M&A Can Ultimately Hurt UCaaS Partners and Customers

The consolidation in the hosted PBX and Unified Communications as a Service space continues with Windstream acquiring Broadview Networks last week. Late last year, Mitel acquired Shortel, and just a few months ago, NetFortris acquired Fonality. While we all realize that M&A in the space is a good indicator of a healthy sector, this kind of activity can shrink the serviceable market for smaller providers and impact both their end-users and channel partners. End-users have fewer choices and less flexibility, while channel partners may lose opportunity as programs are consolidated and requirements raised for participation.

When I mention smaller providers, I’m not talking about companies that have a home-grown solution running on a server or two in the back room. This is more about the mid-tier providers that have a substantial regional or national footprint and solid partner programs.

Impact on the Partners

The first risk to channel partners of the acquired company is that they may simply be dropped from the program due to low sales volume. Another possibility is that partners may be put into tiers, with only the largest partners getting the most leads, opportunities, and highest margins. There may also be new competition because of geographic overlap within the merged partners.

Impact on End-Users

The biggest issue is that customer service may suffer. In the first months (or even years) post-acquisition, the customer service departments may remain separate, but eventually there is always an effort to consolidate functionality. This often results in customers getting short-changed on the level of personalized service they were used to before their hosted PBX or UC provider was acquired.

The available feature set and the pace of innovation can also be impacted when a larger company acquires a smaller UC provider. Smaller companies are often nimbler than a larger company. This means that new features can be integrated quicker and important feature requests get to the top of the priority list faster.

Finding the right balance

Whether you are looking to purchase hosted PBX or UCaaS, or starting a new business selling these services under a white label or agent program, it important to understand how and from whom the service is ultimately provided. Purchasing from or partnering with a large national provider (or someone who is large enough to be an acquisition target for large provider), you run the risk of getting a service with limited options and poor customer service. For partners, you may get a very restrictive partner program that is more focused on your upstream partner’s success than on your own. Purchasing or partnering with a provider that is too small can result in unreliable or low quality service.

Ultimately, both customer and resellers need to find the right balance between the extremes of too big and too small. Resellers need a partner that allows them to truly own their own customers and determine their own pricing while delivering outstanding service and all the tools the reseller needs to grow their own business. The end-user should look to purchase their service from a qualified reseller who can provide the local support, training, and service while the service is ultimately delivered from a partner with the resources and network to deliver a consistent and quality service.