UC Company Strategies: Adjacency

25 Jan 2016

Better to specialize in UC or have UC as one product in a portfolio? There is no easy answer to this, as companies can thrive either way. But in the SMB market, when it comes to the cloud I would argue the portfolio approach is more compelling. Why? SMB enterprises are notoriously unable to properly invest in the IT resources required to run all the services the business needs. And purchasing services from multiple vendors adds management and integration complexity that SMBs can ill afford. So a one-stop approach makes a lot of sense.

Providers are entering the UC space as a way to flesh out their service portfolios. Intermedia acquired VoIP provider Telanetix (which did business under the Accessline brand) in 2013 for just this reason. Intermedia was the world's largest provider to SMBs of hosted Exchange email, and several years ago they decided to reinvent themselves as that one-stop shop for SMB cloud services. Their research showed that SMBs were looking to the cloud for a variety of services to run their business, and UC was a key part of that; hence the acquisition.

Intermedia's product portfolio leverages the idea of product adjacency, popularized in a 2003 Harvard Business Review,[1] which holds that customer outcomes and margins are better when related products are simplified and integrated. Intermedia does exactly this by using a common control panel for all of their services and provides a single bill to the enterprise for the services they consume, which simplifies the customer experience. Moreover, Intermedia is able to integrate their services (e.g., VoIP integrated to Exchange email) to create more value for SMB customers at incremental cost. As part of the Telanetix acquisition, Intermedia also picked up their SIP trunking business. This has enabled Intermedia to verticalize their UC solution and provide more integrated SLAs that are otherwise difficult for SMBs to contract.

According to Intermedia CEO Michael Gold, new customers come to Intermedia as often for the UC solutions as they do for the email solutions, so the Telanetix acquisition was strategic for the business as well as tactical for the adjacent product line. Once through Intermedia's door, the cross-sell and upside opportunities become substantially easier and less expensive, and once multiple products are being used the relationship gets substantially more sticky. Intermedia has its own direct sales force but it also supports a vast channel organization with over 6,000 partners (including a dozen telcos). The "one-stop cloud" approach makes it easier and less expensive for Intermedia's partners to sell the adjacent products.

2016 is going to be a year where more UC companies either expand into adjacent products or are themselves acquired to expand someone else's portfolio. This will be particularly the case in the SMB space, where product adjacency has more customer value.

[1] Chris Zook and James Allen, "Growth Outside the Core" Harvard Business Review December 2003.



There are currently no comments on this article.

You must be a registered user to make comments

Related Vendors