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Who's King of the UCaaS Mountain?
Back in October 2015, global workplace provider Regus had just committed to deploying 8x8's cloud-based communications services. Regus's plan was to serve 140 new centers in the U.S., the U.K., and Europe using the UCaaS pure-play's cloud communications services, then migrate from legacy PBXs to the cloud at existing locations, as described in a No Jitter post from industry watcher and contact center analyst Sheila McGee-Smith.
As she wrote in that post, 8x8 considered the deal to be "material" -- in other words, news that might affect the value of its securities or influence investor decisions, whether that be a positive or negative effect. The material nature of the Regus deal had to do with its potential scope, as there were no promised minimums or defined pace for Regus's adoption of 8x8, although the total addressable user count, at the time, was said to be about 375,000 people -- although the deal came with no promised minimums or a defined pace of adoption.
For 8x8, and any other UCaaS provider, a deal with the potential to serve nearly 400,000 users is a gold mine. And, in fact, fast-forward roughly 18 months, and we've come to learn this week that the company, now known as IWG, has deployed approximately 20,000 UC seats to select office centers in the U.S., the U.K, Ireland, and Germany. Even better, from 8x8's perch, is that IWG not only has upped the agreement to add 13 new countries and a broader range of service options for Regus customers, but also has extended the terms of the contract to 2020.
"Having recently completed a comprehensive review of the latest trends, advancements and providers in the cloud communications industry, we have selected 8x8 as our preferred global partner for migrating the users in these additional markets to next generation communications," said Andre Sharpe, CIO and head of global business development for Regus, in a prepared statement. "We want to provide our hundreds of thousands of business customers that currently utilize our traditional on-premises voice services with access to the most reliable and advanced cloud-based communications services available, including mobile apps, messaging, web and video conferencing, collaboration and contact center."
"Eureka!" as an old-time gold miner would say.
8x8, RingCentral, and many other UCaaS providers covet the large enterprise deal as they look to establish their market presence ... and authority. Plain and simple, numbers (of seats, users, or endpoints, depending on your preferred terminology) matter.
For example, the installed base is the No. 1 criteria that IHS Markit uses when rating providers for its annual UCaaS scorecard, just released for 2017. Installed base, or market share, gets the heavier of two weightings -- the second weighted criteria being financial stability -- that IHS Markit uses in creating the scorecard, Diane Myers, senior research director at the market analysis firm, shared with me during today's No Jitter On Air episode, "UCaaS Scorecard: Rating the Market Leaders." These criteria show that "you're leading in this space, you're doing well, you're getting customers, and you're financially stable," she added.
Myers, who puts together the scorecard, gives raw scores to three other factors -- market strategy, service development, and service and support options. Click on the podcast player below for the full details on each of these metrics and more of Myers's insight on the market, but here's the big takeaway: 8x8 and RingCentral share the top spot in the 2017 scorecard (based on data as of year-end 2016), each with a score of 30.3. This is the first time in the nine years Myers has been compiling the UCaaS scorecard that two providers share the coveted No. 1 position.
To what does Myers attribute the identical rating? "It's a reflection of RingCentral doing very well on the market share piece. It's a reflection of 8x8 having a little bit of a leg up on the financial stability component, and then both of them executing on their market strategy, and doing really well on bringing on new pieces in service and support to back it up, going after those larger enterprise deals, and RingCentral getting a slight leg up on some of the service development pieces they've done over the last year," she said.
With a score of 29.3, Verizon came in only one notch down. In fact, between the top two and number 10 (Jive, with a 19.8) is but 10.5 points, Myers said. Others in the top 10, after Verizon and between Jive, are Vonage, West, Comcast, Star2Star, Mitel, and Nextiva. (Find some of these surprising? Tune in to the podcast to learn more).
Scrutinizing the installed base is essential in coming up with the top 10, Myers emphasized. "I would say that between number eight and number 15, it's so close, in terms of that installed base, that we really do have to look very closely at counting every single user for those customers because it can be such a small differential -- and over the last nine years that is where we've seen the most change in our scorecards, in terms of companies coming and going."
While Myers didn't share exact installed base figures, she noted that the top four to six companies account for well over a half a million users installed. The top 10, when taken all together, she added, have more than six million seats installed. Year over year, this reflects a 20% growth rate, she said.
But here's the thing, she noted: While leaders 8x8 and RingCentral bulk up at the high end of the market, with deals such as IWG and, for RingCentral, Hyatt, companies like Verizon and Comcast are capitalizing on their retail presence with small businesses, and amassing users at the other end of the spectrum. "They're the ones to watch," she said. "They have the potential to dethrone, for sure."