BroadSoft Connections – Thoughts on Being Better Together with Cisco

By Jon Arnold
16 Nov 2018

There has been no shortage of M&A activity in the collaboration space in the last year, and consolidation is a natural part of how markets evolve. Things just happen faster now, and most moves tend to be additive, filling strategic gaps in portfolios. The same could be said for Cisco’s $1.9 billion acquisition of BroadSoft, but after taking stock following this week’s BroadSoft Connections conference, I would also say this move has the potential to become highly transformative. Cisco has made several acquisitions over the last year, but this one feels more strategic.

Aligning two big opportunities

My thinking on this starts with the alignment of two opportunities that play into Cisco’s strengths, which in turn address the challenges these trends present to service providers. First is the industry-wide trend of migrating from prem to cloud, and for the most part, vendors are moving further and faster than the carriers. While carriers know they have to get there, they will lose business if things take too long, and the multitude of cloud-native operators will continue gaining at their expense.

In this context, one of the mantras of Connections was “how do you accelerate your move to the cloud?” BroadSoft, of course, has been preaching this with great success for years, and with Cisco’s newfound emphasis on service providers as a channel, it becomes easier to understand why this deal was made. As the conference progressed, the messaging become more pointed and urgent, citing data that 74% of buyers will choose a cloud vendor in next 24 months, and that the “cloud market is exploding now”.

The cloud may be broad – all kinds of new services for carriers to sell – but also deep, especially for telephony. We all know there’s still a large base of legacy PBXs, and it was rightly noted that when change comes, businesses will be more likely to migrate telephony to the cloud rather than investing in an IP PBX. Sure, that narrative is good for Cisco’s IP phone business, but it’s another strong use case for carriers to shift cloud-ward.

This brings us to the second big opportunity, namely helping service providers move upmarket. Keep the audience in mind here – BroadSoft’s base – where most have historically focused on the <100 market. Among our cohort of analysts, we lost track early on of how many times we heard “mid-market” during the sessions, but after the cloud, this was the strongest messaging theme. The <100 segment represents loads of customers, but small volumes and limited upsell potential. Large enterprises are exactly the opposite, and Cisco really doesn’t need BroadSoft’s help here.

The real opportunity for combining forces is to address the mid-market, which is generally in the 100-1,000 line range. For these service providers to keep growing, they need the right offering for mid-market, and that’s going to require a better cloud-based portfolio. Since they’ve been slow to cloud, they don’t really have enough, and that’s where Cisco – and BroadSoft – come into the picture.

Why Cisco and BroadSoft are better together

This storyline starts adding up when you consider things from the carrier’s perspective, at least for this audience. Aside having focused primarily at the lower end of the market, these carriers simply aren’t equipped for the needs of today’s mid-market. At best, they offer varying degrees of UC to help end customers elevate beyond VoIP, but nothing to the extent being shown at Connections, namely UC-One, Webex Teams and Webex Meetings.

Then there’s contact center. While cloud-based contact center is now practically first nature in our world, this is uncharted waters for most service providers. There really are two challenges here that Cisco is trying to address. First is the lack of familiarity, from which stems either a lack of interest or lack of confidence to offer it to their mid-market end customers. Second is the growing preference among end customers for an all-in-one cloud solution – not just for contact center, but all things UC. I’ve been writing about this trend for a while, but for carriers to stay competitive, they’re going to need an integrated offering along these lines.

Putting vendors aside, the environment faced by carriers is both challenging and complicated. The needs of end customers are getting complex, with different buckets needing distinct capabilities. On a basic level, supporting office workers is quite different from supporting contact center agents. With collaboration being the trend du jour, teams require a distinct set of tools from those used for everyday one-to-one communication. If you’re going down the contact center road, then you must also consider how your customers’ customers prefer to engage. That’s a lot to get right, and is far more demanding that providing dial tone, which is much closer to home for these carriers.

On that note, the importance of voice cannot be overstated. Telephony is still the bread and butter for these carriers, and cloud-based calling is a key reason why Cisco acquired BroadSoft. This is not Cisco’s forte, and it’s a core building block for moving carriers to the cloud. With this piece in place, these carriers can continue what they like and do best – voice - and with BroadWorks being hosted in their cloud, they can white label the service to keep their brand strong. Without carrier-grade cloud-based calling, none of the add-ons from either Cisco or BroadSoft will take flight with this customer base.

Finally, the competitive environment must be considered. These carriers aren’t moving to the cloud just because it’s a shiny object. Their end customers are moving that way, and with that comes a whole new set of expectations that they won’t be able to support as currently constructed. Many types of competitors are already there, having become entirely or primarily cloud-first.

Whether it’s OTTs like RingCentral or Vonage, cloud-based point players like Zoom or Zendesk, or the mega cloud pure plays like Google or Amazon, they already have an inherent advantage, and that’s the gap Cisco – with BroadSoft - is trying to help close. Last but not least, of course, there’s Microsoft, the one player everyone must both play along with and compete against. On the plus side, all of these players lack the voice pedigree of Connections attendees, so for carriers who recognize the full complement that comes with Cisco’s cloud portfolio, they can truly compete with confidence.

There’s more to the story

Much more, actually. Another dominant message from Connections – as one might expect – is that “we’re not just the right partner, we’re the best partner”. There is some merit to that if going all-in with one partner for cloud, not just for UC-contact center integration, but also for having all the end-to-end pieces – networking, software, security and hardware/endpoints. I’ll go along with that – I can’t think of any other one-stop-shop for all those elements. Whether carriers want to buy that way is another story, but if you’re in a hurry to catch up with the market, and have little margin for error, I can see why the answer for carriers is Cisco.

That said, your conclusion should not be based solely on my analysis here. There is much more ground to cover from Connections, especially a deeper dive on the offerings, along with what’s both to like and not like. This is not a perfect world by any means – there’s a lot of complexity to deconstruct, the subscription model doesn’t work for everyone, and how the service provider channel creates some conflict with VARs who sell direct to these same end customers. Consider this post a starting point, and you’ll be reading more soon from fellow BCStrategies colleagues who attended Connections as well.

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