The Acceleration Of Unified Communications Moving To The Cloud
Mike: When did you see UCaaS accelerating and what do you attribute that acceleration to?
Travis: It has been on all of our minds for the last half a decade if not more. We started seeing the fastest acceleration over the last twelve to eighteen months. We have seen more customers looking at more cloud communications solutions, especially larger customers. Looking at our revenue sources at Inflow the revenue from new customers purchasing on-premise communication systems and software solutions has all but disappeared. Those sales were less than 1/10th of what we have seen in previous years. On the existing side, our hardware sales were still strong but on the new customer side is where we have seen the largest shift, and that is the best indication of trends within the industry.
Companies are realizing that they are coming to a junction, a fork in the road. When making a decision on a technology stack as it pertains to your Unified Communication and Enterprise Contact Center solutions they realize that if you invest in the premise-based system, in essence, you are obsolete from day one. All of the research, development, and innovation is happening in the cloud. The API’s, integrations and collaborations have happened rapidly in the cloud. If you wanted to get the type of innovation on-premise, you would need to invest in servers, technicians, and hardware.
Mike: The only other thing I would add would be that for companies that invest in platforms there is not a clear path for them moving forward. What has also surprised us is the rapidness of that shift, people have been talking about this for a long time and talking about Cloud Unified Communications is coming. It has been a slow adoption over the past 5-7 years on the UC side.
When looking at CRM, ERP systems, email & office productivity systems and other technologies that went to the cloud some time ago it was a matter of when not if the Unified Communications industry would get there. Over the past 18 months, there has been almost a hockey stick type of adoption rate in customers moving to the cloud in the UC space.
The Changing Competitive Landscape In Cloud Communications
Travis: On that note have you seen the competitive landscape change because of this?
Mike: You have traditional players who have the premise based experience and they have seen the writing on the wall, They have tried to figure out how to make that transition into a recurring revenue company. On the other hand, you have companies who were born in the cloud. There are pros and cons to both of those, and you have these native cloud companies competing against these legacy companies. There is a battle for who is going to win and there are a lot of players in the mix while also having this convergence of non-traditional companies competing as well.
Take a company like Zoom Communications who has been a player in video that now has Zoom Voice with its basic cloud PBX offering. They are coming at UCaaS at a different angle than say a Mitel who has a rich telephony PBX background. Then you throw in other players from a different angle altogether. Travis, you used the example of Zendesk who has added voice in with their ticketing system. There is this blending of different technologies that can do similar things coming from different areas, where 2 years ago things were friendly those companies are now competitors.
Everyone is now competing for the same space, which creates a great opportunity for the customers who need the technology and also creates uncertainty how this will all shake out over the coming years.
Travis: If you put yourself in the CRM or Zendesk shoes, they have a large loyal subscriber base that they have built up trust with. They can now turn on voice and double or triple recurring revenue. If I was to predict I would say the true winners in the UCaaS space are the ones that focus on being very good at what they do and have a very strong API set on how they integrate with others. It will be interesting to see what happens.
Mike: As you are talking with customers how are companies evaluating the move to the cloud and the reasons why they are moving to UCaaS?
Travis: I mentioned it earlier as far as day one, you are obsolete within your Contact Center with a premise-based system when you are talking to the CIO’s of the companies we work with. The role of the CIO and IT Director has changed with the evolution of technology. Their resources need to be freed up so that their focus is on being strategic for their company looking at API, software, and other cloud applications that can drive revenue and customer experience.
As opposed to decades ago their time was spent managing servers, patch cords, and software. When you look at it that way it makes a lot of sense. They like the OPEX economic models, which initially people thought going to cloud would save them money, but if you look at a simple 3-7 year cost of ownership that is not the case with UCaaS.
Elevating Customer And Employee Experience Through Unified Communications
Mike: Some of the trends within companies would be that they are shifting how they do business, they are trying to innovate and they need something more flexible. Post-recession there are a lot of companies growing and considering what are their limiting factors to growth. Growth usually comes down to bringing on the right talent, and with the market being what it is today one way to fill that need is with remote employees instead of desk space. They have realized that it is easier to connect remote employees, and we have more tools to help them engage with employees when not in the same physical space.
We have heard conversations come up several times, they are in a hard market to find talent within their geographical area, you have companies competing for talent at a global level. It has been surprising to learn that by offering the most cutting edge tools is a necessity when they are recruiting people. They want them to see those tools and it has become a differentiator in attracting new talent. They need to be able to work more efficient and more nimble than ever, so they are losing the systems that don’t create a great employee experience. Not adopting new tools is the opposite of UC as it is 20 applications and no one knows who uses what.
Travis: When you think about a millennial who has grown up with facetime and they show up for an interview and they see a Nortel phone from 25 years ago, that is embarrassing. Not to mention the training needed on how to use it.