Cloud Communications companies continue to perform as remote work drives enterprises to the cloud

The past quarter has certainly been an interesting time for cloud communications companies. The forced move to home and remote working for businesses around the world has driven many to adopt cloud solutions to enable business continuity and their employees to stay connected.

Zoom’s results earlier this week tied up the last of the major US cloud communications providers quarterly reports with significant growth both in revenue (Q1: $328.2 million, up 169% YoY) and in customers (265,400 customers with more than 10 employees, up 354% YoY) as well as massive brand recognition due to the number of consumers using the product to connect during lockdown. Whether Zoom Phone will take off has yet to be seen and whether they will be able to convert many free accounts to paying accounts in the future are both questions that many are still asking. Many organisations had to make a decision on their remote working solution immediately, once lockdown is over and businesses re-evaluate their communications solutions there is a possibility that they may be looking for a more holistic communications solution which Zoom may not be able to deliver.

Zoom is not the only cloud provider to have exhibited strong growth over the past few months and we’ve highlighted below some trends that have contributed to the other successes of key providers.

  • Channel becoming more important
    • Both RingCentral and 8×8 highlighted strong channel growth (62%, 63% YoY growth respectively) and signed key deals over this period (8×8 signing Virgin Media)
  • Partnerships driving growth
    • Five9 signed a key partnership with AT&T where Five9 will underpin AT&T’s new cloud-based contact centre offering in an exclusive agreement. Zoom and Genesys also partnered with integration to create one unified interface so employees can access both solutions.
  • PBX providers forced to move to cloud
    • Avaya’s CEO stated that their “transformation to a software, SaaS, and Cloud-focused company is irreversible” highlighting that cloud is the future. Avaya’s partnership with RingCentral is going to be interesting to see if their partners across the globe will continue to work with Avaya or find their own solutions to take to market.
  • Massive growth in CPaaS and APIs as companies change the way they communicate
    • Twilio’s revenue was up 57% and Vonage’s API platform revenues increased 44% as companies enhance their digital transformation using APIs driving more minutes and messages through their platforms. Bandwidth also saw 31% YoY growth.
  • Contact Centre and UCaaS merging
    • All of 8×8’s top 10 largest deals in the quarter were bundled deals with UCaaS and CCaaS both sold into the same enterprise. The Genesys/Zoom and AT&T/Five9s deal highlight this as well.
  • Uncertainty emerging for the longer-term forecast
    • Many providers have withdrawn their longer-term forecasts as they cannot predict what will happen to their customer bases. We’re already seeing some providers start to be nervous about what happens if larger numbers of their customers default or go out of business as the number of requests for delayed payments is going up.

Cavell will be spending the next few months examining the impact of COVID-19 on the industry from both the enterprise view and the service providers. Cavell is surveying 2000 enterprises to understand how they are changing their buying habits, telecoms choices and impact of COVID on the way that they communicate, helping service providers and vendors really understand what their customers are demanding.

We are currently interviewing the service provider community across Europe as part of our ongoing Cloud Communications Market Reports which will be available in August. If you would like to take part, please get in touch and book in an interview slot with me.

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