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The Cisco/BroadSoft Deal: Will Cisco Own the Market?

We talk acquisitions with analyst Fazil Balkaya

Fazil Balkaya, a leading market analyst, recently published his thoughts about the market-shaking announcement that Cisco had agreed to purchase BroadSoft for $1.9 billion. As two major players in the UC space, it’s fair to say that their integration could be significant for channel providers, end-users, and competitors alike. To help get a better understanding of what this impending buy means for everyone involved, we sat down with Fazil to ask him a few of our most pressing questions.

What’s Your View on the Acquisition?

Fazil Balkaya
Fazil Balkaya

Fazil began by explaining that he believes Cisco chose to make the BroadSoft acquisition as a way of filling some of the gaps in their current go-to-market UC strategy. “If you look at Cisco’s goals over the last couple of years, they’ve been trying to implement Spark into the SMB, as well as the enterprise. Unfortunately, from an SMB perspective, without a full multi-tenant call-control functionality, it’s practically impossible to use Spark as a full-blown solution. With the BroadSoft technology, BroadCloud, and BroadWorks, Cisco can begin to address a new business space.”

In Fazil’s blog, he notes that Cisco is the second biggest provider for UCaaS and Hosted PBX, while BroadSoft is the biggest. The acquisition should mean that Cisco can claim market leadership throughout the Enterprise and SMB space.

The Cisco/BroadSoft Deal: Will Cisco own the Market? Tweet it

Do You Think the CC-One Software is a Better Opportunity for Cisco?

Fazil also commented in his blog post that Cisco already has the largest cloud-contact centre install base globally, but acquiring BroadSoft would mean that the company could bring another huge CCaaS install base into their network.

“The Cisco HCS strategy can compete in the space already, but it hasn’t had the ability to address smaller deployments as much like CC-One can from BroadSoft. At the same time, HCS is a software model, whereas CC-One is a fully-cloud model, which makes it easier to deploy and address different parts of the market faster.”

Fazil told me that while Cisco won’t necessarily be able to cover every deployment size with their acquisition of BroadSoft’s CC-One platform, they will have more versatility available to them.

“BroadSoft already has a very sizable base of contact centre installs in a smaller market. If Cisco makes the most of that and builds on the possibilities available, including enhancing Spark Care with some of BroadSoft’s call-control and contact centre capabilities, then they can start to address smaller and more simple contact centre deployments, alongside larger enterprise options.”

Do You See any Challenges Happening with this Deployment?

As exciting as the Cisco/BroadSoft acquisition might be for many of the people involved, it’s worth noting that such a big purchase rarely goes off without a hitch. With that in mind, I was keen to get Fazil’s insights on the challenges that the companies might face going forwards.

“I can see a number of roadblocks coming up from several different angles. Starting from a Service Provider point of view, one of the major problems in Europe is service providers prefer a range of vendors to play with – rather than just one.”

Cisco Logo“Consolidating BroadSoft and Cisco together might prevent service providers from getting that multi-vendor experience. At the same time, there’s a portfolio challenge for the channel networks too. There’s some obvious overlap between things like Team One, UC-One, BroadSoft Meet, Spark and WebEx. How Cisco will connect with BroadSoft and integrate those products is yet to be seen.”

Fazil also noted that prices would need to be addressed too since the price points for Cisco and BroadSoft are so different at this point. While a single offering has been announced as the preferred option for Cisco, it’s hard to see what this will mean for the future.

“It’s total speculation but I would think that the Powered by BroadSoft program will be folded under Cisco marketing. Eventually, I think that everything will probably be folded under the Cisco umbrella, and then the Spark branding umbrella.”

Who Do You Think are the Biggest Challengers for Cisco Going Forward?

Obviously, if the Cisco purchase goes through and they do manage to acquire BroadSoft, this will make the brand a huge player in the UC space. I was interested to find out who Fazil believed the major competitors for Cisco will be in the years moving forward. He told me:

“I think Microsoft is, and will always be the biggest challenger moving forward. Owning the desktop and office productivity, Skype for Business and Teams have compelling value proposition integrating office productivity and collaboration. Microsoft have just not managed to achieve the same success with enterprise communications yet, (cloud or on-premise PBX) but they are investing heavily into it, and launching Cloud PBX Calling in new countries every quarter. Merger might also convince some Service Providers to revise their Microsoft strategy and trigger the shift in the point of view from competitor to partner.

When it comes to Cloud PBX and UCaaS, RingCentral will be a key competitor. They are a specialist in SME and investing heavily towards larger segments. 8×8 has recently been more competitive, further addressing larger segments and they’ve become a great mid-market player. Fuze is, and will be a key competitor as they specialise large enterprise deployments – head to head competition with HCS providers. If we look at competition both from a service provider and direct sales perspective, Cisco will be coming up against Mitel, who have invested significantly into product enhancements and consolidation. Once they have a better install base with ShoreTel, and stronger business in the United States, I think Mitel will also stand up against Cisco in all markets and segments. Lastly, as the market expands further into Eastern markets, it will be interesting to see how the likes of Huawei, NEC and other local players stand up.”

Any Finishing Thoughts?

As we came to the end of our conversation, Fazil noted that one important thing he thought people should be considering when addressing the Cisco/BroadSoft acquisition, is the regulation concerns that might come into play.

“BroadSoft was already the market leader for cloud PBX, thanks to things like their huge service provider channel base, and their early entry to the market. If you look at the market from a technology perspective, they own about 40% of the installed base, with around 18 million seats. On top of that, Cisco almost has 15% market share, meaning that the combined one and two spots lead to a huge market share.”

Fazil suggested that keeping the marketplace fair may mean looking at Cisco and BroadSoft with a different kind of positioning where they are cloud and software providers to their channels, rather than them being the service providers.

He added: “Cisco and BroadSoft’s combined cloud PBX and UCaaS installed base market share only includes call control enabled seats provisioned via public cloud, which only has single digit penetration today. Market should be viewed from an overall Enterprise Communications perspective, where premise PBX shipments are still way ahead of cloud PBX shipments and then on top of that, there is the whole Enterprise Collaboration Market, which Microsoft is more of a monopoly vs. Cisco’s move of industry consolidation and time-to-market with BroadSoft.”

More: Cisco’s BroadSoft Acquisition by Market Figures – Guest Blog by Fazil Balkaya, Principal Analyst, Balkaya Consulting

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Written by Rob Scott

Rob Scott

Hi, I'm Rob Scott - Publisher. Fanatical about Unified Comms, Cloud & Contact Centres :)