The Death Rattle Of On-Premise Telecom

For the past three days, every analyst, pundit, and blogger has been putting their own spin on Cisco’s acquisition of BroadSoft.

It’s about Consolidation

Some are saying that the biggest impact will be fewer available customers due to consolidation.  Others say there will be new opportunity, because many companies (particularly enterprises) have gone to BroadSoft because they did not want to use Cisco or Microsoft.

It’s about Cisco Spark  

Art Schoeller, vice president and principal analyst at Forrester Research has another take. He believes this is all about getting traction for Cisco Spark. “It’s as if the train had already left the station [for Cisco]. Nine times out of ten, BroadSoft was what I call the ‘weapons merchant,’ the white-label solution for many Tier 1 carriers … it’s cloud, multi-tenant, and BroadSoft has already worked through the economic model of working with a partner ecosystem that’s driving subscription solutions, not premise[s] solutions. So, Cisco is trying to get traction in the market for its multi-tenant solution, i.e. Spark and the future of Spark … the channel says, ‘I’ve already got one, BroadSoft.’”

It’s about Buying Access To Telcos

Rob Salvagno, head of Cisco’s M&A and venture investment team, wrote that Cisco chose BroadSoft not only for its portfolio of cloud collaboration platforms and business applications – assets Cisco already holds – but for BroadSoft’s partnerships with more than 450 telecom carriers in 80 countries, including 25 of the top 30 globally, and some 19 million BroadSoft business subscribers. This is simply Cisco’s way of getting a stronger foothold in selling products to big telecos.

It’s about Buying Talent

Lorna Garey at Channel Partners writes, “Scooping up BroadSoft also demonstrates that there’s a shortage of IT talent — and Cisco is recognizing it.”

It’s about the End of the On-Prem World

For those of us in the trenches selling UCaaS, I’ll go with this statement from Drew Lydeck, co-founder and president of Avant Communications, “This is the biggest validation that we’ve seen that the on-prem world is officially over. Cisco’s acquisition of BroadSoft is also a validation that everything is moving to a software-defined, subscription-based economy.”  This is particularly true when you consider that BroadSoft can be used to displace the premise-based Cisco Call Manager.

You can see from our last blog post that the UCassS market is still growing. There are still plenty of customers, both SMB and Enterprise, whose next phone system will be cloud-based.  They will want to buy the service from a provider that can give them the customized service and support that only a local reseller can give them.

Makeup your mind Avaya – Hardware or Software

Back in January, Avaya filed for Chapter 11 bankruptcy.  When asked why, their Corporate Treasure, John Sullivan explained that after examining their debt “we decided it was a critical next step in our transformation from a hardware company to a software and services company and the best path forward for our customers, partners and employees.”

Guys…Phones are hardware!

They shed some significant assets in March with the sale of their networking business to Extreme Networks but basically, it has been all quite in the newsroom regarding their aforementioned transformation.  That is until May 31, when they announced their foray into a NEW market.  And what is that exciting new venture…SIP Phones!  YAY!  Psst…Guys…Phones are hardware, not “software and services.”

Avaya Vantage Device

Avaya + BroadSoft?

What is even more odd is that the press release says that these phones are being offered in collaboration with and tested for interoperability with BroadSoft.  And BroadSoft has had a campaign in place for a number of months offering Avaya customers a smooth migration from premise-based solutions to a cloud solution.  Is this just BroadSoft taking advantage of Avaya’s lack of foresight? Is Avaya just trying to hold on to any piece of the business they can? Perhaps this a prelude to these two companies eventually becoming one.

Whatever the real plan or outcome is, Avaya was late to the game realizing that premise-based systems are going away.  Many other hardware companies are in the same boat, creating a huge opportunity for agents and white label resellers of hosted services.   All of these companies customers are (or soon will be) available as premise systems age into obsolescence.  Companies need a communications system and hosted is the way of the future.

BroadSoft Eats Its Own: The Death of the Channel?

BroadSoft just announce the commercial release of their Platform-as-a-Service (PaaS) product. They are now one more in a long line of hardware vendors that have turned on their channel by going into the very service business that their products enable. In short, BroadSoft is now in competition with the very customers that have purchased BroadSoft products in the past.

This Has Happened Before

This is not the first time this has happened. Nearly a decade ago, Digium acquired SwitchVox in a similar move. For those not familiar with that transaction, Digium is “the benevolent caretaker” of the Asterisk project. Asterisk delivers an Open Source IP-PBX. Digium provides Asterisk Training and Certification, as well as all the “surround stuff” (PSTN Interface Cards, IP-Phones, Gateways, etc.) that someone who wants to deploy Asterisk would need. They have built a large and loyal channel of people who sell, deploy, and service IP-PBX’s built from the Asterisk project. SwitchVox is a commercially deployed IP-PBX built from Asterisk. It significantly extends Asterisk by adding integrations such as UC Functions, a Graphic User Interface, and screen pops and integration with a number of popular CRM products. So with the acquisition of SwitchVox, Digium became the owner of a product that was directly competitive with the channel partners they supported.

Sangoma (a competitor of Digium) made a similar move a little over two years ago, when they purchased PBXact (a competitor of SwitchVox). So just like Digium, they became competitive with the resellers that are part of their channel.

Who Does It Help, Who Does It Hurt

It hard to know if and who the implementation of this strategy benefits and hurts. Ten years later, Digium and SwitchVox are still going strong. Sangoma’s stock price has more than doubled since their acquisition of PBXact . But who really knows how many of their partners were driven out of business by these moves.

So now BroadSoft embarks down the path of Eating Is Own Channel. Peter Radizenski at Rad-Info recently quoted an BSFT client, “BSFT will force every customer to be on their cloud platform at some point.” He also added a comment to a recent LinkedIn thread on the subject, “it would be better for all if BSFT wasn’t competing with its own customers and selling direct to users at $15 per seat. That smells of desperation.”

Fighting the Trend

If you are a White Label Provider of a service, you need to make sure you provide something more than simply basic service.  You must be ready to deal with the day when someone else, or even your once trusted partner, decides to try and take your business by simply undercutting you on price. To combat this, you should develop specialized knowledge of how your customer does business within their vertical.  You can also enhance the basic service with specialized API integration or provide additional services from other partners.  Simply developing a solid and trusted business relationship with your customer can protect your revenue stream.  With these tactics, you can help to ensure your success, even in the face of ongoing downward price pressure.