451 Research - One Vonage Builds Business Communications Synergies with UCAAS, CCAAS, CPAAS

Summary

At its 2018 industry analyst event Vonage shared its progress in the past few years, highlighting its shift from the residential market to its current focus on business customers. Company executives also revealed product developments and recent acquisitions that show the direction in which the company is heading with its One Vonage platform, leveraging synergies with its communications PaaS (CPaaS), contact center (CCaaS) and unified communications (UCaaS) offerings.

The 451 Take

Just four years after shifting its focus to the business segment, Vonage's strategy is showing strong results. The company is set to surpass $1bn+ in annual revenue for the first time this year, with business customers accounting for nearly 60%. The company will face intense competition from other players that are also incorporating CPaaS into their product roadmaps. However, its early start as a VoIP provider and its innovative approach – with CPaaS at the heart of One Vonage – place Vonage one step ahead and in a good position to benefit from the growing relevance that programmable communications will have for customer and employee interactions.

Context

Vonage is a cloud communications provider founded in 2001. Its headquarters are in Holmdel, New Jersey, and currently has 2,200+ employees. The company, which started out as a provider of residential VoIP, has undergone a major transformation in the last five years to reposition itself as a cloud communications provider for the enterprise. To this end Vonage is making significant investments in R&D and M&A. The company boasts 200+ patents – with an additional 150 pending – and $1bn in strategic acquisitions in the last five years. 451 Research's M&A KnowledgeBase shows that Vonage has made a total of nine acquisitions, including communications PaaS (CPaaS) Nexmo in May 2016, video CPaaS TokBox in August 2018, and contact center SaaS (CCaaS) NewVoiceMedia in September 2018.

Strategy

By different measures, its transition into the business segment is beginning to yield positive results for Vonage. The company currently has over 100,000 business customers worldwide and it projects it will surpass $1bn+ in annual revenue in 2018, with nearly 60% coming from its business customers.

A key element in its strategy is owning and controlling its own software code. Vonage believes this will allow it to differentiate and build its own platform without having to rely on partners. This approach led to its acquisition of NewVoiceMedia and the development of Vonage Business Cloud (VBC), a UCaaS platform that has been architected based on the One Vonage microservices architecture. The company states it will continue supporting Vonage Business Enterprise, its BroadSoft-based UCaaS offering, but will position the One Vonage platform with new customers.

Vonage is looking to move upmarket and is enhancing the capabilities in VBC to address the requirements of the enterprise segment. The company claims to have increased its bookings from customers with greater than $1,000 MRR by 65% in the past year.

Products

One Vonage is an integrated, fully programmable communications software platform encompassing Vonage's CPaaS, CCaaS, and UCaaS offerings. One Vonage provides a range of products that include:

Packaged apps for PBX and contact center
Cloud integrations
API applications including two-factor authentication and split recording
Microservice APIs for voice, messaging and video

VBC, the company's UCaaS solution, is a proprietary platform that was rearchitected based on the One Vonage microservices architecture. Recent enhancements to the VBC platform include a redesign of the desktop and mobile user interfaces (UI) with an integrated UI that combines voice, messaging, and video in a single application and the addition of VonageFlow, a team messaging solution. Other enhancements include Vonage Business Inbox, which allows the user to view messages sent and received via multiple channels (social messaging apps like Facebook messenger, group messages, personal and business email) together in a single unified inbox.

In October, Vonage launched the VBC store. Accessible on the admin portal, the store allows customers to access applications from the Vonage developer network. The company states it is generating $100,000 MRR in new VBC bookings every month from customers adding extensions and features.

Although still evolving, 451 Research believes that One Vonage is aligned with key trends in the business communications space, which we identify in our framework for the software-defined business communications ecosystem (451 Research, 'CPaaS will turn business communications inside out: a primer on who and how this will happen'). The framework is defined by four key attributes including ubiquitous access to content and applications, integration with business workflows and applications, intelligent interactions, and security and compliance.

Competition

The competitive landscape for Vonage includes cloud communications providers that are expanding their capabilities with CPaaS such as Alcatel-Lucent Enterprise (ALE), which announced its acquisition of Sipwise in May; Mitel, which acquired ShoreTel in 2017; and Cisco, which acquired Tropo back in 2015. Other competitors also leveraging CPaaS in their business communications offerings include incumbent UCaaS/CCaaS providers such as Genesys and Avaya.

Other competition for Vonage includes CPaaS providers such as Twilio, a longtime rival of Nexmo since its early days. Twilio has expanded beyond its initial offering of messaging and voice APIs. It launched its WebRTC API for audio and video in early 2015 and in 2016 it announced its acquisition of Kurento WebRTC Media Server technology assets. Other CPaaS competitors include CLX Communications, which acquired CPaaS provider Sinch in December 2016, and IntelePeer, a cloud communications provider that is positioned as a CPaaS 2.0 vendor.

Raúl Castañón-Martínez

Senior Analyst, Workforce Collaboration & Communications

Raúl is a senior analyst based in Boston focusing on business communications and collaboration technologies such as enterprise messaging, voice, bots, speech recognition and unified communications. Before 451 Research, he was a product manager at EMOSpeech, analyzing emotion recognition technology.

Jeremy Korn

Research Associate

Jeremy Korn is a Research Associate at 451 Research. He graduated from Brown University with a BA in Biology and East Asian Studies and received a MA in East Asian Studies from Harvard University, where he employed quantitative and qualitative methodologies to study the Chinese film industry.

Aaron Sherrill

Senior Analyst

Aaron Sherrill is a Senior Analyst for 451 Research covering emerging trends, innovation and disruption in the Managed Services and Managed Security Services sectors. Aaron has 20+ years of experience across several industries including serving in IT management for the Federal Bureau of Investigation.

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