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Monday, July 19, 2021

Zoom + Five 9 = Momentous!

Just seeing that Zoom will be acquiring Five9 in an all-stock transaction valued at approximately $14.7 billion. In the industry now, we see that UCaaS is continuing to evolve to include voice, video, contact center, chat, and messaging. Every wannabe big player wants to have a slice of the large enterprise market and this move brings together the leading video provider and cloud contact center provider and with this the combined entity becomes a formidable force for the large enterprise. Zoom has become a household name ( and attaining iconic status as a “noun” representing video teleconference across devices. as businesses and schools adopted its services to hold virtual classes, office meets and socialise. As businesses and schools adopted its services to hold virtual classes, office meets and socialise, zoom has seen a meteoric success and not to forget, it’s an investor favorite in the year since the coronavirus pandemic, The acquisition will complement Zoom Phone service, an alternative to legacy phone offerings, by adding Five9's business customers and combining its contact centre software to optimize customer interactions across channels.

Clearly, this coming together of Zoom and Five9 is big development in the world of UCaaS. Its well known in the industry circles, that Zoom used partnerships with Five9 and other CCaaS vendors to serve that segment, but the acquisition is a relatively late recognition of the fact that CCaaS is an important product to ultimately win in the enterprise going forward. Zoom has been clearly a company on the roll. It added Zoom apps interfaces last year riding on the success of the video conferencing system . This move fortifies its position in the UCaaS portfolio. Zoom is the undisputed leader in video collaboration, it is quickly establishing its position in cloud telephony (PBX), and one can see the contact center space (known as CCaaS) as the natural next step in its evolution of the product offerings and strategy. If we will look keenly, it will slowly become apparent that overtime this will bring them as a strong player in locking horns with Microsoft and will be seen to bring forth, a significantly differentiated offerings relative to Microsoft, which is matter of fact the big elephant in the lucrative enterprise market. Also, this move will bring tougher competitive love for another well known player, RingCentral in the enterprise and mid market segments.

Automation is a hot area in which Five9 has taken an early lead ahead of competitors. In the post pandemic world , we are now seeing a review of the trend wherein the large enterprises disproportionately allocate spend to labor over technology, there is a huge opportunity for making labor more efficient and allowing customers to increase their tech spend. Growing digital seats with customers should drive higher realization for FIVN given that digital agents monetize at substantially higher rates relative to human agents.

Five 9 has seen rapid growth in the last few quarters with impressive strides in winning deals centered on digital transformation of its customers' investments in their contact centers. And now begs the question - why this valuation and what's the runway ahead ? Various industry pronouncements show that on the whole, the CCaaS market is still only 10-15% penetrated. Despite the fact that FIVN has seen recent acceleration in the rate of digital transformation within contact centers, it is to be noted that the overall market is still just 10-15% penetrated into the cloud, and FIVN is at the front and center of the cloud transition opportunity. The biggest draw for FIVN’s business currently is in the enterprise space, complemented by product portfolio expansion particularly in the area of automation.

The key component of Five9’s recent success relates to its automation portfolio, centered around the Intelligent Virtual Agent (IVA) product. The IVA product mainly focuses on high-volume, low-value tasks that can easily be automated for customers. Five9 is also seeing strong demand for its built-in workforce optimization product that was added through the Virtual Observer acquisition. From a customer perspective, evidently Innovation drives twin advantages like increasing revenue and enhanced cost savings for customers. In all, a bold move and a definite step up for Zoom in the enteprise world - whoc could have imagoned this three years back!


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