Cisco buys BroadSoft in the latest of a hot streak of acquisitions in its hard pivot toward software and services.

Kris Blackmon, Head of Channel Communities

October 27, 2017

4 Min Read
Cisco Systems Logo

Fresh off its announcement last week that it acquired machine learning startup Perspica, Cisco this week revealed its intentions to bring UCaaS provider BroadSoft into its fold. The move, the latest in a long string of acquisitions this year, is part of Cisco’s strategy to quickly pivot from its traditional hardware sales to cloud-based services by buying them rather than developing them.

The deal carried a $55-a-share cash offer, or about $1.9B in cash, and is expected to close in the first quarter of 2018.

BroadSoft offers cloud-based unified communications solutions such as voice, video, messaging, file sharing, and conferencing and should fit in nicely with Cisco’s Hosted Collaboration Solutions services. The move gives Cisco a solid foothold into the UCaaS market, which has eluded the telco giant until now, Jason Noah Ader, an analyst at William Blair & Co. told Bloomberg earlier this week.

Cisco is doubling down on its investments in software and services, a pivot that mirrors the transition that many traditional resellers and MSPs are also executing. Its services division is the second largest business in the Cisco organization; Bryan Palma, senior vice president and general manager of the Cisco Advanced Services Group, told The VAR Guy just last week that its near-term goal is to drive half of its revenue through that business.

Palma says that traditional reseller partners looking to make the switch to a services-based model can leverage Cisco’s programs to generate a recurring revenue stream while still making money from hardware resale. But it’s clear that ongoing services is what the company sees as its dominant future market.

It isn’t hard to understand why. Cisco’s quarterly revenue numbers speak for themselves. According to Martin Wolf, CEO of IT M&A Advisory martinwolf, while Cisco’s latest quarterly results show an overall decline of four percent year-over-year, the revenue generated by its software and subscriptions business increased by 50 percent.

It’s a big shift in a relatively short time period, especially when compared to some of the stumbles other tech giants like Hewlett Packard Enterprise have made as they try to find their identity in a cloud-based market. As recently as five years ago, Cisco was viewed as a highly proprietary, commoditized hardware company. Palma says the shift toward services is different from the other tech waves its had to navigate in the past.

“We’ve managed a lot of technology transitions, whether IP or ecommerce or video. This is much more of a business model transition,” said Palma. “While software and services is becoming more important, that vertical expertise and business knowledge is also becoming more important—and becoming a big opportunity for our partners.”

Many providers have built their recurring revenue businesses on offering UCaaS solutions, which can be an easy segue from an up-front sales model since from a technical perspective, managing on-prem PBX solutions isn’t all that different from managing the cloud-based version.

This may cause some consternation among Cisco channel partners that have invested heavily in developing their own UCaaS offerings that directly compete with those of BroadSoft. Details on how Cisco will help partners manage that conflict have been scarce, but its expected that the company will address this, at least on a high level, at its annual Cisco Partner Summit next week.

“They’ve got a delicate balance here. But I also think this is the writing on the wall. There are a lot of people that have gone out and built hosted PBX solutions utilizing Cisco and have competed against BroadSoft, but I don’t think anyone is having an amazing amount of success, or Cisco wouldn’t have gone down this path,” says Drew Lydecker, co-founder of master agent and distributor Avant. “But they bought a company that is the engine for high service providers that has a proven track record. That really lends itself to what Cisco does.”

For now, Cisco is sticking to generalities when directly addressing the impact the acquisition will have on its partners.

“With the Broadsoft acquisition, we are continuing to accelerate and broaden our portfolio by bringing more flexibility to our partners in terms of delivering on prem and cloud-managed collaboration solutions,” Nirav Sheth, VP of solutions, engineering and architectures for Cisco’s Global Partner Organization, told The VAR Guy. “Broadsoft is an industry leader for cloud managed calling & contact center, and enables our partners to unlock new TAM by providing more in the way of ‘As A Service’ cloud managed options for the mid-market and SMB customer community.”

“I believe this is an amazing opportunity for everybody that is a trusted advisor,” concludes Lydecker. “This is absolutely the golden era. This was literally the shot off the bow that says it’s time to get into this game.”

Read more about:


About the Author(s)

Kris Blackmon

Head of Channel Communities, Zift Solutions

Kris Blackmon is head of channel communities at Zift Solutions. She previously worked as chief channel officer at JS Group, and as senior content director at Informa Tech and project director of the MSP 501er Community. Blackmon is chair of CompTIA's Channel Development Advisory Council and operates KB Consulting. You may follow her on LinkedIn and @zift on X.

Free Newsletters for the Channel
Register for Your Free Newsletter Now

You May Also Like