Cisco Buys BroadSoft, Now What?

As you likely saw elsewhere on No Jitter, Cisco yesterday announced its intent to acquire BroadSoft for approximately $1.9 billion in a bid to accelerate its cloud communications efforts. The deal instantly makes Cisco the market leader in the UCaaS space, as BroadSoft's BroadWorks and BroadCloud offerings are used by the majority of service providers delivering UCaaS.

Cisco's move raises some interesting questions, and potentially creates some market disruptions. Cisco had been in the middle of its own cloud transformation, based on Spark, its team collaboration application. Spark, fully hosted by Cisco, is available as a SaaS offering providing team messaging, meeting, and UC functionality, including the ability to leverage Cisco's hybrid services to integrate it with existing on-premises or hosted deployments of Cisco Unified Communications Manager (UCM) or Hosted Collaboration Solution (HCS). In addition, Cisco HCS partners are able to build contact center solutions based on HCS. Over the last year Cisco has built out the telephony and video offerings to turn Spark into a robust UCaaS offering. Now, with the acquisition of BroadSoft, Cisco adds two new platforms, with lots of overlapping features, to its portfolio.

BroadSoft's white-labeled BroadCloud and packaged BroadWorks software offerings deliver a similar set of features compared with what's currently offered by Cisco. It includes unified communications, meetings, team messaging, and contact center. The primary difference is in terms of focus. BroadSoft sells its wares to service providers who use it to deliver their own UCaaS offerings, whereas Cisco sells direct to enterprises, or enables service provider partners to build custom hosted solutions via HCS.

As UC analyst Dave Michels noted in previous coverage, the primary synergy is one of markets. BroadSoft partners typically sell to the SMB market, whereas Cisco has primarily focused on the larger enterprise. Still, questions remain over product overlap, partnerships, and future direction...

Will Cisco maintain BroadWorks and BroadCloud?

Cisco hasn't exactly ignored the SMB market; its Spark-based telephony and video offerings are well suited for that market segment. Now, with the acquisition of BroadSoft, will Cisco cede the SMB market to service provider partners and continue to develop the BroadSoft product suite? Or does it see BroadSoft's customers as future channels for Spark? How will partners who already sell both BroadSoft and HCS-based offerings react?

What's the integration strategy?

One area where BroadSoft lacks competing products is video and digital whiteboards. Will Cisco integrate its video and Spark Board products into BroadWorks and BroadCloud? If so, how, given the tight integration between Spark and Spark Board?

How will the combined companies compete with over-the-top providers?

UCaaS providers like 8x8, Dialpad, RingCentral, and Vonage, continue to grow by selling direct to enterprises. Cisco and BroadSoft's strategy is to sell through partners. Will they be able to match the pace of innovation, compete on cost, and maintain market share against an ever-increasing array of competitors selling direct to SMBs and larger enterprises? Or will Cisco need to develop a direct sales model, potentially competing against its partners? How will Cisco overcome the inherent advantage that a provider that controls its own platform, and can rapidly deliver new features, maintains over a UCaaS provider who bases its service on a third-party platform?

What happens to Polycom?

Polycom and BroadSoft currently partner to integrate Polycom phones and video endpoints into BroadWorks and BroadCloud. Cisco obviously sees potential revenues from bundling its own phones and video conferencing systems with BroadSoft software and is likely to aggressively work to shift partners away from Polycom.

Is there a large enterprise opportunity?

Nemertes' research continually shows growth of UCaaS adoption. While most of that growth has been in the SMB market, even larger enterprises are eying the cloud to improve agility, gain access to new features, and enable IT to focus on more strategic roles. Cisco's cloud story for the large enterprise today revolves around HCS. Could Cisco look to leverage BroadCloud as a potential alternative solution? And if so, again, what's the impact on partners?

We're only 24 hours past the official announcement, but Cisco has already turned the UC world on its ear. It's not just Mitel anymore that's consolidating the UC market.

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