Raymond James thinks that RingCentral Can Sustain 30% Growth Rate.
While there is certainly room in the marketplace for growth, I don’t think RNG can sustain that level of growth.
When they were growing that much, RNG was spending 60-plus cents on every revenue dollar on sales and marketing. Now that is down to 41-cents. It is an unsustainable spend, especially with the losses every quarter.
RNG has bet on the mid-market and enterprise business segment. Except those segments are being challenged by incumbents – Cisco and Microsoft. Hard to displace the two companies with certified brand ambassadors working within.
On the revenue growth: while they announce these huge deals (TCV = $1M) do they ever actually realize that ARR? Deployment takes time; snags happen. I don’t see a slide in the investor presentation about actual realized revenue as opposed to suspected.
Also, if Enterprise Connect is any indicator, UCaaS will be steam-rolled by CPaaS and an app marketplace on one side and CCaaS on the other.
Other Factors:
Zoom is going public. How will that affect the marketplace? Probably not at all once the stakeholders cash out. I have a bleak view of sales aggression post-IPO.
Avaya is for sale. Rich Tehrani thinks it is because Avaya ignored the changes in the marketplace for too long.
They call that shift the Digital Transformation. It is a struggle to sell cloud services to premise minded buyers. This is the struggle most of UC is facing.
When you tell a business owner that the MRC is going to be $500 per month and he doesn’t own anything, he balks. That is a tough hurdle to jump.
The Other Three
8×8 and Vonage weren’t up to the task of fighting Ring in 2018. Buying companies, re-organizing, playing musical chairs in the C Suite were all distractions last year. Now in 2019, it will look more like the Elite 8 – a little March Madness.
I thought it would be a 4 way rumble with Nextiva as all 4 are platform companies more than UCaaS shops. However, rumor is that Nextiva is looking at a sale, so down to 3.
Branding Gone Wrong
Another obstacle for the sector is the inane naming. 8×8 has an X platform. Well that is a server line from IBM/Lenovo. Not good SEO.
InContact renames as CX-One which is similar to BSFT One.
And Vonage launches CX Cloud Express. Some marketing firm got paid a lot of money to miss it by that much. I mean you all have similar features and functions but now you are looking to name it the same.
BTW, the channel go to market strategy at RNG that they discuss at CRN is the same at 8×8 and Vonage.
SIDE NOTE:
I would suggest that this move (Vonage brings number programmability to its business service) is probably the strongest move for a majority of the marketplace (1-100 employees). CPaaS for the win.