The News

On July 18, 2021, Zoom Video Communications, Inc. announced the acquisition of Five9, Inc. in an all-shares transaction. The transaction values Five9 at around $14.7 billion.

According to the press release “the acquisition is expected to help enhance Zoom’s presence with enterprise customers and allow it to accelerate its long-term growth opportunity by adding the $24 billion contact center market.”

According to Eric S. Yuan, CEO and founder of Zoom, the company is “continuously looking for ways to enhance our platform, and the addition of Five9 is a natural fit that will deliver even more happiness and value to our customers”. He continues with “enterprises communicate with their customers primarily through the contact center, and we believe this acquisition creates a leading customer engagement platform that will help redefine how companies of all sizes connect with their customers”.

Rowan Trollope, CEO of Five9 adds that “businesses spend significant resources annually on their contact centers, but still struggle to deliver a seamless experience for their customers”. Trollope will become a president of Zoom and continue as CEO of Five9.

Zoom expects the acquisition of Five9 to be “complementary to the growing popularity of its Zoom Phone offering The combination of both firms also offers both companies significant cross-selling opportunities to each other’s respective customer bases”.

As especially Rowan Trollope emphasizes upon repeatedly in the acquisition briefing, this acquisition is about accelerating growth by combining the respective assets, software as well as customers.

The bigger picture

The trend towards call centers in the cloud has been there before and it has been amplified with the Covid pandemic. Connecting phone lines from diverse and independent locations into one telephony system gets greatly simplified with a cloud-based infrastructure and the required upfront investments are far lower.

At the same time, the desire and need for unifying personal as well as corporate communication have increased tremendously, for the same reason.

Last, but not least, it can be assumed that workforces will stay in a hybrid mode, with people having the ability to work from anywhere.

Zoom profited from the Covid pandemic in a phenomenal way and was probably one of the biggest winners. However, since October 2020, its stock price went down from a peak of nearly $560 to around $360 (July 22, 2021). This can be largely attributed to businesses having invested into communications tools and strong competition. Especially Microsoft has upped the ante considerably and invested heavily into its Teams software.

From an economy point of view, we are looking at the conversion of some markets in the ongoing platform game. We have the call center software landscape and the communications and collaboration software landscape – usually referred to Call Center as a Service and Unified Communications as a Service.

My Analysis and PoV

Zoom itself has evolved a lot from its beginnings.

Looking at the Communications as a Service landscape, one can see that most of the major vendors have messaging, telephony, and meetings in their portfolio. A small number, e.g. Fuze or 8x8 also offer call center functionality. Microsoft Teams offers collaboration and Cisco’s Webex supports collaboration and call center.

Zoom, without Five9, offers neither of these functionalities, which makes it vulnerable, especially in direct competition with a software that is as ubiquitously available as Microsoft Teams. The vulnerability is the risk of being pushed into a niche instead of staying the top dog that Zoom still is at least in the videoconferencing/video meeting market. Zooms reduced, yet still impressive, growth, is indicating this vulnerability.

On the other hand, the company is awash in cash and can draw off its still high valuation, which it did to acquire Five9.

Zoom is a top dog when it comes to meeting solutions, with its additional solutions it plays pretty strong, but not decisively so, in the market of communications solutions. Five9 is a serious player in the cloud call center software space.

With these areas merging, both players have lots of parts that the respective other does not have. Think video call centers, or video assisted support and remote control. Combining this is a strong value proposition in the short- to midterm.

I do not fully buy in to the story of the proposed “omnichannel engagement platform” as I do think that some crucial aspects, like the ability to identify and profile a customer and her complete context, are missing. I rather see an omnichannel engagement execution platform. Add the profiling part, as Twilio did with acquiring Segment, and we have a really compelling story, especially if Zoom Phone takes off. Having access to the call center, consented customer profiles, and the access to the consumer customers’ devices via Zoom Phone could totally change the game.

Until this happens, I do not see much that hasn’t been done before, although the respective offerings of Zoom and Five9 may well be better than the ones offered by the companies I mentioned earlier.

Still, a good, yet expensive, move that raises the appetite for more.

The News

Today various media outlets broke the news that Salesforce is in advanced talks with Slack Technologies about a possible acquisition. The news had two effects: Slack stock went up nearly 40 per cent during trading hours while Salesforce stock loses out by 5 percent, which basically says that Salesforce investors are not so convinced about this acquisition being a good thing, whereas Slack investors clearly are.

Slack and Salesforce share an integration, which is listed on appexchange since 2019.

There have been speculations on Slack being a good target for Salesforce that date back till August 2016, basically ever since the integration between Salesforce and Slack got announced.

The Bigger Picture

There are several aspects to this news.

Salesforce already has Chatter, a tool that often gets negative feedback. The company also owns Quip, which is essentially a solution for the collaborative creation of documents and spreadsheets.

And Salesforce has created work.com, as a solution to increase business resiliency and to improve collaborative work.

On a larger scale, and accelerated by the Covid crisis, the need for fast and efficient communication and collaboration of distributed work forces and their customers, using various means of communication is there. Actually, it has been there for quite some time, as the emergence of solutions from Slack to Teams, Zoom, etc. proves. E-mail is still very important, but only a part of this communication, which includes near instant chat, voice and video communications as well as collaborative work on documents – inside and outside an organization.

Another part is, that this communication needs to be tied to business processes and enable three things: Better outcomes by connecting all documents and communications to business processes and business objects, the ability to use this additional data to feed models that enable better predictions and/or actions and a reduction of efforts for the involved people, e.g. when it comes to finding information.

Businesses have a challenge here and are looking for solutions to fix it, and fast. This can be seen by the revenues of Zoom nearly quadrupling between Q2/19 and Q2/20 or the usage of Microsoft Teams skyrocketing from 13 million daily active users in July 2019 to 75 million daily active users in April 2020. At the same time Slack grew its paying customers between February and July 2020 by more than 20 percent, too.

Because of this, vendors of CRM solutions have increasingly been strengthening their built-in collaboration and productivity suites or are forming partnerships with companies in this space.

My Analysis and PoV

My first reaction was: Wow!

Slack, coming out of the developer community, has been an early player in the communications tools space. It does not only allow chat, voice and video communication for (smaller) groups but also allows embedding of bots as well as workflows. The company is clearly loved by small companies and startups and has been able to get a substantial number of customers.

As the numbers above show, Slack has not been able to capitalize on the Covid crisis and grow as fast as the competition. Further, Slack has not yet become a profitable business and also has a negative cash flow. Especially Microsoft putting an increased focus on Teams, put Slack, as well as Zoom, under significant pressure, as there is a considerable benefit to use MS Teams in an environment that already uses MS Office. Given that, I think that Slack is in a tight position. I dare saying that Slack on its own would not have been viable for much longer.

When it comes to Salesforce, Slack makes for a terrific addition to its portfolio for various reasons.

Slack enables Salesforce to significantly strengthen its productivity/collaboration suite, bringing it to a level that is no more far behind Microsoft. Productivity/collaboration is one of the four core pillars for a platform player. While Salesforce already has Chatter, this tool only works within a company and does also not allow for voice or video communication.

Neither Oracle nor SAP have a similar technology, although Oracle has its Beehive product that offers web and audio conferencing, plus a strategic partnership with Zoom, which it increasingly embeds into its CX suite. SAP has a strategic partnership with Microsoft and deployed MS Teams throughout its organization.

Slack also comes with far more than 100,000 customers and an expected revenue of in excess of $860 million in FY 2021, which would nicely add to Salesforce’s platform revenues, which in Q2 of FY21 rose to $1.2 bn.

In addition, the customers that Slack brings, are predominantly SMB businesses. In FY 20, less than 900 of 110,000 paying customers spent more than $100,000 for using Slacks services. This opens up a huge opportunity for Salesforce to tap into the SMB CRM market, which is a market that all big players are trying to scale down into. It remains to be seen in how far especially the smaller Slack customers accept a Salesforce that is seen as an enterprise player, as a partner.

In conclusion: For Salesforce, acquiring Slack makes perfect sense. It enriches the platform and therefore the Salesforce CX play. It is at least a jab against Microsoft and ringfences the Salesforce portfolio in the Clash of Titans with Oracle and SAP.

Some Data Points

The Reality …

• Apparently, there is a disconnect between what companies offer – which is what they perceive as important for their customers – and what customers expect.
• Disparate entry points and data silos are inefficient and lead to frustrations of the employees who try to help their customers.
• There is a poor customer experience as companies do not have a consolidated view on the issues their customers want to get resolved due to silo’ed systems, processes, organizations, etc. it is hardly possible to start a longer customer service conversation in one channel and to continue in another without friction.

My Take

• rich user interfaces, but less individual apps
• search with ‘traditional and conversational interfaces, both text and voice.
• Dialogues via text and voice.