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UCaaS by Numbers

What do the numbers look like? Despite all of the noise, the year over year growth of UCaaS isn’t great. While RingCentral is in the 35-38% YoY ARR growth, they have 9 of the largest partners – Verizon, AT&T, Avaya, Mitel, et al to help them grow. That’s a lot of unfilled potential.

8×8 grows around 15%. Vonage on the UC+CC portion is single digit. (That doesn’t matter because Ericsson acquired it for Nexmo.)

Zoom is trending down to 35% but there was no way to keep doing 50-380% growth quarter after quarter. With 2.2 million Phone users, they are certainly grabbing share.

Mitel got out of the UCaaS game. So what does that say about the growth? So did Avaya. They turned it over to RNG also. Verizon has Cisco and Broadsoft but chose to use RNG for SMB. AT&T once owned CallVantage consumer VoIP. AT&T has Cisco, Metaswitch and Broadsoft, but keep cycling VoIP service offerings as they search for one that sells as well as Office@Hand by RNG. Comcast had a Broadsoft – and acquired Masergy which had a BSFT! Yet Comcast acquired Blueface — and we haven’t heard a peep since that happened in 2020. That is a lot of Big Companies that struggle to sell UCaaS to SMB. Enterprise is different since Cisco HCS and Microsoft are in the mix.

There are several providers who are close to the $100M mark. That is a significant milestone.

Dialpad announced in 2021 that they were at $100M ARR. They have raised $400M to get to that point. They have used that money to acquire a bunch of AI and other functions. The valuation they are throwing around is $2.2B.

Nextiva is privately held in Arizona. Recently, Goldman Sachs invested $200M in the company. The valuation is estimated at $2.7B. The revenue is $200M, double what Dialpad is doing. Nextiva has had a bunch of musical chairs in the executive wing lately. Maybe better positioning for an IPO? Or for a new phase of growth. As they say, “The thinking that got you here won’t get you there.” Honestly, the Musical Chairs at many companies has been stupid crazy in the last two years. Hard to execute a strategy when the chess pieces keep changing on the board. It takes 2-3 years to execute a strategy successfully. Some people in telecom aren’t in the position a full year!!!

Intermedia is known for Microsoft Exchange hosting with 7000 partners. Intermedia also has a fully flushed out and robust UCaaS+CCaaS offering in Unite. Intermedia is doing $251.6M according to its S1 filing. The UCaaS biz is doing almost $90M annually, about 35% of that.

Another UCaaS provider actually went public last year. Weave is a cloud comms platform for small healthcare offices. The company specializes in dental and medical offices. Revenue is just about $100M in ARR.

Sangoma acquired Star2Star early 2021 for $400M. S2S was doing $79M in revenue.

CXDO before they acquired NetSapiens softswitch had less than 12% YoY growth just selling UCaaS per their 10-K for 2020.

There are over 2000 providers offering UC in the US. Most are private, so who knows what the revenue numbers look like. Even the public ones like LogMeIn (going private equity) don’t break out the numbers. Windstream offers Broadview, Mitel, Avaya and Allworx now. (They paired it down, but don’t talk numbers.)

CenturyLink/Lumen launched Engage, but I have seen nothing about it. This has to be a third offering from C-Link. They can’t seem to move the UC needle. You would be amazed how many of these ILECs resell a mix of competitors like Zoom (Wind) and Chime (Nextiva, C-Link) to flush out the UC bundle.

So the numbers are foggy and the analysts keep saying CAGR of 30-something per year. It would be nice if it grew that much – and maybe price decompression and product replacement are shading the growth. The hockey stick growth of Zoom’s $10 Phone has certainly caused a stir in the market. As the price per seat diminishes, it is harder to make that revenue needle move as fast.

Offering MS Direct Routing – like almost everyone – notably 8×8 with 100K subs – is a sub-$9 sale. Takes a lot of these sales to move the needle — plus when selling MSDR, you aren’t selling UC seats!

PBX hardware sales actually did really well during the pandemic to the surprise of everyone I speak to. This would lead to SIP Trunking or CPaaS sales. These aren’t UCaaS seats either.

CPaaS sales are growing at Vonage, Twilio, Sinch and Bandwidth. CPaaS and CCaaS are growing. (Five9 is at 35-37% YoY.) Some would say that UCaaS is getting marginalized, but I think it has to do with a lack of sales skills. Our industry is all about replacement sales transactions for a savings. Nothing about cloud comms is same-same. As different as AWS is from your colocation rack, as Salesforce CRM is from ACT!, cloud comms is from the PBX. Education is all.

This isn’t me being down on UCaaS. This is just notice that UCaaS providers need to educate their sales teams and Prospects in order to attract growth. They also might want to alleviate the Quota thinking at all levels because that thinking means sell at any price anyway you can.

Microsoft, Metaswitch and UCaaS

Microsoft Teams takes up a lot of space in the UC&C discussion. With over 250 million active monthly users and 80 million Phone users, any provider has to take notice. Many UC providers offer a Direct Routing option for MS Teams. Essentially that … [Continue reading]

More Master Money Mania

Bridgepointe just got $100 million dollar investment from private equity firm Charlesbank CP. With the this tranche of dough, the master agencies have raked in about half a billion dollars in my estimate. Upstack, AppSmart, Telarus, Avant and … [Continue reading]

Is It a Win-Win?

RingCentral (and some of their partners) are touting what a win the Mitel deal is for partners, customers, job seekers and workplace. For $650M I guess you HAVE to call it a win, otherwise shareholder lawsuits. From one partner: “The recent … [Continue reading]

Market-mis-placement

In this Channel Insider article (or this interview where he says the same stuff), we get a summary of a Forrester keynote about how the channel is changing. Jay has been predicting the death knell of the channel as long as I can remember. [There will … [Continue reading]