Looking at the latest quarterly results of the publicly traded cloud communications providers.

OOMA:

Total revenue was $61.7 million, up 9% year-over-year. Subscription and services revenue increased to $58.0 million from $52.6 million in the fourth quarter of fiscal 2023, and was 94% of total revenue, primarily driven by the growth of Ooma Business and the acquisition of 2600hz, Inc. (“2600Hz”).  [source]

• GAAP net loss was $3.1 million
• Total revenue was $236.7 million, up 10% YoY – only $125.9M is B2B!
• 1.2M core users – only 484K are Biz and 759K are Resi!
• ARPU $14.72 with a 72% margin – Biz ARPU is ~$23; Resi ARPU is $9

Ooma started in Consumer voice (Telo), acquired Broadsmart (a Broadsoft provider), then OnSIP, then 2600Hz. They also push POTS Replacement.

WEAVE:

Weave is unique because they are verticalized and do not talk about UCaaS, CCaaS or CPaaS – just on results for dentists, vets and medical offices. And they are winning with Integrations:

“Integrations with practice management systems strengthens our product market fit and increases the value our platform provides to customers. We launched new and deepened integrations with Athenahealth, DrChrono, and Patterson Veterinary-owned practice information management systems NaVetor and IntraVet. Scoping and development have started on our integrations with IDEXX-owned practice information management systems ezyVet and Neo and we have a product integration and commercial partnership agreement with Prompt EMR.”  [source]

• First quarter total revenue of $47.2 million, up 19.2% year over year.
• Estimated full year revenue is $197M to $200M
• GAAP gross margin was 69.9%
• GAAP loss from operations was $8.2 million

RINGCENTRAL

• Total revenue increased 9% year-over-year to $584 million.
• Subscriptions revenue increased 10% year-over-year to $557 million.
• Annualized Exit Monthly Recurring Subscriptions (ARR) increased 10% year over year to $2.37 billion.
• Mid-market and Enterprise ARR increased 11% year over year to $1.48 billion.
• Enterprise ARR increased 13% year over year to $1.02 billion.
• GAAP operating loss was ($11) million.
•  Spend net free cash $250M on stock buy-back to prop it up for execs.
• 15K partners and they can only grow globally 9%?!

8×8

• Fourth Quarter revenue of $179 million;
• Fiscal Year 2024 revenue of $729 million;
• Total ARR was $697M, a decrease of 1% from same period last year.
• 2024 Cash flow from operations increased 62% YoY to $79 million;
• Year-end cash, cash equivalents, restricted cash and investments of $118 million;
• Total revenue decreased 2% to $728.7 million.
• Service revenue decreased 1% to $700.6 million:
• GAAP operating loss was $27.6 million;
• GAAP gross margin was 68%, compared to 70% in the same period last year.
• 3M+ paid Biz licenses.
• 400K+ Voice for Teams licenses

ZOOM doesn’t release results until May 20, 2024. Today is 5/9/2024.

• Zoom’s last results in February was 4Q2024 total revenue of $1,146.5 million, up 2.6% year over year.
• Total cash, cash equivalents, and marketable securities, excluding restricted cash, as of January 31, 2024 was $7.0 billion.
• Total revenue for the fiscal year was $4,527.2 million, up 3.1% year over year.
• As of February 2024, Zoom Phone had over 5.5 million paid user seats

Remember Taqua, Tekelek, and Coppercom? How about Cypress Communications that used Nortel for phone service in office buildings?

Lucent 5ESS switches are housed in Central Offices and at one time were attached by copper to every household in America to provide phone service. Today, copper is going away and the need for the 5ESS is going away as well.

Cablecos provide more voice service than telcos. Cellular is the primary voice service for many people.

The CLEC industry boomed due to the Telecom Act of 1996. Switches getting installed in every POP and CO with space. Integrated T1 sales brought revenue to many CLECs.

Broadband kind of killed the T1. Also 1.5MB was not enough anymore — or so the buyers were told.

Telecom architecture changed. Cablecos don’t have a CO. They have POPs.

ISPs had POPS (Points of Presence) usually data centers. But last mile circuits often came from the ILEC, so it kind of came through the CO anyway.

VoIP Providers use data centers for their POP or CO. The age of the Central Office is declining. Telcos needed a solid, secure building to house the switch and terminate all those copper lines. Now the copper is replaced with fiber. The switches are just servers on racks. Things changed.

The age of the softswitch ushered in UCaaS. Broadsoft, Metaswitch, Ribbon, Netsapiens, 2600Hz, Freeswitch and others powered many a VoIP Provider out of a data center rack.

Broadsoft sold to 450+ providers globally. Netsapiens is in 200+ providers. Metaswitch is inside the network of thousands of telcos. But today BSFT and Meta have been closeted inside Cisco and Microsoft, respectively.  Now that Microsoft is NFV-ing the SBC and the Metaswitch, what will telcos do?  Get a huge pipe to Azure? Or go another route?

It all depends on what you need the switch for. Many smaller cablecos wholesale voice from a provider like Momentum, because they just need cheap residential dial-tone. Lumen chose Alianza as a wholesale softswitch.

The PE-backed FTTH providers will need a way o provide digital voice.

Much of VoIP and UCaaS backends into a CPaaS shop like Bandwidth.com, who handles all the DIDs and telecom back-end for Microsoft and Google.

There isn’t that much TDM inter-connection left. Now it is inter-connected VoIP.

So if Residential Voice is your primary reason for a switch, what do you do?

What if the ISP has 10K, business voice lines? What will they use?

Getting a big pipe to Azure for 10K B2B seats might be cost prohibitive. Might require too much expertise.

With the average business having 12 employees, what kind of B2B offering do you need? Or do you have to be like FTR, VZ and AT&T and have multiple offerings for small, medium and large businesses?  Depends on your geographic market.

This is what providers are going through today. Join a webinar I am doing with ECG on May 30 titled:  BroadWorks, Metaswitch, NetSapiens, Ribbon: What does the future hold?

Lumen uses PartnerTap to facilitate a co-sell arrangement with partners. I was invited to 7 opportunities to do this. These are 7 accounts that over the years I sold to that procured a service from a provider that now identifies as Lumen. In all 7 instances, it has gone nowhere. I spoke with a CM about 2 accounts. I needed billing info because I have no idea or insight into what they have now. Crickets. Nothing back from the CM.

Through the PartnerTap portal I pinged the other 5 CMs. I emailed him. Crickets.

Lumen has been cancelling services, retiring products and running a revolving door of personnel so this situation will only get worse.

Now the Prez & CEO of Lumen tells CRN that they are going to use the channel to get more Enterprise accounts.  One, they can’t manage any accounts they have now. Two, few partners sell to enterprise.

I run into this too often. Sell My Stuff!

You want partners to sell your stuff – and you can’t understand why they don’t – and you kind of think they should or they are missing out. And you are angry at the Channel.

Here’s why this may not be working out.

1. Do you have a clearly stated Value Proposition?
2. Do you know who your Target Customer is?
3. Do you have a Partner Profile?

Without those 3 things, your program will struggle.

If you can’t explain Why You and not the myriad of others, then you offer a commodity and it better be at a low price and decent commission.

If you don’t know who your best Customer is – or worse, you think it is Everybody – you have a problem.

• 98% of US businesses have fewer than 100 employees.
• 89% have fewer than 20!
• 72.5% of C Corps in US had fewer than 10 employees!
• 7.5M businesses account for 61.5M employees – (8)
• US businesses average 12 employees.
• There are only 60,000 orgs with more than 500 employees.

The target is Small Business. Which size? 20 employees? 99+? 150? It is NOT 1-1000. It just isn’t. The average is 12 employees.

You want to win? Figure out how to streamline sales and service to very small business. That is a majority of the market.

You don’t have a Partner Profile, so you don’t know who to recruit. So you spend time and money recruiting anyone and then sales are slim.

You need to know your target customer in order to identify partners who also sell to that customer!

What business model works best for your service offerings and compensation? MSP, VAR, Agent? If you don’t know, that’s trouble.

Who is the Buyer?  Most partners sell to the IT Admin or the CIO/CTO. If your Buyer is the CMO or the CFO or HR, well, most Channel partners will not reach that Buyer.

If your buyer is the CISO, find a partner business with a CISO!

Selling your stuff is hard. Are you easy to do business with? You think so, but are you?

Do you know why Customers buy from You? If not, get on the phone and find out.

Everyone thinks that anyone can sell their stuff to anyone. It doesn’t work that way. You aren’t selling bottled water or potato chips. Sure, the market looks like the supermarket aisle of potato chips or bottled beverages, but you have to figure out why the customer picked you from the aisle.

Funny thing, execs are angry at TSBs and Partners because they are shelling out dollars but not getting enough sales. They don’t like paying out SPIFFs and commissions. Have you examined what selling direct looks like in terms of costs and results?

60% of salespeople do not hit quota! You have to pay salary and benefits. Do you know what the cost of customer acquisition is?

Just some things to think about what you ask a Partner Why are You Not Selling my Stuff?

 

The costs of driving sales.

• SDR (Sales Development Rep) is $40K + incentives + benefits.
• Sales Rep $60-85K + incentives + benefits.

Pay-per-click is running $20-60 then there is your Google Rank Score.

• Someone has to manage that spend (Google Ad manager is $100K or $500 per day with benefits).
• Someone has to maintain the SEO and website content ($100K).

At $40 per click, let’s say 1 out of 7 is a warm lead. That is $280 for a lead. On top of the Ad Manager, SEO, and webmaster.

How many of those leads will the sales rep convert in an hour? These leads are only good for an hour. If he converts 1 out of 2, your cost of a lead is now $560. Plus $1500 for the day for Sales Rep, SEO and Ad Manager.

Right now, you do none of that. You don’t do SDR. You don’t have a Lead Gen program. You can barely explain Why You.

Heck, you don’t have a Product Manager or Product Marketing Manager to manage the Product, features, messaging and road map.

You have a bunch of partner managers who recruit, manage and co-sell with partners. Not many people are good at all 3 functions.

So you pay partners a 5x SPIFF and 25% commission to the TSB. You pay the CM in place of the Sales Rep. You aren’t paying for SEO or SDR or Google Ads.

Average sale is 12 seats at $15 is $180.  The SPIFF is $900. Not for a lead, for a closed sale. You don’t pay for cold or warm leads, just closed sales.

The commission is $45 per month while the customer pays you. You still keep 75% and your costs are under $6 per seat usually (or 40%).

Do you know how many channel only vendors there are? Lots. Why? Because this math works out.

Your mad because sales aren’t booming in a hyper-competitive market with compressing pricing and, quite frankly, slowing demand.

The channel does not create demand. The channel supplies demand.

More than 85% of channel partners procure services for SMB!!!!

When you talk about SME or Enterprise or Government, I know you do not have a clear understanding of the Channel – and discount everything you say.