Despite a chaotic year, a steady stream of enterprise communications mergers and acquisitions occurred all year. The world accelerated the adoption of digital technologies, and providers stepped up their acquisitions to meet capacity and fill portfolio gaps.
There are lots of motivations that can drive mergers and acquisitions. The main reasons to acquire are to expand a portfolio, expand customers or revenue, grab IP or patents, and/or hire a functional team in one swoop.
The enterprise comms sector has been promoting remote teams and a new way to work for over a decade, but 2020 escalated these topics to a matter of business survival. It appears that the pandemic may end in 2021. While elements of the new normal remain unknown, it seems reasonable that modern, cloud-delivered enterprise communications will play a major role.
I write about sector M&A monthly, and these are the top ten acquisitions that I consider the most significant in 2020 (listed in order of announcement):
1. Verizon and BlueJeans — Over the past several years, we’ve seen several video pure-plays get acquired. Of those, Verizon’s acquisition of BlueJeans is among the more significant, as it involved two large providers. Verizon now has OneTalk for voice, BlueJeans for meetings and events, and recently launched a new CCaaS. These applications, combined with its wired and wireless services, position Verizon as a one-stop communications provider. Verizon’s CEO made vague references to 5G at the time of the BlueJeans acquisition, raising questions about how net neutrality’s absence could impact Verizon’s customers.
2. Microsoft and Metaswitch — Microsoft’s acquisition of Metaswitch filled in some gaps regarding its prior acquisition of Affirmed Networks. Metaswitch designs, develops, manufactures, and markets telecommunications software used by service providers, equipment manufacturers, and large enterprises. Combined with Affirmed Networks, Microsoft is suddenly well-positioned for software-controlled, cloud-delivered 5G back-end services. This is an Azure/cloud play, likely motivated by the West moving away from Chinese made infrastructure. While 5G preparedness appears to be the primary motivation, some UC elements from Metaswitch will likely find their way to Teams.
3. Zoom and Keybase — Though not entirely of its own volition, Zoom made a rapid shift toward security and encryption in 2020, and that included its first acquisition. The entire courtship reportedly only took weeks, and the pandemic prevented the CEOs from ever meeting in person. Keybase was known for distributed encryption, and within weeks of the acquisition, Keybase enabled Zoom to publish its architecture for encryption. Phase one of that architecture has already been implemented. This acquisition is particularly notable due to its speed and how it enabled Zoom to respond quickly to widespread security concerns. The rapid increase in virtual meetings this year caused several providers to change or implement new security practices. In addition to Zoom, several other providers launched or enhanced their support for end-to-end meeting encryption.
4. Cisco and BabbleLabs — Though a relatively small acquisition, noise reduction in meetings has become a major area of innovation. Rather than suppressing noise through creative muting, BabbleLabs removes noise. The technology can identify and separate noise and then enhance the speech. Cisco wasted no time in deploying the new technology to both its software and hardware endpoints. It also represented the first of three acquisitions by Cisco Collaboration in 2020.
5. Dialpad and Highfive — Dialpad’s move to acquire Highfive was surprising because it already had its own meetings technology. The provider started as UberConference, a WebRTC-based conferencing company. However, 2020 raised the bar on video, and Highfive had the technology, the (local) staff, and the room strategy that Dialpad needed. The companies complement each other nicely, creating a UCaaS provider with global reach, a strong UCaaS offer, messaging, and CCaaS. Dialpad’s Voice Intelligence provides coaching, automated notetaking, sentiment, and transcription analytics. The company just completed a $100M Series-E funding round with a valuation over $1.2 billion.
6. Twilio and Segment — While the contact center and customer relationship management providers jockey for their position over customer data, Twilio opted for a different strategy around customer data management. With the acquisition of Segment, Twilio intends to help its customers leverage data across many silos, including CRM, e-commerce systems, marketing automation systems, support systems, homegrown apps, mobile apps, and more. Segment provides tools that simplify a comprehensive view of the customer using data from disparate systems. Segment emphasizes unlocking data from existing, rather than replacing, systems. Also notable is the all-stock transaction. The CEO of Segment said the merger accelerates Segment’s mission.
7. Bandwidth and Voxbone — This acquisition gave Bandwidth a stronger international presence across 60+ countries, complete with a deeper well of global phone numbers. It enabled Bandwidth to emerge as a global communications platform and network. More importantly, Bandwidth now powers 11 out of 12 of Gartner’s Magic Quadrant Leaders for UCaaS, CCaaS, and Meeting Solutions. Voxbone sold for about €446 million, representing six times its anticipated 2020 revenue.
8. Salesforce and Slack — Salesforce is no stranger to collaboration acquisitions yet isn’t really viewed as a collaboration company. That’s likely because the company keeps making small acquisitions companies like Buddy Media, Rypple, Dimdim, Etacts, and Quip. Slack is its biggest and boldest move into collaboration so far. It also shores-up the non-Microsoft solution stack. Most Slack customers have rejected Teams, and most Salesforce customers have rejected Dynamics. A single, larger vendor provides a stronger competitive alternative.
The time seemed about right. Slack was feeling the heat from Microsoft, and it had not seen a pandemic bump like many other distributed work companies. Slack is a single-app solution, and the providers that complete the comms stack tend to offer alternative solutions for messaging. However, acquiring Slack also exaggerates existing portfolio gaps found in both companies, specifically: voice, meetings, and CCaaS. The build vs. buy evaluation to fill those gaps just got a lot more interesting.
9. Cisco and IMImobile — Cisco’s acquisition of IMImobile earlier this month is notable for several reasons. First, it represents the increasing importance of digital channels within the contact center. Note, Cisco is not new to the contact center and claims it’s currently supporting over 3 million agents. But the space is evolving rapidly, and digital channels can be more important than upgrading call control. Cisco will also leverage IMImobile to extend its customer journey solutions to customers outside of the contact center. IMImobile already powers digital engagements for other enterprise centers in marketing, sales, service, logistics, and more.
10. RingCentral and DeepAffects — Just in time for inclusion, RingCentral announced its first acquisition with the purchase of conversational AI provider DeepAffects. AI technologies are already adding significant value to both video meetings and contact center solutions, and the technology continues to improve. RingCentral Video launched earlier this year, and it already supports popular AI-based features such as background substitution. DeepAffects brings to RingCentral a new set of voice-biometric capabilities, such as emotion recognition, speaker identification, and accent detection. RingCentral intends to integrate DeepAffects technology across its entire portfolio, including the branded solutions it powers.
Honorable Mentions:
- Five9’s acquisition of Virtual Observer is representative of CCaaS providers expanding into adjacencies (workforce optimization) to create a more comprehensive solution, protect customer accounts, and grow top-line revenue
- LifeSize and Serenova were likely a first act in combining pure-plays (meetings and CCaaS) — I expect a UCaaS act to follow.
- Salesforce should value Slack and Rimeto simplifying the search for subject matter experts with using smarter, more discoverable directories.
- Facebook’s move with Kustomer better positions the provider for digital-first, automated customer engagement.
Dave Michels is a Contributing Editor and analyst at TalkingPointz.
