Went to Enterprise Connect yesterday. Had some meetings and walked the show floor. Two terms showed up at most booths: CX and AI. Not a surprise, but really boring. The same thing over and over.
At one meeting I was asked about the future of cloud comms. I don’t think the 5% CAGR puts it in growth mode. As I have said previously, Enterprise Communications is for 44K companies, which does not represent most of the addressable market. The addressable market is SMB, which represents 99% of your customers.
The major problem for most cloud comm providers is that they want to sell to Enterprise and Big Business without the ability to actually do that. They won’t hire a sales and marketing team. They won’t put in the work. Partners can’t do that work for you. They supply demand; not create it.
RingCentral spent years and a couple of billion dollars going after to mid-size and large accounts. SDR, sales teams and tools, every aspect of marketing, R&D, user design, and M&A. It made deals with Mitel and Avaya to get into large accounts. It partnered with VZ, AT&T, Spectrum and other telcos for more opportunities, but had to suffer through the piles of smaller deals that came with it.
And even with all that Microsoft Teams and Zoom have taken all the oxygen out of the UC&C room. The CCaaS space is hyper-competitive with most of those providers also chasing Enterprise because who else has call centers with at least 200 agents?
What has your company done to win enterprise?
I sat through a TSD’s partner workshop last week where they paraded vendors that only sell to enterprise in front of us. And the whole time, I am thinking: “What a waste of our time and theirs.” Historically, the channel handles the SMB space. There are partners who sell to Enterprise, but that is a small subset of partners.
The SMB market is 33M businesses in the US with less than 500 employees. 15.7M have between 1-49 employees.
SMB is most of the accounts. Most partners (85%+) sell to SMB. SMB does not buy like enterprise nor do they have the organization or staff of enterprise. Small business lacks the technical skill and the staff to run a POC (proof of concept trial); play with SDKs; try to get integrations to work. They need reliable solutions that are turn-key with a specific ROI.
If you notice lately, some Enterprise vendors want to move down market. They have been fighting for 44K largest accounts and they are tired and bloody. It is very hard to displace Microsoft, Cisco, IBM, and Google.
Let’s talk AI for a minute.
AI for the most part (at this time) is a cost savings and productivity tool for large business. Does it save so much productivity that each employee should pay $30 per month for it? Probably not. Does it save a call center agent or two? Probably.
Chatbots, assistants, AI agents – they don’t work in a vacuum. They require data. Where are they going to get that data?
Freshworks surveyed 600 businesses in 2024 and found 71% of small businesses use CRM. I think that is high, but also begs the question: What CRM? There are over 800 CRM platforms out there. Stripe and Quickbooks could be the CRM. Really hard to extract data from either of those platforms for your GenAI chatbot. MSPs use ConnectWise for CRM, billing and ticketing. Really hard to extract data from that platform as well. So where does a small business get usable data to feed into the ML/AI?
Is the data in your SaaS applications available to your AI? Is it only available to YOUR AI or to everyone’s AI?
Most examples of AI are writing assist – emails, business plans, marketing copy, blogs. (Great! We are replacing humans writing!) Or chatbots. In some cases, the AI is just fancy IVR.
These are Enterprise uses. That’s who CX and AI are built for. That’s what EC targets: Enterprise Comms. Just remember that Enterprise buys different things and in different ways from SMB.
That’s why it is important to know who your Buyer is and what benefit they get from your services. Otherwise you are chasing a market that
Businesses with Under 99 employees will continue to leverage PBX – from Asterisk, 3CX, Freeswitch, Yeastar, Zultys and others. The on-premise phone system is still affordable and a solid tool. Ask VoIP Supply or 888VoIP.
Very small business (under 10 employees) buy UCaaS – and that is a large portion of businesses in Europe, Canada and the US. Yet not many providers want to target that market. It requires efficiency and has high support costs. And they may not buy YOUR UCaaS because they may want one integrated into the software that runs their business. Or one designed for VSB.
We are on the cusp of seeing more verticalization, specialization and platforms designed for the VSB. Weave has done well in the SMB healthcare space. Others have done well with law, hospitality, retail. This will be the trend.
With the Avaya/Mitel/NEC issues; Zoom/MS Teams dominance; Broadsoft/Metaswitch EOL; BEAD billions; and other factors, I think Voice will go back to being Voice for most businesses and Collab/Video/Messaging will be a separate thing. There is a growing problem with robocalls, scam calls, scam texts. The $4.5M fine on Telnyx for robocalls will also ripple. The mess that is SMS/MMS, 10DLC and the Campaign Registry will also cause headaches for businesses and providers. There are just too many moving parts in telecom for cloud comms right now.
Many CSPs are about to decide of a voice platform for FTTH. That will swing focus, sales, and attention to digital voice, not a full stack CP+UC+CCaaS. That will shift things further for many UCaaS players who are already struggling.
Meanwhile, on the sales front, due to macro-economics, the political environ, the hype of AI and CX (without concrete outcomes), sales are taking longer. Status Quo is winning. That isn’t good for the industry.
Side facts:
ServiceNow is now a CRM and agentic AI company.
50% of CRM projects fail because of a lack of cross-functional coordination. [source]