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BroadSoft: What's Good for the Goose
BroadSoft recently celebrated its 15-year anniversary, and chose its annual Connections conference for the celebration. Highlights from its 15 years include: First APAC deal in 2002, launch of residential voice in 2004, first call center solution in 2006, IPO 2010, and UC ONE in 2012.
BroadSoft's last reported quarter was Q3-13, with revenue of $42.9 million, up 7% year over year. The company sells its softswitch solutions to service providers in 71 countries, and tripled its revenue over the past five years. Yet it remains largely unknown with end users, as its service provider customers use its technology to create their own branded offerings.
Several announcements were made at BroadSoft Connections, including expansion of its UC ONE suite, a new extension for Google Chrome, and enhancements to its go-to-market program. What attendees were talking the most about, however, is BroadCloud--BroadSoft's wholesale service solution.
BroadSoft's products are organized into three "broad" categories: BroadWorks, BroadTouch, and BroadCloud. BroadWorks is its flagship softswitch software that service providers license and run in their data centers. BroadTouch represents end-user applications such as desktop and mobile clients, which are also sold through service providers. BroadCloud represents wholesale services hosted by BroadSoft that providers can subscribe to and rebrand.
BroadCloud offers a la carte services to enhance BroadWorks implementations such as instant messaging and presence. It also offers a complete, fully managed solution called BroadCloud PBX. This solution includes BroadWorks and back-office automation with a "wizard-like" quoting tool, electronic contracts, and preconfigured drop-ship CPE. It also includes BSS/OSS and required operational equipment (SBCs, servers), network services, and staff to keep it going. Because infrastructure costs vary wildly, the break-even point with the traditional licensing model is hard to generalize.
We know the proposition of public cloud services: OpEx instead of CapEx; focus on the business not the infrastructure; pay-as-you-go; invest in core services, not infrastructure; reduce IT costs; and so on. To deliver this, service providers typically make significant capital investments in operations, networks, staff, and softswitch licenses to create their services.
Is what's good for the goose, also good for the gander? The question has some providers uneasy. I did speak to a few that were excited about the option, and BroadSoft has confirmed that one BroadWorks provider has already begun its transition to BroadCloud PBX.
It seems unlikely BroadSoft will attempt to sell directly to end users any time soon, but BroadCloud PBX does lower the barrier-to-entry for new providers to offer hosted services. It also creates a form of channel conflict, as both existing service providers and BroadSoft itself are targeting non-hosting providers to become partners. BroadSoft claims that it's the larger providers that are mostly attracted to BroadCloud PBX because smaller providers prefer to create, rather than integrate, the service's operational processes.
BroadCloud PBX is available to North American providers now, with near-term expansion plans for Europe. Another option for USA-based providers wanting a BroadSoft-powered turnkey option is Clearspan, the CPE platform that Aastra OEMs from BroadSoft.
UC premises-based vendors understand well how cloud services can create channel conflict. This is a similar story to what we've seen in the premises-based channels. The PBX and premises model relied heavily on a distributed channel network, whereas economies of scale for hosted services tend to favor centralized operations. Nevertheless, a distributed channel continues to be highly desirable as a go-to-market strategy.
BroadCloud PBX enables BroadSoft to better understand end-user behaviors, usage, and preferences. Developers of cloud solutions potentially have an advantage over traditional product vendors when they have a glimpse into actual usage patterns, regardless of whether the sales model was direct or indirect. BroadSoft states that its BroadWorks software will continue to remain available for providers that want to host.
BroadCloud PBX makes BroadSoft's technology more accessible to providers as its competition heats up. A lower cost-of-entry for providers seems logical, and few of BroadSoft's competitors are attempting to host communications services. It also solves the current problem with version control because, as with premises-based solutions, timely updates can be difficult to enforce. In contrast, with BroadCloud PBX, BroadSoft controls the version and updates of its cloud-delivered services.
Public-cloud-based implementations remain the minority in enterprise UC, but continue to experience significant growth--especially when compared to premises-based implementations. Best practices are still developing, and it is interesting to watch how each of the manufacturers and service providers experiment with the go-to-market variables.
I suspect that what is good for the goose is good for the gander, and that many providers will migrate to wholesale hosted solutions.
Dave Michels is a Contributing Editor and Analyst at TalkingPointz.