Beth Schultz
Beth Schultz is editor of No Jitter and program co-chair for Enterprise Connect. Beth has more than two decades of...
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Beth Schultz | June 28, 2016 |


CPaaS Oligarchy in the Making?

CPaaS Oligarchy in the Making? CEO Alan Masarek shares his insight on Vonage's cloud communications strategy, perspective on the communications API opportunity, and more.

CEO Alan Masarek shares his insight on Vonage's cloud communications strategy, perspective on the communications API opportunity, and more.

As communications API provider Twilio shook things up last week with its initial public offering, Vonage CEO Alan Masarek asked us not to forget the other big event of the month marking a world of change in the cloud communications universe -- his company's acquisition of Nexmo, announced in May and completed June 6.

Not that he begrudges Twilio its time in the sun. In fact, he's glad for it. By shining so much light on the communications platform-as-a-service (CPaaS) model, Twilio's IPO will help the market better understand why Vonage acquired Nexmo, its sixth buy in the last three years -- not to mention help Vonage in its competitive positioning, he told me in an interview.

During that interview, Masarek explained his vision for cloud communications, both generally and for Vonage in particular, discussed why Vonage zeroed in on Nexmo, and told me why he thinks the communications API market will become an oligarchy. Here are edited snippets from that call, in Masarek's own words.

Alan Masarek, Vonage

On Vonage's general acquisition strategy...
At its simplest, what we're doing in cloud communications for business is connecting ... a company's communications infrastructure at the center, which we're 'cloudifying' with our UCaaS business, with the cloud-based apps that they use in their ordinary workflow communications on one side --, Google for Work, Office 365, Zendesk, or what have you -- and on the opposite side the cloud communications a company uses for customer communications. The acquisitions we've done have been in fulfillment of that vision.

We started in UCaaS, with four deals. Because UCaaS penetrated the business world first with small companies and worked its way up to large enterprises, we first purchased Vocalocity, ... which is now Vonage Essentials, our own proprietary stack. Subsequently, we rolled up three of BroadSoft's most meaningful service providers -- Telesphere [Networks], Simple Signal, and iCore [Networks] -- together as Vonage Premier. From day one, our strategy has been to serve the full range of businesses, from the smallest to the largest enterprises, and we chose to do that with two purpose-built solutions targeting respective ends of the market: Vonage Essentials is midmarket down to microbusiness, while Vonage Premier targets from midmarket up to largest enterprises.

We also purchased, a little over year ago, gUnify, for that middleware functionality that integrates our call processing stack to SaaS-based workflow tools. And now, with Nexmo, we are connecting our UCaaS stack with how companies are incorporating the same communications functionality into their communications to their customers.

We believe that through these six acquisitions we've built the broadest feature set for connecting the flow from cloud-based workflow tools, through [a company's] communications stack and, irrespective of the mode -- voice, video, text -- through how I communicate with my customer in a way that's integrated, and seamless.

On the need to add CPaaS into the mix...
While UCaaS has been about communications for a company's employees, CPaaS has been about how you communicate with customers. That's because we communicate with our customers via websites, mobile apps and, increasingly, chat apps. And developers who own those websites and mobile apps or business process apps, chat apps or what have you, are incorporating the communications functionality -- messaging, voice, or video -- through Nexmo's APIs (and Twilio's APIs as well). It's the identical communications functionality but a different delivery model. With UCaaS you're selling the whole meal. With CPaaS, you're chunking it down and letting it be consumed in bite sizes.

On why it selected Nexmo rather than Twilio or other CPaaS provider...
Interestingly, Nexmo and Twilio are sort of the inverse of one another. Nexmo is more globally -- outside the United States -- focused, and more focused on messaging rather than on voice. And Twilio is more focused domestically and more on voice. Now think about who we are as Vonage -- a strong domestic voice provider, with probably the largest VoIP footprint around. That complements where Nexmo has its strengths -- internationally, in APAC and EMEA, and in messaging.

On what Vonage brings to Nexmo, and vice versa...
If you look at our distribution in North America, we become a force multiplier for Nexmo as it comes here. We have 70,000 business customers, many are small companies, but many are large as well. We find that companies are looking for a UCaaS solution, and then they are separately working with CPaaS solutions for communications with their customers from their websites and mobile apps. What will happen over time is we will marry the two, ... and by virtue of being able to bring Nexmo's APIs together with UCaaS functionality, we believe we will be able to leapfrog the competition.

You get the ability to have this high-quality voice because we have this very thick MPLS backbone with all these PoPs and super PoPs throughout North America and termination contracts with carriers throughout the world. That benefit instantly accrues to the Nexmo customer. Our brethren in the CPaaS side don't have that network underneath them.

Continue to Page 2 to read Masarek on Nexmo's path forward, the difference between selling UCaaS and CPaaS, and the oligarchical nature of CPaaS


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