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Microsoft unbundles Teams from Microsoft Office in Europe to appease regulators

Image Credits: Jaap Arriens/NurPhoto / Getty Images

Microsoft has announced that it will unbundle its Teams business collaboration software from its broader Office suite, following growing regulatory scrutiny and a complaint filed by rival Slack.

The changes are effective from October 1 (a month from now), and come in various forms depending on the customer. Enterprise customers in the European Economic Area (EEA), which constitutes Switzerland and the 27 European Union (EU) members plus Iceland, Liechtenstein and Norway, will be able to purchase a Microsoft 365 or Office 365 subscription without Teams included, and will be charged at €2 per month less than before. Separately, Microsoft will offer Teams as a standalone product costing €5 per month, but only to new customers.

Now, this is where things get a little complicated. Existing customers on an enterprise subscription can remain on their current plan -- replete with Teams -- if they wish. Or they can choose to downgrade to the cheaper plan without Teams. For customers on one of its small business or frontline worker plans, Microsoft said it will continue to bundle Teams with its broader software suite, but will also offer them a plan that comes without Teams for a lower price (this price varies depending on the precise product and country where it's offered). These customers won't be able to subscribe to a separate, standalone Teams plan.

So effectively, customers that have Teams as part of their Microsoft 365 or Office 365 subscription, but use Slack or a combination of third-party tools to collaborate and communicate with each other, can lower their monthly outlay to Microsoft. But only larger "enterprise" customers will be able to buy Teams as a standalone product. Microsoft defines an enterprise customer as one with more than 300 individual users.

What all this means is that new enterprise customers that sign up for Microsoft Office and who also want Teams, will pay more from October 1. Indeed, while they will pay €2 less each month for the main Office suite, given that Teams will cost them €5 a month, this represents an overall increase of €3 per seat.

TechCrunch reached out to Microsoft for additional rationale on these changes, and a spokesperson said that the European Commission's main focus with its investigation is on the enterprise segment. However, the company has decided to also offer smaller businesses additional options anyway -- they just won't be able to procure Teams as a standalone product.

Cutting Slack

The crux of these changes can be dated back three years when Slack lodged an antitrust complaint with EU authorities against Microsoft.

For context, Microsoft had launched Teams back in 2016, with Microsoft and Slack enjoying some "healthy" rivalry in the years that followed. However, Slack CEO Stewart Butterfield became increasingly frustrated with Microsoft over the way it bundled Teams with Microsoft, also calling the company out publicly over its "active usage" claims related to Teams. Indeed, Butterfield argued that Teams isn't really used as an alternative Slack, and that companies tended to use Teams more for for voice- and video-based communication.

The long and short of Slack's formal complaint, however, was that by bundling Teams, Microsoft was abusing its market dominance with Office to shoehorn millions of workers onto Teams. Moreover, it offered no way for companies to remove Teams or even know how much it costs them, given that it was included in a broader subscription.

While Slack has since been acquired by Salesforce, the original complaint holds firm and the EC confirmed last month that it was proceeding with an in-depth probe into Microsoft's practices. While it took a fairly substantial three years to reach that stage, the Commission said in July:

The Commission is concerned that Microsoft may be abusing and defending its market position in productivity software by restricting competition in the European Economic Area (‘EEA’) for communication and collaboration products.

In particular, the Commission is concerned that Microsoft may grant Teams a distribution advantage by not giving customers the choice on whether or not to include access to that product when they subscribe to their productivity suites and may have limited the interoperability between its productivity suites and competing offerings.

Remedies

With these changes, Microsoft is hoping to address at least some of Europe's concerns while controlling the specifics of the remedies. However, the Commission's concerns extend into other realms of the antitrust space, including ways in which Microsoft may -- intentionally or otherwise -- restrict interoperability between its own services and that of its competitors.

And that is why Microsoft has said that it will develop greater support and resources to support customers and developers looking to build integrations with Microsoft Office, or export data from Teams into other third-party applications. Additionally, it said that it plans to "create new mechanisms" that will allow third-party developers to host Microsoft Office web apps without having to build their own integrations.

"We believe these changes balance the interests of our competitors with those of European business customers, providing them with access to the best possible solutions at competitive prices," Microsoft's VP of European government affairs Nanna-Louise Linde noted.

TechCrunch reached out to the European Commission, and while it said that it takes note of Microsoft’s announcement, it has no further comment to make at this time.

*This article was updated with additional comment from Microsoft.