Vonage and Hosted Consolidation

Cloud Telephone System Consolidation Continues

SimpleSignal, a local (Dana Point) UCaaS provider, was purchased by industry giant Vonage and the press release is as fun as ever. Ah the acronym just rolls off the tongue: UCaaS (pronounced “you-cass” I believe), short for Unified Communications as a Service, which in this case is internet telephony plus a desktop software, smartphone or browser-based interface for your users. It is no less awkward to say than “VoIP” which rhymes with the “goit” in goiter, I suppose. Our industry needs a marketing overhaul.

Vonage, or rather the rebranded Vonage for Business, is gobbling up competing hosted commercial telephony providers left and right. Starting with Telesphere for $114M, a provider we represent and like very much, moving on to Vocalocity for $130M, who we had just signed up with, and now the aforementioned SimpleSignal, which has been bought for $25M, Vonage appears to be moving swiftly to combat hosted solutions from Mitel, Shoretel, 8×8, Five9s and every single telephone carrier.

Similar to our friends at Los Angeles-based j2 Global, Vonage seems to be intent on rolling up as many small, successful firms in their space as possible as valuations keep rising on cloud-based service businesses.

Similar to Telesphere, SimpleSignal pursued the ‘hosted plus dedicated circuit’ model where VoIP traffic is delivered over a dedicated data connection from your premise to the provider. By requiring a dedicated circuit, QoS is assured and

SimpleSignal by the numbers:

  • 1,600 customers
  • $11M in revenue (per Inc Magazine) or $20M in revenue per TMC
  • So, $573/mo per customer in revenue. Which seems high for the industry except we know that these guys push an MPLS circuit on their customers.
  •  $25M purchase price

If we assume each customer has a single $400/mo MPLS connection, monthly revenue from MPLS circuits is $7.7M (1,600 customers x $400/mo x 12mos). That is a low margin business, as the lines are leased wholesale from a Bell descendant.  The $400 is an estimate based on prices we see in Los Angeles, which tend to be lower than what we see in most US local markets.

Another critical assumption is that one MPLS circuit per customer. If you look at the customer list of SimpleSignal, there are a lot of chains and franchises. I am not sure that a small franchisee with two phones could be talked into getting a MPLS circuit but perhaps they didn’t have a choice.

A real advantage of the MPLS portion from a business standpoint, IMHO, is that you lock hosted customers into a multi-year contract. UCaaS and SaaS consumers are used to month to month or annual contracts – telling them that you would like to cast the agreement as a 2, 3 or 5 year agreement typically falls on deaf ears. I hear from customers that the technology is thought to be too new, and one feature of SaaS-type services is the low switching cost (I should say, a low perceived switching cost, as porting numbers to a new service, leaving SalesForce, or moving from Office 365 to Google for Business, for example, are all painful events). Long contracts negate this.

SimpleSignal customers

SimpleSignal customers

By comparison, Vocalocity in 2013 had 21,000 businesses and $28m in revenue. That works out to $111/mo per customer, which is works out to 4 seats per customer at $25/mo a pop plus the monthly extra charges for items such as an auto attendant and additional phone numbers. If you net out the estimated MPLS charge of $400/mo, you at $173/mo per customer or let’s call it 7 seats per customer. This puts SimpleSignal in the 11,000 seat range, or about half the size of Vocalocity in terms of seats. Home Depot alone has 2,200 stores and Domino’s has over 10,000 world-wide so I think it is reasonable to question the penetration into these accounts, though this is in the end a good thing for the new ownership.

Point of all this discussion is to keep sight of what the cloud industry looks like. Mostly small businesses – what used to be called SOHO (small office/home office) – focused on savings and on UC and PBX features previously unavailable to them. The real drivers of hosted adoption will continue to be the increasing cost of POTS lines and the ever decreasing cost per megabit per second of internet access. Now that phone lines are approaching $60 per month before usage in LA, it makes even less sense to keep traditional phone service in a small business.

Zultys, you’re the real MVP

LA Kings captain Dustin Brown hoisting the Stanley Cup

LA Kings captain Dustin Brown hoisting the Stanley Cup

Los Angeles Kings and Zultys: Champions of the Universe

Winner, winner, chicken dinner! Looks like the press loves Zultys’ cloud offerings as much as we do.

tl;dr – Zultys cloud solutions are just as awesome as the award-winning premise version – in fact, it is the same core software and features.

Zultys has a single software stream of solutions – that means whether you install a phone system in your office in a Zultys server, run Zultys on VMware, throw Zultys in your data center, use Extenda’s data center, use Zultys’ data center, or just rent the system from Extenda, Zultys or another vendor, it is the exact same multi-media unified communications system, with the same features and interoperability between locations.

Below is the press release regarding the various 2015 Product of the Year honors won by Zultys.

“Zultys, a leading provider of innovative unified communications solutions that empower businesses to collaborate effectively, has been awarded top honors by TMC, a global, integrated media company. Zultys’ MXvirtual, an integrated unified communication solution and IP phone system in a VMware®-Ready virtual appliance, was named a 2014 Cloud Computing Product of the Year Award winner.  Meanwhile, Zultys Cloud Services—fully-hosted turnkey Software as a Service (SaaS) offering—was recognized as both the 2015 INTERNET TELEPHONY Product of the Year as well as CUSTOMER Magazine Product of the Year Award recipient.

In 2014, Zultys introduced the cloud-based version of their award-winning MX IP-PBX platform; MXvirtual brings all of the advanced functionality of premise-based MX solutions to the cloud. Zultys Cloud Services, which launched towards the end of the year, makes deploying a Zultys Business Phone System easier than ever in a Software as a Service model with Zultys providing their users with a fully hosted highly advance business phone system. Zultys Cloud Services extends the power of Zultys MX enterprise grade IP-PBX into a fully hosted solution, while preserving the exact same experience regardless of the platform. Zultys’ cloud-based and premise-based phone systems share exactly the same user client and administration interfaces, simplifying training and making it easy for users to transition from a premise-based system to the cloud if necessary, as well as allowing businesses to mix and match premise and cloud systems within the same organization. Despite various different deployment options, the premise-based MX phone systems, MXvirtual and Zultys Cloud Services offerings boast exactly the same feature set including: chat, IM, presence, auto attendant with IVR, sophisticated contact center functionality, smart phone integration, outbound dialer application, 3rd party integration and much more.

“Hosted IP phone systems offer businesses unmatched convenience and ease-of-deployment, but often at the price of advanced functionality. Zultys aims to create a universal experience for all of our users regardless of whether they are utilizing a premise-based MX system or are hosting their phone system in the cloud. We are proud to see our efforts recognized by such reputable publications,” said Steven Francis, chief sales and marketing officer at Zultys.

2014 Cloud Computing Product of the Year Award

TMC named MXvirtual as a 2014 Cloud Computing Product of the Year Award winner.

The Cloud Computing Product of the Year Award, presented by Cloud Computing magazine, honors vendors with the most innovative, useful, and beneficial cloud products and services that have been brought to market in the past year.

“Recognizing leaders in the advancement of cloud computing, TMC is proud to announce MXvirtual as a recipient of the Cloud Computing Product of the Year Award,” said Rich Tehrani, CEO, TMC. “Zultys is being honored for their achievement in bringing innovation and excellence to the market, while leveraging the latest technology trends.”

2015 CUSTOMER Magazine Product of the Year Award

Zultys Cloud Services was declared 2015 CUSTOMER  Product of the Year Award winner.

“On behalf of both TMC and CUSTOMER magazine, it is my pleasure to honor Zultys with a 2015 Product of the Year Award,” saidRich Tehrani, CEO, TMC. “Its Cloud Services solution has proven deserving of this elite status and I look forward to continued innovation from Zultys in 2015 and beyond.”

The 17th Annual Product of the Year Award winners will be published in the January/February 2015 issue of CUSTOMER magazine.

2015 INTERNET TELEPHONY Product of the Year Award

Zultys Cloud Services was also a recipient of a 2015 INTERNET TELEPHONY Product of the Year Award.

“It gives me great pleasure to recognize Zultys with a 2015 Product of the Year Award for its commitment to excellence and innovation,” said Rich Tehrani, CEO, TMC. “In the opinion of our distinguished judges, Cloud Services has proven to be among the best communications and technology solutions available on the market. I look forward to continued innovation from Zultys.

The winners of the 2015 INTERNET TELEPHONY Product of the Year are featured in the 2015 January/February issue of INTERNET TELEPHONY magazine and online at www.itmag.com.”

Lunch and Learn! Oct 24

iPhone 6 up for grabs at our VoIP Lunch and Learn

RSVP today (call Brandi Jackson at 818-786-2411 x207) for a chance to win a free iPhone 6 in our raffle, free lunch, exceptional company in the form of Extenda personnel, and of course, the benefit of our expertise.

Did I mention we are raffling off an iPhone?

iPhone 6 up for grabs at our VoIP Lunch and Learn

We are giving away a really cool pocket computer PDA from Apple called an iPhone 6. It runs Unified Communications apps from Mitel and Zultys, too.

This Lunch and Learn will cover all sorts of cloud-related information, and is taking place on:

Friday, Oct. 24th

11:30 AM to 1:00 PM


Kings FishHouse at Bella Terra

7691 Edinger Ave

Huntington Beach, Ca. 92647

Or just click here for a Google map