UCaaS Consolidation

Those examining vendor M&A will find it helpful to categorize the topic by technology. The four technology buckets Channel Futures examined – network, UCaaS, CX/CCaaS and cybersecurity – compare differently to one another in terms of market saturation, acquisition drivers and the actual pace of M&A.

However, it may help to start with unified communications as a service (UCaaS), which has created such a wealth of opportunities for channel partners in the last five years. And for some partners and industry insiders, what we’re seeing in UCaaS M&A sets a pattern for other technologies.

It’s no secret that UCaaS vendors have been offering massive upfront SPIFFs to agents that sell that platforms. On one hand, newer partners have seen those incentives as a godsend as they try to build their monthly recurring commissions.

On the other hand, those SPIFFs won’t last forever. According to experts, those SPIFFs help function to gain market share in a crowded landscape. Curt Allen, managing partner at X4 Advisors and strategic advisor at Bluewave Technology Group, said rationalization was inevitably going to come to the UCaaS sales model to bring those vendors closer to the software rule of 40. 

“The UCaaS magic trick is turning 85% gross profit into 4% by paying five people on every deal,” Allen told Channel Futures.

Eric Ludwig, co-founder of RISE Technology Advisors, said Microsoft’s shadow looms heavily over the UCaaS industry. The vendors that are surviving, he said, are those like CallTower that have embraced integration.

“Microsoft’s technology and adoption are so disruptive that you can’t be a small UC player,” Ludwig told Channel Futures.

As a result, M&A is the inevitable outcome for many of these vendors. 

“Right now the UC M&A is occurring so that they can survive,” Ludwig said.