Cloud communications provider Vonage this week announced that CEO Alan Masarek is stepping down and exiting the board, to be replaced in those roles by Rory Read, who joins the company from Dell.
Most recently, Read served as Dell’s chief operating executive as well as CEO and president of the Virtustream business unit. In his years at Dell, he also has been EVP of Boomi, a SaaS integration platform, and chief integration officer, leading the historic and massive merger between Dell and EMC.
Masarek’s tenure at Vonage should be viewed as nothing less than a smashing success. When he joined Vonage in November 2014, the company had almost no business revenue and was best known for the long-running “woo-hoo-woo-hoo-hoo” jingle that drove its consumer business. With stock trading at around $3.50 per share and revenue at about $850 million, Vonage was on the fast track to nowhere. Today, the share price is $10.59 and revenue is in the $1.2 billion range, with sales to business customers accounting for the majority of it.
Turning around a company, particularly one with a brand that’s so well known as a consumer one, isn’t easy and can’t be done overnight. Think of Masarek’s work as a well-written play with the following acts.
Act 1: Change the culture
The Vonage that Masarek walked into was a typical East Coast telecom company. Its headquarters was a big building in a small town in New Jersey, and a trip there kind of felt like going to visit Lucent back in the day — certainly nothing exciting for employees. He worked diligently on changing the culture and making Vonage a great place to work — a challenging, collaborative, and fun place where people are excited to go. Today the HQ is still in that small town, but it and other Vonage offices have a much more West Coast vibe — collaborative workspaces, bright colors, and plenty of energized people trying to change the industry. Once Vonage became a place people wanted to work at, Masarek was able to recruit fresh talent while retaining who he wanted.
Act 2: Stabilize the business
The main reason Vonage wasn’t able to grow business revenue prior to Masarek’s arrival is that it didn’t have a great cloud offering for that audience. Launched as a consumer company, Vonage served those customers well but didn’t offer a broad enough set of capabilities for businesses. Masarek fixed this problem by going on a shopping spree and rolling up a number UCaaS providers — iCore Networks, SimpleSignal, Telesphere, and gUnify — into Vonage Premier, which met the needs of large enterprises. Meantime, the Vonage Essentials proprietary stack served the needs of SMBs. As for the consumer business, which had headed into decline, Masarek decided to stop investing in it and to use the cash it generates to evolve the company. This shift set the foundation for all the future moves Masarek would make.
Act 3: Move into CPaaS
Once Masarek had shored up the core business, he started thinking strategically about adjacent markets. His first bold move came in May 2016 when he snapped up Nexmo, the number two player in the emerging communications platform-as-a-service (CPaaS) space. This move made Vonage relevant with developers, creating a new market opportunity for the company. Nexmo didn’t have the same kind of brand recognition as Twilio, the number one player, but it had some unique capabilities, most notably around its integration with social platforms like WeChat, Viber, Line, Facebook Messenger, and more. In August 2018, Vonage acquired Tokbox, bringing video APIs to the platform. This technology has been nothing short of game changing, particularly during the COVID-19 pandemic as it has enabled companies to create entirely new experiences (see my related posts on embedded video here
Act 4: Here comes cloud contact center
After four short years, Masarek had fixed the UCaaS business and moved into CPaaS. In September 2018, Vonage set its sights on the lucrative, high-ARPU, margin-rich CCaaS market with the move to acquire NewVoiceMedia, a U.K.-based CCaaS vendor, for $350 million in cash. Given many of Vonage’s business customers are mid-sized companies, CCaaS made a lot of sense as an adjacent market. Businesses now compete on customer experience, and that starts with an omnichannel contact center that brings digital channels into fold. Vonage is now a player in it.
Act 5: Single stack is the way
The parts Masarek assembled were a collection of clouds. This gave the company all the necessary components to compete in the different communications market, but leveraging capabilities across the platforms was difficult. The company’s next move was to create a single cloud back end that could power its UCaaS, CPaaS, and CCaaS offerings. Along the way, it also built its own meeting and video solutions and moved from its use of Amazon Chime to provide those capabilities. During an analyst meeting, Masarek reiterated several times how critical having full control over the software stack would be in allowing Vonage to move in any direction it wants. Today, Vonage is still the only communications company that offers the trio of UCaaS, CPaaS, and CCaaS from a single cloud back end. Branded Vonage Business Cloud, or VBC, this is now Vonage’s go-to-market foundation.
Act 6: Rebrand Vonage
The orange colors and consumer look and feel had been in place for years. In November 2019, Vonage held Campus, its first-ever user conference, in San Francisco. At the event it unveiled its edgy new logo, a black V, that replaced the orange one. It’s sleeker, and has more of a business feel. At Campus, Vonage also showed off Vonage Meetings, video, and VBC, as talked about its upcoming AI capabilities and what the future of communications would be. In many ways, Campus was the coming out party for Vonage to shift its talk track from Vonage transformation to industry transformation.
Act 7: Graceful exit
With the evolution complete, Masarek had one final act: to find his replacement. From what I understand, the transition has been planned for some time and the timing makes sense. The company is stable, has a new software platform, full set of services, and new brand identity. As I pointed out in this No Jitter post
, it’s now go time for the company, and that require a different skill set than the one needed to rebuild it.
I don’t know the new CEO, Read, at all, but I have heard that the entire Vonage board, including Masarek, believes he is the perfect choice. And equity analysts I know who track Vonage view the appointment positively, so that’s a good sign. Read’s resume speaks for itself: He has SaaS experience, has integrated companies, has held CEO roles… and the list goes on. I’m certainly looking forward to getting to know him.
As Read steps into the role, he’ll have a few pressing matters to consider. The first is the sale of the consumer business, which is something equity analysts tell me they’ve been waiting to see. Their complaint is that the consumer business drags down the company’s growth numbers; that said, the consumer business does generate a lot of cash, so there’s a balancing act that needs to take place. Also, Read will have to find a replacement for Dave Pearson, who in January announced his retirement as CFO.
After that, it’s about stepping on the gas and taking the competitive edge Vonage has from its single stack and using that to outpace the competition. This won’t be easy against competitors like RingCentral, Five9, Twilio, and Zoom. However, with Vonage’s brand recognition and strong products, it’s not impossible. And heck, Read brought Dell and EMC together, and that merger has gone much smoother than experts thought it would.
As for Masarek, I have nothing but positive things to say about him and I wish more CEOs followed his lead. He was always very engaging, whether in a formal meeting or if you just ran into him walking down the street. In fact, Masarek is one of the most participative CEOs I’ve encountered in my many years of attending vendor analyst events. Another No Jitter blogger, Blair Pleasant of UCStrategies, said much the same in commenting on LinkedIn: “I’m sure Rory will do a good job, but Alan was one of my all-time favorite CEOs. Always engaged with analysts.”
Another strong endorsement for Masarek came from Ryan MacWilliams, with financial services firm Stephens. In his research note, he wrote: “We commend Mr. Masarek for deftly guiding Vonage through a series of transformative acquisitions, that helped guide Vonage from a 100% consumer-oriented VoIP business to a leader in business cloud communications.”
I have no idea what Masarek’s next stop will be, although I hear Poly is looking for a CEO.