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Vonage Success Depends on Balance of Strategic, Tactical

Over the past five years, Vonage has shelled out hundreds of millions of dollars to acquire companies to compete in the UC-, contact center-, and communications platform-as-a-service markets. At the same time, it’s been building new products that sometimes compete with those acquired… and along the way it’s also used partners to plug holes in its product line.

From the outside, the portfolio might look like a bit of a confused mess, with some segments having multiple solutions. However, as Vonage CEO Alan Masarek explained this week at the company’s first-ever analyst event, he’s carefully balancing the tactical with the strategic -- meaning, he’s shoring up the businesses and executing today while building for the future.

Alan Masarek, Vonage CEO, balancing the strategic and tactical

Since Maserek arrived four years ago, his goal has been for Vonage to own its own software so it would have complete control over its offerings. But building a software portfolio takes time, so he made decisions along the way meant to bolster the business in the interim. For example, it’s reselling Amazon Chime so it has a meeting solution to offer today while it takes the time to build its own product.

Below is a look at how Masarek is balancing the tactical needs of today with the strategic requirements of tomorrow across the portfolio.


  • Tactical: The Vocalocity stack, acquired in 2013, could only scale to about 25 users per company, Masarek admitted. Given its upmarket goals, Vonage needed a better solution. However, it didn’t have the time to roll its own. Instead, Vonage acquired three BroadSoft- based service providers and created Vonage Premier.
  • Strategic: Earlier this year, the company announced Vonage Business Cloud (VBC), a modern, microservices-based platform. The new stack gives Vonage total control and greater agility so it can deliver new features on its own schedule. The other benefit of VBC is deployment in the Amazon Web Services cloud, making it easy for Vonage to bring services into new regions.
  • The balancing act: Vonage has a large base of customers currently on the BroadSoft platform. During the analyst event, my fellow No Jitter blogger Dave Michels, with TalkingPointz, asked whether Vonage would still have customers on this platform in 10 years. While Masarek said probably not, he admitted Vonage needs a strategy to make migration easier. In the near term, Vonage will continue supporting those customers but direct all new business to VBC.


  • Tactical: Anyone who follows the contact center space knows that CCaaS has been red hot over the past few years, and Vonage had no solution to ride this streak. As a tactical solution, Vonage has been reselling Nice InContact’s contact center solution, which gave it a viable offering. Vonage hasn’t had a tremendous amount of success in this market, mostly do to a lack of sales focus.
  • Strategic: Late last month, Vonage finalized its acquisition of NewVoiceMedia for $350 million, a move that gives it its own CCaaS product and control of the product roadmap. As Vonage shifts NewVoiceMedia to a programmable microservices architecture, it will be able to add call center functions to its list of APIs available from Nexmo, the CPaaS provider it acquired in June 2016.
  • The balancing act: Vonage has stated it will continue to partner with Nice InContact to meet the needs of different companies. That’s the right thing to say since it has customers on this platform, but you’d be naïve to think there isn’t a plan to phase it out eventually in favor of the NewVoiceMedia platform for all customers. The contact center market is evolving fast, and I’d expect the dual strategy to be something that’s in place just a few more years. Like with its UCaaS business, the difficulty will come in migrating customers.

Network Services

  • Tactical: Like many service providers that own a network, Vonage likes to sell telco termination services as part of a communications bundle. Offering last-mile services isn’t very profitable, however, and managing outages is a pain. Last-mile services can hold up deals, too -- often the customer is ready to go but there’s a lag in terminating T1s so will have to hold on the project until the network is in place. Also, as more apps move to the cloud, the network bandwidth needs to be shared with those apps, which could degrade voice and video.
  • Strategic: In February, Vonage rolled out a software-defined WAN (SD-WAN) service, SmartWAN, based on VMware’s VeloCloud, one of the leading products. SD-WAN obviates the need for last-mile services, meaning customers can use their current broadband or Internet transport to deliver Vonage communication services. Also, the VeloCloud technology includes a number of integrated optimization features, such as dynamic path control, WAN optimization, and QoS, to ensure the quality of the real-time apps remains high.
  • The balancing act: Vonage will be aggressively moving customers from the legacy T1s to SD-WAN, Masarek said. There’s no real downside for the customer, and transitioning should be non-disruptive. An interesting aspect of this is that while SD-WAN greatly improves last-mile performance and resiliency, a private network offers better performance over the middle mile, particularly for long-haul connections. Vonage now has the best of both worlds; the SD-WAN can connect customers to the Vonage network, carry the packets over a private network until the destination, at which point it hands off the traffic to the SD-WAN serving at the far-end last mile. If problems do occur on the private network, SmartWAN can flip over to the Internet to optimize performance. The combination of SD-WAN and private networks gives Vonage excellent network control, which is important for cloud services.

Five years from now, the product strategy for Vonage should be crisp, with the “One-Vonage” platform offering CPaaS, CCaaS, and UCaaS in any configuration the customer wants.

In the short term, Masarek and his leadership team must focus on this delicate balancing act of giving customers what they want today but building to what they need in the future. This task isn’t easy; it requires strong execution. But, if done right, can give Vonage, its customers, and investors some significant upside.