UCaaS Consolidation

By Claudia Adrien

It’s not a new prediction that consolidation is a trend in the UCaaS landscape. However, the pandemic propelled greater adoption of unified communications as a service, making continued consolidation in this field our projection for 2023.

Although UCaaS has changed our lives on a personal level, much attention is placed on how employers use video conferencing, business calling and other services. That in mind, UCaaS providers must also develop an environment where more complete offerings tackle and adapt to the needs of specific customers.

In fact, many customers are asking for more than just basic UCaaS tools from providers, putting into question the survival of standalone providers. Artificial intelligence, real-time reporting, 5G mobility and API-based integrations are now services that customers expect from vendors.

But how do they offer all these solutions?

“Through the mergers and acquisitions of various companies, UCaaS vendors are able to create more comprehensive ecosystems for communication and collaboration,” writes Scott Aldridge, director at Primetel, on LinkedIn. “While extensive research and development may be able to achieve the same results in some cases, many vendors simply don’t have the budget, time or specific expertise to develop new innovations from scratch.”

For example, the acquisition of Vonage by Ericsson should help with the development of new 5G initiatives. And Dialpad’s acquisition of Koopid “brings native conversational experiences further into the Dialpad ecosystem, allowing for more meaningful omnichannel digital engagements,” Aldridge writes.

Jon Arnold, principal of J Arnold & Associates, said paying attention to how much UCaaS firms spend on R&D is a strong indication of company health in the coming year.

“I think the good ones probably spend maybe 10% or more in this area,” he said. “If you see that number starting to tail off, that’s a pretty bad sign.”

What’s another poor indicator of health?

“I would much rather see a profitable company that isn’t growing very much than one that keeps growing and adding customers but is not sustainable,” Arnold said.

Looking ahead, he suggests that if a company’s annual growth rate is 20%, it’s a signal that the markets won’t turn on the firm.

However, growth still requires innovation. Yet, the UCaaS arena is analogous to the iPhone. There are only so many iterations one can make.

“So last year, a UCaaS offering might have supported 10 languages and this year they support 20,” he said. “It’s more of the same and it’s not creating anything radically new. It’s becoming very commodified.”

Arnold did suggest that the race to adopt CCaaS solutions is different from UCaaS as it is solving and innovating for a customer service problem.

In 2023, expect to see more UCaaS companies consolidate to adopt CCaaS solutions, modernizing the contact center space and helping the bottom line.