NICE just announced a UCaaS offering at $5 per seat. TalkDesk launched a phone in 2021. It was rumored to be $10, like Zoom Phone. What does all this mean for the average UCaaS provider?
NICE has decided to get more channel friendly now that they are all in on CX1, their cloud offering that grew out of InContact. When they NICE acquired InContact for $940M in 2016, they got a channel friendly org. However, like most channel orgs, the primary customer was SMB. NICE was selling to enterprise.
Today, it seems like NICE wants back in to the SMB (or at least the mid-market). They also are competing against Five9, which has several UCaaS partners including Net2Phone, Nextiva and Panterra. So NICE decides to go all in with UC-CX1. We will see if they can actually profitably sell to mid-market. It is one thing to sell to Enterprise with Professional Services, but another altogether to go down market with the same process.
At $5 per seat how many seats will they sell? Well, the UC might be cheap but the CCaaS isn’t.
Support and Implementation are unknowns – and for SMB their voice service is vital.
Does the channel want $5 seats? Not really. The average sale size is 13 seats. Who wants to sell and do LNP paperwork for a $60 sale? Let’s say the smallest deal is 50 seats; that is still a $250 deal.
NICE explains that their “sweet spot are contact centers with between 20 and 400 agents” on a TSB website. That copy maybe prior to acquiring LiveVox for $424M to get $142M in revenue. Overall they have $2.5B in revenue of which $1.7B is cloud revenue. In quarterly reports there was no mention of LiveVox when mentioning the YoY growth of cloud revenues of 27%. Maybe an oversight.
They certainly are on the move. But what does that mean for other UCaaS providers?
First, it means that that UCaaS ARPU is still compressing. Growth year over year will slow because every new contract or renewal will be less than last year. This mainly means that mass market, nay commodity, UCaaS will bottom out at $4 per seat.
Some of this is directly related to how UCaaS is sold. It is POTS and PBX replacement, so it is a commodity. The fact that so many UCaaS providers also have Direct Routing and Operator Connect for MS Teams showcases the inability to demonstrate the value of your cloud communications platform. Period.
To me, chasing MS Teams dial-tone revenue is to just want money. Any money. And it dilutes the brand. Distracts sales.
UCaaS providers should have listened 3 years ago when I was yelling to go vertical and integrate. Not many listened, so now they are the equivalent of a Integrated T1. That’s right, we are back in the jungle, baby! The commodity voice jungle.
Vendors have to go back to the drawing board and decide who they are and who they want their customers to be. The Value Proposition and Target Customer are vital to providing value beyond dial-tone.
When you consider that there are over 2,000 providers** selling/reselling UCaaS of some kind, that is a crowded environment. To do well, you either have to learn to profitably sell, provision and maintain a $5 seat and do it at scale – or tell a story of why your platform is worth what you are charging and that it isn’t for everyone but those that are targets get great leverage from it.
To do that you have to consider that Cbeyond was a large CLEC with less than 53K customers. USLEC died with 26K customers. NICE after 2 acquisitions has 25K customers.
You won’t have 28M subscribers like Spectrum/Charter but then neither does Verizon, AT&T or Altice!
The key is to get to 25K profitable and happy customers.
Cbeyond was the first CLEC to take a 15% share in one Metro. They didn’t come close to that market share in any expansion market. Focus, strategy, and execution are more than words.
- What is your Focus?
- What is your Strategy?
- How well are you executing?
- Who is your Target Customer?
- Why should anyone buy from you? What makes you so special?
Need help answering these questions? Call our office at RAD-INFO INC at (813) 963-5884
**The 2000+: NCTA has 200 cableco members; NCTC has 700 members; ACA Connects represents 500+ rural providers. USTelecom don’t list the number of members. Broadsoft sold to 450 CSPs – about 350 in the US. Netsapiens (now CXDO) has 150+ customers, quite a few white-label. Skyswitch has 750 MSPs selling off its platform. Momentum Telecom provides voice for many tier 2 and 3 cablecos. 2600Hz white labels Kazoo for a couple of hundred providers. There are 75 other white label providers including WLC, Alianza, and Intermedia. I don’t know how many members are part of Cloud Comm Alliance or the Cloud Voice Alliance. Add all that up and it crosses well over 2K providers pushing UCaaS but only grabbing less than 30% of the US market in 21 years of marketing!