On the Soapbox: What We Think of Cisco’s Broadsoft Acquisition
Thoughts from telecom leader on the industry’s biggest acquisition.
Last quarter we learned that Cisco is gobbling up Broadsoft, a provider of cloud PBX, unified communications, and contact center solutions, for almost $2BB. Obviously this event piqued our interest since Broadsoft provides the software for our business customers’ unified communications solutions. So we decided to get up on the soapbox and pontificate about what this may mean for the industry and its enterprise clients.
Our first reaction was, “Congratulations to our friends at Broadsoft!” Look at where they started. This company was founded in the late 90’s when nobody knew what VOIP was. Now here they are 20 years later selling the company for $1.9BB in cash. So they’ve had a great run.
As for the statement this makes about the general state of the market, it completely reinforces what we at Stage 2 see as the major trends in telecom: higher employee productivity and workforce collaboration enabled by solid, easy to use software solutions, remote work becoming the norm rather than exception; necessitating ever increasing mobility, and heightened demand for presence, IM, video meeting rooms and joint work on documents.
The world is becoming increasingly mobile as workers are contributing from anywhere and through any laptop PC, smartphone or tablet they can get their hands on.
When one of the world’s most successful tech companies buys the leading software supplier in a niche market, that is a sign of some major “street cred.” There’s no stronger indicator than cash-in-a-flash and it’s clear that Cisco has voted with its dollars in favor of the cloud over prem-based solutions. It doesn’t come as a surprise to us, but it just validates that the trends we are seeing are so real.
This deal is reminiscent of Cisco’s acquisition of WebEX, an enterprise solution for video and web conferencing, over a decade ago. It’s not surprising that King Cisco is interested in deepening their penetration into this “employee productivity” type of tool.
Not About Routers and Switches Anymore
Cisco’s gobbling up of one of their closest competitors solidifies their position as a dominant player. They came into glory by selling equipment to the carrier market but evolved into selling directly to the enterprise. As Broadsoft has traction with some of the world’s largest carriers, the company’s united position can only be strengthened by this combination.
With the commoditization of the market for routers and switches, Cisco’s move is a wise one strategically as the company can now sell higher-margin services to their existing customers. Broadsoft will make a nice addition to Cisco’s Spark (team collaboration) and WebEx (video and web conference). The combination of these applications can make for quite a robust Unified Communications offering.
This is a smart decision on Cisco’s behalf as it appears that the market for enterprise collaboration will only be growing. According to Markets and Markets, enterprise collaboration is expected to reach over $49BB by 2021 (Markets, 2017).
What the Competition Has to Say
We’d expect to see more transactions like this in the future, with or without Cisco’s name on it. In 2017 we saw Mitel buy ShoreTel and surely the heightening demand for the cloud had something to do with it.
What do we expect to see from Amazon as a result? Amazon is the largest cloud infrastructure product in the world, but when it comes to SaaS they’re not offering anything that special. We’re not convinced the Amazon Chime product is going to stand up to the competition within cloud-based unified communications.
Betting against Jeff Bezos is never a good idea but we just think Amazon is better positioned for consumer businesses (e.g. books and groceries) than high touch middle market and enterprise B2B services. Their amazing run in cloud-based servers is attributable to their ability to deploy with scale and efficiency like few before them. The service doesn’t require much pre-sales engineering or customization to deliver.
While most CIOs know what they need when it comes to cloud-based servers, the market lent itself to a massive new entrant; but this is not the same case with unified communications. Can business processes be automated? Yes, and we are beginning to see that with auto-provisioning, etc., but the customer’s needs are varied enough that face to face consultative selling still seems to rule the day’s UCaaS market.
Will that change in the next few years? Perhaps….
In any event, to get where Cisco is in the UC market, Amazon would have to make a few successful chess moves. For now, it appears the risk of not succeeding is too great for them to be going after it.
Key Takeaways from our Soapbox Session
We think the Cisco-Broadsoft merger is great, and a positive signal of even better things to come for an enterprise collaboration market that is clearly on fire. But of course we’re biased because this is what we do for a living.
Agree, disagree? We’d love to hear from you. Enter your comments below or contact us with any questions.
Markets and Markets. (2017, Jan 5). Enterprise Collaboration Market Worth 49.51 Billion USD by 2021. Retrieved from https://www.prnewswire.com/news-releases/enterprise-collaboration-market-worth-4951-billion-usd-by-2021-609772265.html.