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Service Provider Channel
Several service providers have shared their positive feedback on the acquisition. Many BroadSoft providers -- e.g., AT&T, BT, CenturyLink, Evolve IP, Telefonica, Verizon, Vodafone, and others -- also have long-standing relationships with Cisco. This move can help them streamline vendor management and potentially enable compelling integrations across the two technology portfolios. Cisco has been very supportive of its HCS providers, and is likely to apply a similar approach to BroadSoft partners. Cisco's large geographic footprint and considerable R&D, services, sales, and marketing resources are likely to help accelerate technology innovation and boost sales.
There is, however, a possibility that future portfolio rationalization could have a slightly disruptive impact on the providers. Re-envisioning the user experience to include elements of Spark and UC-One, for example, would require provider as well as end-customer education and training, and potentially re-engineering of some custom integrations developed by the providers, customers, or third-party developers.
Potential Cisco barriers for third-party endpoint and infrastructure (e.g., gateway and session border controller) vendors may also affect service providers by limiting the options they can offer to their customers.
Also arguable is that, with the pending disappearance of the leading independent service provider platform vendor, the providers will lose some bargaining power. Supplier consolidation can often lead to reduced price pressures and more limited incentives for the platform vendors to innovate at a rapid pace. Fortunately, however, growing competition from Microsoft, Mitel, and independent UCaaS providers as well as looming participants such as Amazon and Google is likely to continue driving innovation and keep Cisco on its toes.
Non-BroadSoft UCaaS Providers
The acquisition's impact on non-BroadSoft UCaaS providers is likely to be minimal in the short run. Despite any portfolio or strategy changes that may eventually occur, BroadSoft providers with established UCaaS offerings will conduct business as usual for the foreseeable future. Cisco isn't likely to do anything disruptive to limit its channel's chances for success. Rather, it's more likely to seek to accelerate channel sales.
This acquisition plays against some popular notions that solutions based on proprietary cloud platforms are inherently better suited to address customer needs and drive more rapid provider growth. Cisco's choice to acquire BroadSoft, rather than further enhancing its own Spark Calling functionality or acquiring an independent UCaaS provider, validates the benefits of BroadSoft's more mature technologies, the key role of the service provider channel, and the importance of a broader geographic footprint.
Some independent UCaaS providers -- e.g., 8x8, CoreDial, Fonality, Fuze, Intermedia, Jive Communications, Mitel, Star2Star, and RingCentral -- have done exceptionally well. However, their successes can be attributed to a variety of factors, including entrepreneurial cultures that have helped some of these organizations to be more nimble than the large telcos that represent the majority of BroadSoft's channel. Platform ownership will remain a key success factor for these providers, allowing them the agility to react quickly to market trends, but will need to be reinforced by technology vision, operational efficiencies, and effective marketing and sales strategies. Also, in the short term, confusion and uncertainty about Cisco's vision and product roadmap are likely to compel some customers to more strongly consider non-Cisco and non-BroadSoft providers.
The Cisco-BroadSoft acquisition is likely to pose a number of threats to independent UCaaS providers in the long run. The merger will create a formidable competitor with substantial engineering, services, marketing, and other resources, as well as a strong brand. Cisco is likely to seek additional market share in two ways: by enabling existing partners to compete more effectively, and by aggressively pursuing new partners. There is, of course, a possibility that Cisco may not deliver a strong vision and a compelling solutions roadmap thus curtailing its channel's ability to compete and opening opportunities for other UCaaS providers to more successfully attract and retain customers.
Non-BroadSoft UCaaS providers have an opportunity to compete based on individual strengths, including advanced features, service quality and reliability, competitive pricing, customer service and support, and other differentiated capabilities.
Other Provider Platform Vendors
Market consolidation creates both opportunities and challenges for other market participants. The Cisco-BroadSoft acquisition is likely to have a similar effect on provider platform vendors such as Alcatel-Lucent Enterprise (ALE), Avaya, Centile, Metaswitch, Microsoft, Mitel, NEC, Ribbon, Unify, and others.
The creation of a powerful UCaaS competitor with a dominant market share and considerable resources is likely to shift many partner and end-customer investment decisions in favor of the new entity. A strong brand and large market presence, in terms of both geographic footprint and market share, typically boost buyer confidence. A diversified solutions and services portfolio offers the benefits of a one-stop shop. The Cisco installed base, in particular, will be much more strongly compelled to consider a Cisco cloud option than a solution offered by a competitor.
However, competitors bring some differentiated capabilities to the table that they can leverage to their advantage. Vendors with premises-based solutions can offer a better migration path and more effectively support hybrid cloud and premises-based deployments for their existing customers compared to Cisco or BroadSoft. Also, some competitors (such as ALE via Rainbow) are focusing on delivering advanced cloud-based functionality to businesses that choose to retain their premises-based PBX or UC systems, rather than aggressively pursuing rip-and-replace scenarios. Vendors with telco-centric portfolios (e.g., Centile, Metaswitch, and Ribbon), on the other hand, have the advantage of greater focus and commitment to the service provider community, which eliminates the potential for channel conflict.
Company and portfolio integration challenges are, however, likely to negatively affect the new entity's ability to focus on product development and partner and end-customer support. Confusion and uncertainty about the merged companies' portfolio roadmap, in particular, are likely to compel some channel partners to consider other vendors, either as their primary solution providers or as a back-up and/or hedge for existing Cisco or BroadSoft investments.
There is also some possibility that Cisco will fail to integrate the two portfolios successfully and create a strong technology roadmap for the future. It can make bad choices about applications, endpoints, channel support, and other important aspects of its UCaaS strategy. That will naturally create opportunities for other vendors to fill a void and boost their market presence at Cisco's expense.
Speed to market and long-term vision can determine competitor success. The global market is still relatively untapped; however, increasing market concentration is gradually shrinking vendor and provider opportunities to secure a strong market position.
Continued to next page: Impact on Various Stakeholders in the UCaaS Ecosystem: End Customers, and Conclusion
