Over the last years, few conversations have gone by without someone pondering when the ‘roll-up’ would inevitably start in the hosted voice space. But in 2009, while many may have poked around, the opportunities were more so to pick off distressed properties than to invest in real scale or product line expansion. People were nervous, hosted voice was still tackling early adopters and ultimately few deals of meaningful value were executed.
Yet, it seemed intuitive that once it finally started, a wave would hit. You see, buying companies is much like fashion decisions in high school: We all wanted to be the first ones to wear something cool, but ultimtaley most of us waited by the pool until someone else jumped in. In the Hosted Voice space, someone – more than just someone – made a splash this week. And now it seems, or at least feels like, a wave is coming. Here’s what happened and what the implications may be of each:
1. M5 Buys GeckoTech: M5 Networks, led by hosted visionary Dan Hoffman, has been at this as long as anyone and much longer than most. They were marketing hosted voice solutions when those in the premise world thought of it as no more than a pipe dream, or a short-lived trend. But with very targeted and education-based marketing, M5 not only grew but became one of the few to penetrate up market with voice services from the cloud.
But like many trailblazers in this market, M5 did a lot of business in its home region (NY). Selling costs to early adopters is just too high to add foreign geographies early on. Their acquisition this week of Chicago based GeckoTech, a successful operation built on a Cisco platform (in itself an accomplishment) by local entrepreneurs, gives M5 instant presence, credibility and sales talent in one the best if not the most underrated cities in the US for selling communications services.
Potential Implication: Do other regional leaders, like those for example in Cloud Communications Alliance, go fishing — or be fished? (As an aside, rarely do we see terms of a private deal announced unless somehow both sides are happy. So I’m guessing that to be the case and if nothing else it creates a benchmark for many other deals being discussed at dinner tables around the country.)
2. Cbeyond buys Aretta Communications: Actually they bought more than that (see here), but Aretta for me is the story. Aretta is a hosted PBX company based in Atlanta (no coincidence there) that went to market on an Asterisk-based platform. Again, like the Cisco one above, not something we see everyday. But it worked, they had traction, and were very channel focused.
Cbeyond, on the other hand, is a national company know for being a sales channel powerhouse with robust connectivity offers, but lighter on the application side. The market at large has been waiting to see if and how they would enter the PBX space.
Potential Implications: Two here. One, what does this mean for Cbeyond’s existing channel, many of whom I believe sell premise based PBX’s. And secondly, is this the other shoe to drop that fills the void of a true national provider of hosted PBX’s to the SMB market? This, combined with XO’s thoughts towards the hosted PBX business in 2011, suggests indeed it is.
3. Oracle buys ATG for $1Billion: This one may be outside the classic B-B comm space, but it’s an important one just the same. In late 2006 an ecommerce company called ATG made an almost $50M deal to acquire what was then click-to-call provider Estara. I remember this well because I was working to help get Ifbyphone it’s first significant round of money at the time. In those days, while Ifbyphone went on to be much more, the VC community understood click to call so naturally we pitched the Estara deal in our favor.
Some four years later, Oracle just picked off ATG for $1Billion dollars, citing their cross-channel (including web-to-call center telephony) commerce platform as a key.
Potential Implications: Further validation of the innovation and trailblazing work companies like Ifbyphone, RingRevenue and Freespee (in Europe) have done to educate buyers of the value of integrating the phone into marketing and ecommerce-related campaigns (like call tracking and more).
There were a few more small deals this week and surely more to come. But these alone tell us that times are changing, and probably for the better. After all, who doesn’t love to talk about a deal?
Stay tuned.
