The CSP’s Dilemma (original) (raw)

Many believe the UCaaS industry is maturing, but it’s never that simple. The #UCaaS industry continues to change. In some 15 years, it went from geeky to mainstream. The PBX in the backroom has finally flown the coop, and now nests in the cloud. Simultaneously, the new hosted voice industry discovered messaging and meetings and became unified communications — cloud and UC together is UCaaS.

The intrigue now is less about the technology and more about who provides it. The pioneering providers of cloud-delivered communications, sometimes referred to as communications service providers (CSPs). Traditional telcos didn’t have a chance against UCaaS. It’s textbook disruption, the incumbents were content with their business model while the CSP iterated and improved their offerings.

Many of these CSPs obtained their underlying technology from a new breed of calling software solutions from vendors such as BroadSoft and Metaswitch Networks . The solutions allowed the providers to rebrand and customize the solutions. Gartner’s early Magic Quadrants for Cloud PBX were dominated by CSPs running on third-party call management platforms.

In 2007, the Cloud Communications Alliance (CCA) was formed. Initially, it was an independent BroadSoft user group. It expanded its membership to include providers using other platforms, and shifted its focus to the broader needs of CSPs. It’s a nonprofit, communications group, by and for the CSPs. The CCA is hosting Cloud Connections, the first conference I plan to attend in 2023. The theme of the conference is that CSPs are at a crossroads.

“A chain reaction probably started when Cisco acquired BroadSoft in 2018,” Elka Popova told me. Elka is a VP of Connected Work Research at Frost and Sullivan. “That event accelerated what became a clear trend of platform developers becoming service providers.” The CSP was suddenly competing with its supplier. Over the past few years, every major platform provider has been acquired (Cisco/BroadSoft, Microsoft/MetaSwitch, Dstny/Telepo, Enreach/Centile, Crexendo/NetSapiens, and Sangoma/Digium).

Additionally, the CSPs are under pressure from large over-the-top UCaaS providers such as 8x8, Cisco Webex, GoTo, Microsoft Teams, RingCentral, and Zoom. The Magic Quadrant that the CSPs once dominated, now excludes them. The CSP disruptors are at risk of becoming the disruptees. CSPs need to adapt to find new ways to differentiate.

Elka says that the CSPs have to decide if they are willing to move out of their comfort zone. They have been very good at selling connectivity and voice, and at least some will continue to do that. Many others will adapt their business, and there’s many interesting options on the table.

Cloud Connections will open with Michael Tessler and Clark Peterson sharing the opportunities they see. Tessler was the co-founder and CEO of BroadSoft (currently the CEO of True North Advisory ) and Peterson was the founder and CEO of Telesphere (acquired by Vonage ) (currently the Chairman of the CCA).

Elka believes there are five major paths for CSPs to consider — all of which will be discussed at Cloud Connections. The first option is to work with the platform provider in new ways. For example, Cisco now allows CSPs to supplement the provider’s BroadWorks voice solution with Webex meetings and messaging (two providers with one client).

A second option is to team up with a major UCaaS provider. A good example is how RingCentral is working with providers such as AT&T and Vodafone. Each of these providers have launched a version of RingCentral Office which natively integrates with their wireless services. UCaaS Mobiity 3.0 blurs UCaaS and cellular into a single offering for desk phones, softphones, and smartphones.

There will be a dedicated session on UCaaS Mobility 3.0. It is currently available with Cisco Webex, Teams (Telia and Rogers), RingCentral (AT&T and Vodfone), and Enreach. I expect a lot more announcements in 2023, starting with Teams/Verizon in January.

Option three is to ride the momentum of a UCaaS provider’s ecosystem. This strategy involves improving a UCaaS solution, but not necessarily selling it. Teams, for example, has limited resell options, but there’s other ways to play. In another CCA session titled Swim with the Shark or Head to Safer Waters, Art Schoeller will cover the opportunities (and risks) that Microsoft Teams creates such as Direct Routing and BYO Carrier. The enterprise comms sector has not seen a provider as dominant as Teams since Ma Bell. There’s also other fish, or ecosystems to consider. In another session there will be an overview of the major UCaaS providers, and many of them have ecosystem plays.

Option four is to pursue higher-value services such as #CCaaS. There will be a panel discussion on the CCaaS opportunity with myself, Blair Pleasant , Elka Popova, and Art Schoeller. Other high value services could include hybrid work design, private 5G wireless, and AV solutions.

Then there’s option five, M&A. There’s lots of reasons why including acquiring for scale or exiting the sector. Catharine Trebnick from MKM partners can provide insights on what drives provider valuation. Jordan Rupar from Q Advisors will provide an overview of the M&A process and where to start.

In addition to these options, CSPs are encouraged to reexamine their business model. The industry started with a perpetual license model that’s giving way to various seat/mo models. CSPs also have the choice of what goes in their data center or if they should even have one. These and other topics will be put to a panel of platform vendors that includes Chris Carabello from Microsoft/Metaswitch, Brian Beutler from Alianza, Patrick Sullivan from 2600Hz, and DP Venkatesh from Cisco/BroadSoft.

There’s quite a few more sessions, but one more I want to highlight here is a look into the future with Thomas Frey CSP . I have found Thomas to be very insightful and thought provoking, and I have two of his books! He intends to share some of the disruptions that he sees coming, and how one best prepares for them.

I typically focus on the various vendor offerings. The Cloud Communications Alliance focuses on the needs of the service providers and their world is changing quickly. I think the theme is appropriate, and it should be a good, member driven event.

If you think there's too many mentions in this post, wait til after the conference because Evan Kirstel B2B TechFluencer will be doing a hands-on workshop on how to make your social pop.

The event is by and for CSPs, but also open to the public. See you there?