s business and I was frankly shocked. Zoom’s lack of growth indicates one thing to me, Microsoft Teams is disrupting it and gradually displacing it as the former market leader in its category.

More than half way through 2022,?over a quarter of a billion?people use Microsoft Teams, making it one of the most popular business communication services in the world.

Of course we have seen this before with how Teams beat Slack, which was acquired by Salesforce in December, 2022. I definately don’t hear about people using slack quite as as much as a few years ago.

Remote work has become more common than ever and WFH becoming an option at a majority of companies with some even going permanently remote globally. This means digital transformation is a big deal for our productivity and using a service like Zoom, Cisco or Teams becomes nearly ubiquitous.

Microsoft has come a long ways from its Skype acquisition days.

During the pandemic they really developed the Teams product in how they efficiently bundle services. Teams has a software interoperability advantage that’s impossible to compete with. Microsoft Teams is a communication platform included in?Microsoft 365 . Teams is highly integrated with other products in the Microsoft suite, including Word, PowerPoint and Excel, making it a true collaboration platform.

Created to compete with Slack, Teams has grown from 2 million users at its initial launch date in November 2017, and has been scaled in the last five years to become now the dominant leader it is.

Businesses can now add Microsoft Teams voice and video calling into their own apps

The interoperability now means yet another step forward. Microsoft's Azure Communication Services (ACS) for Teams has reached general availability, giving independent software vendors (ISVs) and developers the tools to integrate Teams capabilities within their custom business applications.

I believe this now makes Microsoft Teams pretty much impossible for players like Zoom or Cisco Webex to compete with.

As of April, 2022, Zoom has in the area of 300 million daily active users users. I believe 2022 is the point when Microsoft Teams overtook them and becomes simply the more convenient option.

Interoperability of ACS and Teams lets developers build custom applications that tap Teams for voice, video, chat and screen sharing. This means Azure just keeps building features that enhance its moat and capabilities for enterprise and small to medium sized business users.

Zoom is a unified communications platform that encompasses audio and video conferencing, chat functionality, video webinars and more. But it has been struggling to grow now in single digit growth territory in its latest earnings. As Zoom tries to expand in customer service and sales capabilities or even experiment with advertising, Teams keeps getting integrated better with Microsoft’s core value proposition.

Microsoft Teams capabilities can go beyond the app itself, thanks to new SDKs for Azure Communication Services.

Microsoft also has this SDK advantage with developers. So now, besides enabling Teams calling in custom business apps, businesses can build new workflows for applications that require custom management of incoming and outgoing Teams phone calls. Developers can also bring Teams calling capabilities into devices that are not supported with the standard Teams client,?according to Microsoft .

Microsoft’s reach and interoperability in a Software moat then means Zoom is spending too much to acquire new customers in terms of sales and marketing spend, making it difficult for them to become anything much more than our pandemic darling. Slack of course was a startup darling before being acquired by Microsoft CRM rival Salesforce.

Azure’s Cloud presence and dominant Cloud growth means it can keep powering forward as Microsoft is one of the most diversified corporate Giants in the world. As for internet speeds recommended by either Zoom or Teams, again Teams is more approachable. Microsoft Teams recommends a 2.5Mbps upload and 4Mbps download connection for high-definition group calls, while Zoom is a bit more demanding. Zoom recommends 3.8Mbps up and 3Mbps down for video calls at 1080p.

Zoom’s lack of growth signals to me that Teams is winning, am I wrong? Zoom’s revenue growth slowed to 8% from 12% in the year-ago quarter, a lesser result than analysts had predicted. Zoom’s stock is down 54% year to date and it doesn’t appear to have much else up its sleeve to change back the momentum. Zoom had stunning growth in 2020, nine years after it was founded but that momentum like so many companies that had pandemic cheat benefits have evaporated.

Microsoft has so many subscription revenue streams it boggles the mind. If software is eating the world, Microsoft’s Cloud moat gives it an unfair advantage over potential competitors and Slack and Zoom never really stood a chance in a sense. While Zoom’s popularity has plateaued in 2022, Microsoft Teams is winning the long game.

See you next time.

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