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 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 is dial-tone and SMS for MS Teams. That isn’t robust or valuable. It’s like the days of switched long distance.

UC Providers are so needy for revenue of any kind that they have started selling SIP trunking as a Microsoft add-on. They sell UCaaS on price, even as Zoom Phone has entered the fray, signed up 2 million subscribers and at $10 each, compressing the pricing.

By the way, if you think price is sticking point, you should take some sales training with me. It is never about price. There are FREE alternatives. There are low cost options. When a true TCO is done, taking into account downtime, management time, clumsiness and lost productivity, the winner is not the cheap solution. Most businesses want tech to work seamlessly in the background. That’s what the job of a service provider is.

You are selling Productivity and Customer Experience now. Not a phone system.

Most UCaaS provider don’t see growth like Zoom or Microsoft, because they are selling phone systems. Dialpad, Zoom, MS are selling software. They talk about it like it is software. AI, UX, analytics, visual voicemail, meetings, presence and other capabilities and oh, yeah, dial-tone too. UCaaS comes at it from phones first. That has always been a hurdle. Who wants to be a Poly or Yealink distributor? Who wants to spend cycles haggling over handsets – which one, own or rent, etc.?

Where is Microsoft going?

Since buying Metaswitch, Microsoft has slowly been moving ILECs – the smaller incumbent phone companies – to the cloud. Metaswitch tried to get these customers to move to NFV and SDN in 2016. Now with Azure for Operators, MS CPaaS, virtual SBC and more, these telcos ARE using NFV. Right now, MS offers Metaswitch’s MX as a softphone, but that is all going to morph to MS Teams being the default softphone – for about 900 telcos globally. Do you still want to be selling SIP trunking, I mean, Direct Routing then? Then you will really have a race to zero.

The key to winning sales is to ask great questions and do real discovery. In the four secret shopping projects I have done since 2019, the discovery by the UC providers has been pitiful. We are still at the early majority of the tech chasm on UC&C. This means that education is still a priority. That means that the salesperson’s job is to educate the prospect on the potential of the tech. Most people don’t know what they don’t know. It also isn’t their job to be the UCaaS SME — that is YOUR job as a UC salesperson. You need to discover needs and where the business is looking to go, then explain how the tech can take them there.

Every business would like Amazon like capabilities – that is the underpinnings of Digital Transformation. It is the UC provider’s job to explain to businesses how their platform can deliver on those functions. That is selling Value, that is selling Solution, not pushing product.

In 2022, UCaaS, CPaaS and CCaaS won’t matter. They are morphing into one big bucket of functionality that businesses want to obtain. Most buyers are not searching on any of those terms! They don’t care about the packages or the buckets, they want to buy functionality, customer service, outcome. Some companies are using CXaaS but it really is just Business Comms.

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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 Bridgepointe – and probably a couple of other smaller, un-hyped deals – makes a half a billion in investment. This won’t grow the revenue – it just moves from one partner’s books to the master broker’s P&L. This won’t create a marketplace or ecosystem or even a clunky e-commerce website for procuring telco and tech. This simply moves money around.

All of this in hopes of an exit.

If Jay is correct, and the procurement moves from channel to marketplace, and no one can build that marketplace, what happens?

Marketplaces work great for SaaS. Any software can find its way into a marketplace – just look at Google Play. Getting traction is tough for a marketplace unless it is an ecosystem of an anchor software like Salesforce. But this is off course.

Today’s announcement marks the tipping point. My guess is that more money follows this. Notably, TBI and PlanetOne have not taken money (because it would have to be walking away money.) Personally, I don’t want my deals in a PE-owned Brokerage. What happens IF/WHEN they don’t pay me? They certainly aren’t making these brokerages a swiss watch from my experience. This leaves a great opportunity for a regional broker to become a national player filling the gap. It would just take great marketing.

This tips over because all this money won’t produce a four-fold increase in revenue. Even if 4x the deals come in, how do they scale to handle it – and they only keep a portion of it! One million dollars in billable revenue is about $250K in commissions, whereby at least 70% is paid to the partner. That leaves $75K at the broker on $1M in billing. I’ll leave that there to ruminate.

I don’t see how this plays out. Where the exit is. SPAC?

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 RingCentral/Mitel partnership gives RingCentral millions of new customers. It puts Mitel customers who are ready to migrate to the cloud in the fast lane. And it also opens up thousands of career opportunities. We’d call that a win-win-win. (Is that a thing? It is now.)”

Does it give RNG new customers? Well, the MiCloud customers are now being registered on the RingCentral portal in order for partners to continue to receive their commissions, so I guess some revenue is being achieved. So technically they are new customers – new billing arrangements anyway.

The MiCloud customers already migrated to cloud as Mitel described it. Granted they are now on a platform that is end of life… But here’s the rub: These customers had the opportunity to buy RNG instead of MiCloud and chose not to. Why would they choose RNG now instead of any of NEC, Intermedia or any of the other UCaaS/CXaaS providers out there?

How does it open up thousands of jobs? Mitel had a huge RIF after this deal (just before Christmas 2021). Net net it probably doesn’t create jobs.

I think a lot of this is hope, smoke and mirrors. It made a splash, which a lot of these partnerships with RNG are. Verizon, AT&T, ALU, et al – 9 in all – and RNG is only growing at 36% YoY. Granted, Vonage is at 8% for UC+CC and 8×8 is at 18%, but RNG has deals with 9 giants that they paid a lot of money for. It is not paying off the way they need it to. Unless it was a stock pump-and-dump plan, then yeah it worked.

In the Mitel deal, RNG gets some revenue and if they can retain or upgrade some of them, great – they get some of that $650M back. If not, it was a gamble that didn’t pay off. Shrug and on to the next one. Not certain calling it a win-win-win right now is honest.

PS Avaya chasing Mitel partners (like HERE) is goofy. Mitel partners could have been selling RNG, ACO or any number of vendors but chose to die on the hill of Mitel. (And Mitel partners can sell RNG now too. Why would they “switch” to Avaya to sell RNG?

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 be Change, but there always is.]

“The good news is the channel is growing and full of opportunities.” That is true. But what segment of “The Channel”? There is not one channel; there are several. MSP, VAR, agent, ISV, dev, etc. Certain segments of The Channel are in turmoil due to M&A – mainly MSPs & Agencies. Another segment [VARs] is being swept up by vendors, like HPE, Dell and Cisco who are changing to a subscription or HaaS model. It seems like they don’t mean Channel so much as they mean MSP & VAR.

Also, Jay and Co. proclaim that businesses are procuring software from marketplaces. What types of businesses? Small, very small, mid-market or enterprise?

All marketplaces are not equal. “By “marketplaces,” we mean Salesforce, Adobe, Azure, Oracle Cloud Marketplace, AWS, IBM, Google Cloud, SAP, ServiceNow, Workday, Dell, Sage, Alibaba, Rakuten, eBay, Mercado Libre, and Walmart+.” How are eBay and Walmart+ comparable to Oracle? Where is Amazon on that list? Who is buying “tech and telco” from eBay?

If 90% of software will be procured through a marketplace, why did Telarus sign up Nord and Netacea sign up Upstack for distro deals this week when neither one is a distributor of anything but commission checks? They are brokers formerly known as master agencies.

If 90% of spend will be “partner assisted” does that mean partners end up being affiliates? It certainly sounds like if it isn’t “partner sourced”, then the partner’s compensation will be smaller. It makes me wonder who is paying for install, support, management, training and break/fix? The customer? For stuff they only rent? The partner won’t be able to for the tiny commission check. Microsoft lost a third of its partners when it closed SBS and tried to force Office365 on all partners. Not all partners want to sell stuff for a referral check. Mainly they like technology and watching it help businesses do work.

When you consider a $400 invoice, represents less than $100 to a partner to pay bills, comp sales reps, and support the customer, how many hours can you spend with a customer per month for $60-80? Not much.

Doug Dawson wrote about the data storage dilemma that is coming. There is also the power and climate problem coming. How do these conflagrations affect the current Forrester trends? Data centers are burning up too much power (and not enough of it is renewable). The cost of storing data will increase as more and more data is stored by each person and business – iCloud, Google, Amazon – photos, songs, movies, Instagram, FB, and on and on. Do these costs – power, storage, carbon offset and more – get passed along to the buyer? Yes. So all subscriptions will increase soon.

Will most businesses rent everything and own nothing? That changes the balance sheet and increases the cost of doing business. If you rent everything and store everything in the cloud, who controls your data? That gets into a whole other debate about privacy, security and liability.

“But the big change is that 80% of these partners will no longer collect customer funds.” The understanding is that if it is procured via a marketplace, the bill will come from the vendor or the marketplace; the MSP won’t bill for it or white-label it. Unfortunately, white-label and single-bill are not going away. Just look at cybersecurity and UCaaS where MSPs white label, bundle and bill for those services. If the MSP isn’t billing for it, again who will support it?

I see a different section of the channel and a different segment of businesses. I don’t have a data driven 10,000 foot view (and I don’t talk to enterprise CIOs, who quite frankly probably don’t know anything about procurement).