Vonage Calls on Integration
In the recent Q2 2016 performance briefing CEO Alan Masarek provided a glimpse into why Vonage acquired Nexmo. The acquisition surprised many as most UCaaS vendors see CpaaS as a separate business.
Prior to its acquisition, Nexmo was an independent CPaaS provider similar to Twilio. The acquisition was announced in May, and completed in this past quarter. During that period, Twilio did its highly successful IPO.
Masarek stated, “With the closing of the Nexmo acquisition we’ve created a powerful and differentiated value proposition because we can seamlessly integrate the entire business communications value chain.”
Like most UCaaS providers, Vonage already offered integration into popular cloud services such as Salesforce.com. Most integrations like these add the ability for the UCaaS client to use the published APIs of the destination service. Taking that model a step further, in 2015 Vonage acquired gUnify which provides cloud-based middleware services that enable further manipulation of the data.
Masarek wants to take integration further than workflow, and extend into customer interactions. A popular use of Nexmo is to embed communications capabilities directly into customer facing mobile apps, websites, and business processes.
Masarek wants Vonage to deliver end-to-end business communications. To clarify his point, he provided this example:
"Assume I’m online trying to book a flight next week. I want to fly say from our Vonage office in Hong Kong to the Vonage office in Singapore. I’m several minutes into the online session and I have a problem. What do I do? I call the airline’s 800 number and then I need to completely reintroduce myself to the agent, because he or she has no information, no context regarding what I was trying to accomplish online."
This is a familiar pain point. Not just because we have all experienced it, but because the industry has been attempting to solve it for years. This example is one of the favorite examples of WebRTC solutions because the technology adds communications to websites.
The problem though really isn’t technical. The reason the problem persists has to do with organizational structures. The solution involves modifying the website with hooks into the contact center. The tools and processes are known and available. However, the steps to do it involves custom development across organizations that don’t mix easily.
Masarek is betting that the floodgates will open for a simple, single provider solution. Vonage already has three options for call (Essentials, Premier, and Skype for Business), multiple options for contact center, and now the strongest set of APIs and integration capabilities of its UCaaS peers.
Vonage intends to bring it all together, and it just might have the expertise and volume to be successful. It completed the acquisition of Nexmo two months ago. Masarek claims that they have already begun next year’s planned enhancements of Nexmo’s platform.
Vonage will soon begin offering Nexmo services to its business customers to help them cultivate more personalized relationships with their customers. Vonage currently supports 74,000 businesses including the 8,700 new ones they added last quarter.
Additional synergies associated with the acquisition include a decrease in Nexmo’s costs and increase in quality as the traffic is moved to the Vonage network over the next quarter. Nexmo’s costs of phone numbers and termination charges will also decline.
Both Nexmo and Vonage are experiencing strong growth. Vonage Business revenue increased 75 percent compared to the same quarter last year. Nexmo revenue grew 43 percent in the same time. Vonage expects its business revenue to overtake consumer revenue next year. The company is also up about 50 percent on its stock buyback program.
Vonage is not alone with its plan to merge UCaaS with CPaaS. Cisco acquired Tropo with similar intent. Genband has Kandy to complement its UCaaS offers, and Twilio itself has also expanded into hosted SIP services. However, most of the UCaaS industry appears to be content with APIs and simple integrations to popular services.