Why these startups think chat apps are the next big thing in workplace collaboration

With the cloud storage wars raging on, it’s getting harder and harder for the big-time cloud storage companies as well as the file-sync players to distinguish themselves from one another beyond price cuts. But an interesting development seems to be occurring; these companies are now tacking on work-collaboration features on top of their storage services as a way to lure more customers who might be enticed to sign up because of the benefits the features might bring to the workplace.
While Amazon (S AMZN), Google (S GOOG), Box and the rest of the prominent cloud players may be working on their own work-collaboration features, there are now a host of startups like Slack and HipChat that have been developing their own tools to make it easier for workers to communicate with colleagues.
The idea is that workers are now spending their days immersed in the world of the chat box; a sort of modern-day equivalent of the office water cooler, where ideas and jokes can be shared, but also — thanks to software and the ability to link up to the storage-service providers — the place where documents can be stored, indexed and able to be easily accessed.
According to a recent Gigaom Research report by Stowe Boyd, this idea of contextual conversation “is likely to become the dominant social motif of the next generation of work-technology applications.” As the rise of mobile has made people obsessed with their phones, people are now accustomed to staying hooked into their work environments. Add on top of that the popularity of chat tools like Whatsapp and Snapchat and you have an interesting opportunity.
But just like the cloud-storage wars have demonstrated, these startups are going to have to figure out a way to stand out from the pack.

Why chatting in the old days was a real bummer

If there’s a common theme that dictates how many of these work-collaboration startups got their ideas off the ground, it’s the fact that chatting and working over the web just less than a decade ago used to be a major drag.
Stewart Butterfield, president and co-founder of San Francisco-based Slack, recalled how when he first started the company in 2009 — which at the time was trying to make a massive multiplayer role playing game — his small development team was spread out in four different cities and used the old-school internet relay chat (IRC) technology as its primary method for communicating.
Because IRC didn’t allow for the type of features that are now commonplace, like the ability to send messages when one user is not online, Butterfield said his team had to build “hack upon hack upon hack” to get IRC to function to the team’s liking.

Graphic detailing Slack's interface

Graphic detailing Slack’s interface

HipChat’s founders faced a similar problem back when they used to work for Plaxo in 2006, said company co-founder Pete Curley. Curley and his team had to make due with using AOL instant messenger (AIM), but found its limitations — like the fact that when a employee left Plaxo his or hers profile would still be part of the chat interface — very annoying.
When Plaxo got acquired by Comcast in 2008, Curely was appalled to find that a company as big as Comcast (S CMCSA) was still using AIM. Curley and his co-founders then looked to the work-collaboration tools the big enterprise companies like Microsoft (S MSFT) were selling, but discovered that the process of getting those tools involved a lot of legwork, like having to deal with armies of salespeople. It was then that he and his team got the idea to create their own chat tool as they found that the market was lacking in an easy-to-setup enterprise chat interface.
“We wanted to make it easy for people to sign up for, like AIM, but [the tool] would have the features of an enterprise product,” said Curley.

With new technology, comes better collaborating

While IRC and AIM had pretty limited abilities beyond simply sending a message to another person, Slack and HipChat as well as others have improved on the technology and each developed their own unique take on what chat can do.
Take Flowdock, for example. The Helsinki, Finland-based startup, now part of the agile development software company Rally, created a JavaScript application that functions as the chat interface with a back end that is comprised of 15 different services like Ruby on Rails and Node.js and a data store that includes MongoDB, Codepress and Redis, said Flowdock founder Otto Hilska.
Flowdock’s interface resembles a large group chat, but it also contains a box to the right of the chat interface that lets users create work-related tasks and have them be checked off if completed; this is handy for coders who might need to sign off on whether or not a developer-related task — like performing an acceptance test — has been completed, thus negating the need to send an email to the right people.

Flowdock chat and box interface

Flowdock chat and box interface

Slack has focused on building streamlined search powered by Solr, so that if a user were to share a Word document in the chat interface, the file gets sent to the messaging server where it then gets delivered to the appropriate person as well as being indexed in the database.
Instead of solely concentrating on chat, San Francisco-based Convo touts its threaded-conversation wall, akin to Facebook, as a better way to organize work-related conversations and document sharing rather than having a big group chat, explained Convo CEO and founder Faizan Buzdar.
The roughly 40-person Convo team also decided to concentrate on mobile, and is working on making sure that images and documents load well on its mobile app, so that if a user tries to view a PDF or similar file, the image should look the same as it appears on a web browser.
“When business users wake up, the first thing they’ll notice is the Convo icon on their iPhone,” said Buzdar. “My most valuable conversation is there; in a lot of other platforms you reach for [service] after looking at your email.”
Graphic showing Convo Mobile

Graphic showing Convo Mobile

HipChat’s tool contains a chat interface but it also allows users to create special rooms for different groups in an organization, like a developer team or a testing team, said Curley. Using REST APIs, a user can configure services like Twitter or Github to send notifications to the right group as a way to notify colleagues of important events or changes.
The tool also archives every chat that gets sent and with Elasticsearch running in the background, users can supposedly search for specific conversations.

Of course, the fact that all these work-collaboration startups are archiving messages and documents (Slack, HipChat, Flowdock and Covo all store their data in the Amazon cloud) presents potential legal headaches for companies that use their services, albeit the legal issues aren’t really new and pertain to the measures companies must be aware of when using any cloud storage service.
“Whenever you’re using cloud storage and putting documents in a service like this, there is always a risk that law enforcement may issue a search warrant on the cloud provider, which could require the cloud provider to provide data to law enforcement,” said Catherine D. Meyer, a senior counsel specializing in data privacy at the law firm Pillsbury Winthrop Shaw Pittman.
These services need to be able to handle the fact that some industries, like the financial sector, require for certain documents to be retained for a specific amount of time, explained Meyer. These startups need to also make sure that only the appropriate employees can access the service so as to ensure that when a person leaves a company, he or she won’t be able to log in and grab sensitive information.
[pullquote person=”Pete Curley” attribution=”HipChat co-founder Pete Curley”]“I don’t think they know what’s going on, really. Google had seven permeations of chat in just a few years.”[/pullquote]
To counter these problems, Butterfield said that Slack allows users to set expiration dates on the files they upload or the chats that take place, so a company could configure the service to have direct messages erased after seven days. Slack also has the option to set up access control so as to ensure that only the right people are deemed appropriate to use the service.
With HipChat, a customer would have to upgrade to its Plus service for an extra two dollars a month per user; with the Plus service, customers have more control around the policy aspects of the service and should be able to setup document retention plans depending on the industry.

Graphic displaying HipChat's interface

Graphic displaying HipChat’s interface

Companies that use work-collaboration tools also have to be aware that if they get sued, they “have an obligation to put a litigation hold on all the documents that have to do with that litigation,” said Meyer. In this case, all of these services allow for users to export their data from the cloud so as to retrieve the information, but Convo takes it a step further with its E-discovery feature, in which a customer can choose an employee to act as the legal stewart in Convo’s system that is in charge of keeping track of all sensitive information, said Buzdar.

The will to survive

With so many of these types of startups competing for market share, it’s obvious that not every company is going to become the next hot multibillion dollar standout. In Boyd’s research report, he wrote that he anticipates a potential acquisition spree where big companies like IBM or Google might try to snatch the best startup that they deem a good fit.
This trend already seems to be happening as Rally acquired Flowdock in 2013, Atlassian bought out HipChat in 2012 and Microsoft purchased Yammer for a cool $1.2 billion in 2012 as well.
Butterfield believes that slack will be around on its own for a while; he pointed to an April funding round of $42.75 million as evidence that investors have faith in his startup. Slack has a total of $60 million in funding.

Stewart Butterfield

Stewart Butterfield

Buzdar said Convo has $8 million in funding and will not be needing any more investment until next year.
In regards to the big companies like Google, Amazon and Dropbox stepping on their turf with their own work-collaboration tools, these startups are confident the big guys can’t match their focus.
“I don’t think they know what’s going on, really,” HipChat’s Curely said when asked about Google and its enterprise endeavors. “Google had seven permeations of chat in just a few years.”
Regarding Amazon’s Zocalo work-collaboration tool, HipChat principal product manager Jonathan Nolen said that the tool doesn’t replace the value of HipChat, which is meant to be activated and used by employees all throughout the day.
“Amazon has built momentary collaboration over a document,” said Nolen.
But of course, all of these work-collaboration tool startups have to deal with their own public perception as they grow up and contend with bigger players. As we have seen with Dropbox and Box, things seem pretty rosy when a startup first starts getting a lot of nice attention and adulation from investors and the public. Once they grow up, however, and they start competing with companies with more resources, it gets a little more challenging to attract more customers who might be persuaded to go with the big boys.
Post and thumbnail images courtesy of Shutterstock user Sergey Nivens.