Microsoft’s Jeff Teper: Teams ‘will be even bigger than Windows’
Jeff Teper, CVP for Microsoft 365, has a vision for the company’s Office 365 chat-based collaboration tool that competes with Slack, Facebook’s Workplace, and Google Chat. In terms of reach, Teper wants Microsoft Teams to eclipse Windows. (Windows 10 runs on over 1 billion monthly active devices.) Our interview took place a day after Microsoft […]
Jeff Teper, CVP for Microsoft 365, has a vision for the company’s Office 365 chat-based collaboration tool that competes with Slack, Facebook’s Workplace, and Google Chat. In terms of reach, Teper wants Microsoft Teams to eclipse Windows. (Windows 10 runs on over 1 billion monthly active devices.)
Our interview took place a day after Microsoft concluded its online-only Build 2020 developer conference, where the company gave business developers new tools to build Teams apps. Microsoft launched a Visual Studio and Visual Studio Code extension for Teams in preview, introduced new integrations between its Power Platform and Teams, and announced a custom app submission process to help IT admins. Teper was happy to cover a range of Teams topics, including metrics, growth, competitors, consumer positioning, machine learning, and of course dealing with the increased demand during the coronavirus pandemic.
Teams is Microsoft’s fastest-growing business app ever. That was true in 2018, long before lockdowns started juicing up numbers for remote work and learning. As of April 29, Microsoft Teams had 75 million daily active users, up 70% just six weeks prior. That month, Microsoft saw more than 200 million meeting participants in a single day, generating more than 4.1 billion meeting minutes.
Metrics: DAUs and MAUs
That 75 million number encompasses people who use the Teams app every day — millions more likely use the app only during weekdays, weekly, or even less frequently. In Microsoft’s most recent quarterly earnings, CEO Satya Nadella said the company had 258 million paid seats of Office 365, which includes access to Teams. That means less than 30% of Office 365 business users are using Teams every day (how much less depends on the number of free Teams users).
Microsoft has attributed this year’s spikes in Teams usage to the pandemic, meaning a drop is inevitable. Still, given Office 365’s size, Teams has plenty of room to grow, though Teper doesn’t quite see it that way.
“I’m very bullish on us getting more Office 365 users to use Teams. But also, first line workers adopting Teams in healthcare, in retail, airlines, and so forth,” Teper said. “It actually gives us a much bigger addressable market than say the people who author Word, Excel, and PowerPoint documents all day. So I think we’ll see strong growth, hundreds of millions of people using Teams. At some point, the percentage of time people are spending in online meetings has got to go back down. So, the 4 billion daily minutes, that will continue to grow. But at some point, that number is going to level off because people don’t want to spend eight hours a day in online meetings if they can meet in person. But as far as the users, I’m very bullish on that’s going to continue to grow.”
When Microsoft shares an Office 365 seats number along with a DAUs figure for Teams, it gives ammo to competitors like Slack. Why not break out how many daily active users Office 365 has to make an apples-to-apples comparison possible?
“In the matrix of all the things we could disclose we’ve decided to keep it relatively simple. The reason we decided to make the change for Teams is because it’s a communication app,” Teper explained. “People said, ‘Hey, for communications apps, those things are daily habits. In order for us to understand how well you’re doing for Teams, you should give the daily active number.’” We’ve actually had a cohort of people who want us to disclose the monthly active number for Teams. That’s a bigger number than the daily active user. But there’s financial regulations about material disclosure and so forth, so I won’t throw out any new numbers because the SEC and Microsoft won’t let me.”
Microsoft currently has no plans to share DAUs for Office 365 or MAUs for Teams.
Teams has dwarfed the competition, based on numbers shared so far. Slack has 12 million DAUs as of October, Facebook’s Workplace has 3 million paid users as of October, and Google has yet to share a number for Chat. We asked Teper which tool he views as Microsoft Teams’ number one competitor. At first, he dodged the question.
“I was going to say pen and paper,” Teper said. “I think there’s still people doing things that need to be automated and digitized. I think if we look at targeting 1 billion, 2 billion people, many of them are doing things in person, that is expensive. You’ve got to travel. They’re doing things manually with pencil and paper. We certainly see that in hospitals. So our biggest competitor is transforming how people work. That’s how we go big.”
Google Meet has 100 million daily meeting participants and Zoom has 300 million daily meeting participants, which puts Microsoft Teams right in the middle with its 200 million meeting participants. (Unlike daily active users, “meeting participants” can count the same user more than once.)
But Google Meet and Zoom are only for video conferencing. How does Microsoft view the competitive space here?
“First, we start from a customer standpoint,” Teper said. “There are a billion people using Windows and Office so clearly there is a billion people who should be using our cloud services, mobile applications, and desktop applications. And then part of the reason we’re excited about Teams is that it can be used by people who are involved in business processes who may never have been traditional Office customers.”
Microsoft offers virtual patient consults in Teams. Doctors and nurses sometimes use Office, of course, but most of their day is spent talking to patients. Microsoft hopes they can use Teams to collaborate with other healthcare practitioners in their organizations as well as carry virtual discussions with their patients. Teper also envisions airlines using Teams to collaborate with maintenance crews and retail stores trying to automate workflows.
“We think about how many people in the world we can empower with our tools,” Teper said. “We are thinking about hundreds of millions and billions of people. Satya, when he came in as CEO, said ‘every person and organization on the planet’ because he wanted us all to think about our mission and opportunity and impact. We start from there. And then we do that by building a suite of tools, integrated in Teams for chat, for calling, for meetings, for files, etc.”
“So that’s the second part,” Teper continued. “And for sure, in those categories, there are big competitors who have good products, and we’re absolutely striving to be the best choice in each category. So yes, people are very much choosing Teams over Slack. Our success is in the zone of Zoom, but if you look at the commercial-business-and-education-only number which we produced — they have a lot of consumer numbers — I think we’re doing very well. So we start from a customer standpoint, we bring together a suite of tools that nobody else does. And each of those tools needs to be best of breed and be chosen and loved by customers in that category. And then the third thing, which is really what Build was about for us, which I think is unique, is making all this a platform.”
Teams as a platform
Teper is referencing the tools the company released last week to help business developers build apps for Teams. That’s where he argues Microsoft’s integrated offering is in a “clear leadership position.” In other areas that Teams competes in, “it’s a bit of a dogfight,” he concedes, but in terms of a platform for developers, Microsoft is ahead.
“Teams is a shell, a platform for building collaborative applications and integrating them in,” Teper said. “And creating enormous opportunity for partners to build solutions for customers and frankly make money investing in building their applications on Teams. We’ve had a 750% growth of apps inside Teams [over the last year]. Seeing solutions for healthcare, education, manufacturing being built on Teams, is that thing that I think maybe not everybody appreciates that we’re trying to focus on now. Everything from the Power Apps support to Visual Studio support, how people deploy applications. That’s the big thing that is the game changer versus the alternatives in the industry out there. So we’re going to help organizations solve their specific problems, not just give them general purpose tools.”
From there, Jeff starts to dream big. “That platform then becomes an ecosystem, much like Windows became an ecosystem, people build on it. You get the network effects and flywheel of that.”
Is that how Teper sees Teams? The next Windows, if you will, for communication?
“I wouldn’t use those words exactly that way because Windows is going to be the next Windows,” Teper said. “But it’s a platform that transcends operating systems that will be even bigger than Windows. Yes. We want people to build Teams-based applications that run on iOS, Android, the web, the Mac, as well as Windows. So by that definition Teams will be ultimately, even more ubiquitous platform over time. It won’t obviate the need for Windows but …”
Teams for consumers
The other piece of the puzzle in making Teams a massive platform is expanding beyond businesses. In March, Microsoft announced Teams for consumers features were coming to the Android and iOS app in the next few months.
There is precedence for consumers using business tools. The latest high-profile example is Zoom — an enterprise product that consumers have embraced. Everyone understands why people want to use video conferencing tools, especially during lockdowns. But what is the attraction of a chat and collaboration tool over, say, social networks, messaging apps, or just plain texting that consumers use today?
“Almost every Microsoft product that we’ve done — Office, Outlook, OneDrive, etc. — because we’ve offered it to people across work, school, and their personal use, they’ve been really successful,” Teper said. “Not everybody in their personal life is building giant Excel spreadsheets, but hundreds of millions of people are, to manage soccer teams, home improvement, keep track of their finances, athletic training, etc. So, we’ve been very successful in building products for work and life. We do think that there are teams in your personal life. There are sports teams. There are families. There are religious groups. There is running a charity auction, etc. etc. And we don’t think those team-based activities in your personal life are well served by doing them on public social networks, or just in chat. We think, once things get a little more structured, you want a structured tool to help on it. And so we are introducing Teams for that.”
Building a product for both enterprises and consumers at the same time, however, brings its own set of challenges. There are also advantages though, as Teper pointed out.
“We are also recognizing, as we’ve done with Windows and OneDrive, that while the core product should be the same, we really should streamline it for those consumer scenarios,” Teper continued. “And by doing that, we’ll make it better for everybody. Part of the work we’re doing in the next few months as we get ready to start with Teams for consumers, first on mobile phones, is to streamline the experience. But I think if you’re doing any kind of structured activity that’s not an ad hoc conversation, Teams is going to be a better choice than an existing chat product or social network. We’re not trying to displace all that. We’re just saying there’s an unmet consumer need in these more complicated activities in your personal life where getting organized is useful, just like it is with OneDrive or Excel.”
Microsoft Teams for consumers will naturally intersect with Skype. We go over Teper’s thoughts on that overlap here: Microsoft promises new Skype features despite Teams for consumers launch.
When business users started increasingly working from home, Teams usage spiked. There were even reliability issues. We asked Teper what it took to handle that demand beyond simply spinning up more cloud instances.
“Teams already, before COVID-19, was our fastest growing business,” Teper said. “So we were used to nonlinear growth. But then post-COVID-19 it went off the trend line. The Teams architecture and the things behind it like SharePoint and the Microsoft Graph are elastic. So, as we saw a new demand, we needed to just spin up more Azure capacity around the world. And there was definitely a lot of excitement, back in the first couple weeks in March because we were doing that. We found a few bottlenecks. When you have a large-scale system, we had a few things to tune, which we did. Through this it’s been pretty smooth sailing. The one stat I share is the number of daily meeting minutes is about 20 times what it was when we started. I’m pretty proud of the team that built the software that could scale 20X. Yes, we had to spin up a lot of Azure capacity for it.”
Some code, such as the provisioning system for adding new accounts to Teams, required reworking. The company had simply never anticipated adding as many users per day as it did during the lockdowns. Thankfully, Microsoft didn’t have to turn any organizations or users away. But the company did adjust how it predicts usage.
“At the start of this we had a meeting — every three days, that went to twice a week, and then once a week (now it’s sort of every couple weeks) where we would look at all the signals,” Teper said. “We would look at the usage intensity of our existing customers. We had lots of people who would had licensed the product who were using it more. We looked at the signup rate of new customers.”
In one case, a school system told Microsoft that 800,000 students would be showing up on Teams the following week. The team had to look at its the data centers near those users to make sure there was capacity. At first, the Teams team was talking to the Azure team every day about where capacity would likely be fine and where it needed help.
That was then. Now, the company has enough data to make smarter decisions.
“And then as we got probably a couple weeks into this, our data scientists got enough data to start to model a forecast,” Teper said. “The first week you’re sort of going off anecdotes. Tell us about all the schools and big customers. We’d walk through them. And it was a little bit of conjecture about ‘Will every student show up? Or just most of them? Or some of them?’ And so after a couple of weeks we had enough data where the new models became very reliable again. So we didn’t have to over-provision. At the beginning when we were surprised by the demand, we swung the pendulum to add a lot of capacity for the extreme case scenarios. That was largely what played out. You don’t want to operate that way forever because you can over-provision.”
That’s not an easy balance to strike.
“We spend billions of dollars a year building out our data centers and adding capacity,” Teper continued. “If we under-build for the peaks, our customers wouldn’t have a great experience. If we over-build, our shareholders wouldn’t have a great experience. Yes, we forecast this very carefully and have meetings. There’s sort of a meeting every month that I go to with my peers to make sure that we’re very safely in the zone of demand that we think we’d forecast. But again you sort of design your systems for Black Swan events. We had not modeled 20X growth in meeting minutes in a quarter. We wrote the software that was ready for that. We got a lot of great help from our Azure friends. We talked about a Black Swans scenario, but it wasn’t in our model.”
Today, Teper is comfortable with the team’s ability to predict demand, even though “new users are still coming to the service at a faster rate every day. We’re back to, for lack of a better term, ‘normal mode’ where we’re not meeting every couple of days to look at the data. It’s not changing as much as it was at the beginning.”
AI for rules and features
Early on, the company would measure the number of PCs and people as “countries were hit at different rates with COVID-19.” Collecting all that data let Microsoft build ML models to predict how organizations might increase their intensity of Teams and when work from home rules would be set.
“More users show up, there’s more meetings, people do more tasks per day, and we build models on that,” Teper said. “We make a set of predictions and then we learn and there’s a feedback loop. Then there’s a second model of when do organizations come up under the service. Because there you have a sales pipeline that you talk to salespeople on, but you really want to validate that. So we built this separate set of models there.”
Microsoft uses these algorithms to help it forecast both the growth of Teams and monitor for issues.
“We used to write rules to monitor our software,” Teper said. “We now use ML to do that. Because for example, if we have a spike in support incidents, we will use machine learning to correlate that with telemetry we see in our servers around the world. And the machine learning will then write rules of patterns for us to detect. This is why our service reliability has gotten pretty great through all this. I feel very proud of our machine learning based monitoring.”
AI use doesn’t end there. “The biggest focus on AI is actually in the product,” Teper said. We’ve covered Teams’ various AI-powered features — most recently, we went deep on how Microsoft Teams will use AI to filter out noise from video calls. But Teams also uses AI to surface relevant conversation notifications and produce live captions of meetings. And there’s more in the pipeline.
“We also have an effort called moonshots, which are sort of big crazy bolder things we’d like to do in Teams,” Teper said. “If even one out of five of those pay off, we’ll have some pretty amazing things in the next couple of years.”