I’m on my way back from a jam packed 3 days at Broadsoft Connections17. As usual, Broadsoft put on a first class event complete with great networking, content (saw a really cool lifecycle mgmt app called gpxcloud – haha), food, drink, etc. Again I didn’t heed Michael Tessler’s advice on Sunday morning at the CCA event to pace myself but managed to get through the event in one piece.
Obviously the big news from the show was the announcement that Cisco had acquired Broadsoft on Monday. This deal like many in recent months is just further evidence of the shift in what was once called the telecom industry. The move away from capital intensive hardware-centric network infrastructure to opex-based, cloud delivered “asset lite” networks is accelerating and this deal is just another transition companies like Cisco need to make to capitalize on this trend. This deal also was a pre-emptive strike to keep this crown jewel of the collaboration space out of the hands of rivals like Microsoft, AWS, Oracle, SalesForce, Facebook, etc. We truly have an industry where the term “carrier” no longer describes the players that will likely dominate it in the years to come.
As I look at the prospects for the services and software that Cloud Age delivers I am excited by this transition as it offers great opportunities to impart the knowledge and tools that we have amassed over nearly 30 years in the industry. Our focus is not on any particular type of company but on any company that uses network services in the delivery of their service. This definition yields all sorts of providers out there including UC, CPaaS, traditional CLECs/ILECs, call tracking, resellers, agents, applications, etc. that will need help managing their network costs for years to come.
I also attended an interesting session presented by Michael Quinn at the Cloud Communications Alliance (CCA) meeting at Connections. Michael’s firm (Q-Advisors) is in the middle of a lot of the mid-market deals going on in the cloud communications space today so has great insight on the business side. One point Michael made to the group that was music to my ears was that too many of the emerging cloud comms providers have focused their efforts solely on growing the top lines of their businesses thinking that this will enable them to have an exit only to find out that they need to also have some level of profitability (EBITDA / cash flow). Michael spoke of the formula called the “rule of 40” that determines valuation levels in this space. This formula is (Revenue Growth + EBITDA Growth) >= 40% in order to have a decent valuation. The reason I found this formula interesting is related to how our services can help the companies in this space achieve / exceed this metric. We recently completed a project for a hosted UC provider that resulted in nearly 40% annual network expense reduction that added 7-8 points in margin. These types of results can build significant value for these companies so I am excited at the prospect of doing so.
Well, that is the captain on the overhead speakers letting us know that we are approaching DCA so I have to finish up this post. It was a great event and so good to see many long-time friends / customers as well as to make several new connections.