As a result of the torrent of mergers and acquisitions over the past few years, the unified communications market has seen a great deal of consolidation and contraction. In particular, unified communications as a service, or UCaaS, has been a highly active and competitive segment of the overall market.
Just to recap some UCaaS deals:
- Cisco acquired BroadSoft.
- Mitel acquired ShoreTel.
- 8x8 acquired Sameroom.
- RingCentral acquired Glip.
- Star2Star merged with Blueface.
- And LogMeIn is set to acquire Jive Communications.
In the midst of such market tumult, users need to fully vet their potential UCaaS provider.
Most importantly, organizations should perform financial due diligence to ensure a UCaaS provider has long-term stability, said Irwin Lazar, a unified communications analyst with Nemertes Research, based in Mokena, Ill. In addition to determining if their prospective UCaaS provider possesses solid financial footing, organizations should look for vendors that can provide customer references and show a history of growth.
When shopping for a UCaaS provider, some other issues and questions to consider include the following: How big is the UCaaS provider? How broad is its customer base? Will the vendor be acquired in the next year?
Expect more mergers and acquisitions
During any acquisition, the fallout for customers can vary depending on the merging companies. The recent Plantronics-Polycom deal, for instance, should not disrupt customers too much, because the vendors' products have limited overlap, Lazar said. But after Mitel bought ShoreTel, existing ShoreTel customers have dealt with the conversion to Mitel products.
"If one vendor wants to buy a competitor and consolidate the market, usually that's not good news for customers," Lazar said, because the acquiring company would want to eliminate redundant products. "[For users,] it's a matter of doing some due diligence anytime there's an acquisition and understanding what the product roadmap is for the vendor."
With so many UCaaS providers still in the market, tech buyers can expect even more consolidation over time, Lazar said. Recent corporate tax cuts could also fuel future acquisitions, as vendors now have more money at their disposal. Initially, though, that added cash is going toward stock buybacks and dividends, Lazar said.
Although the tax cuts won't exactly spark a buying spree, he added, larger vendors could move more quickly on acquisition targets they already had in mind.
Market share and global presence
When evaluating UCaaS vendors, some market reports herald certain providers as market share leaders. One UCaaS provider, for instance, might lead in revenue and subscription seats, while other vendors excel among small businesses or midmarket and large enterprises. The vendors themselves are proud to publicize their market share positions.
But do buyers really care about market share ranks? Is it a determining factor in the buying process?
"You certainly discount when a provider says, 'We're the leader in everything, according to XYZ,' because it's hard to differentiate the reality from the market spin," Lazar said.
Additionally, some market reports stress UCaaS providers need a global presence, as large global enterprises start to adopt cloud services. These larger enterprises would need a UCaaS provider to offer resiliency, data protection, reliable performance and local language capabilities within remote countries, Lazar said. UCaaS vendors also must expand into larger enterprises, because the small-business market is already hotly contested.
In the video above, Lazar discusses these UCaaS market trends and more.