In short, Vonage has a stellar brand, a low cost structure, great technology platforms, and excellent cash flows and financial flexibility, and we combine all of this with a highly experienced leadership team.
Since joining Vonage in November 2014, I’ve immersed myself in the company by traveling to our various offices, conducting operating and strategic business reviews, and listening to and learning from our employees, investors and business partners. Inevitably, one of the first questions I’m asked is, “Why leave Google and that California weather for Vonage?” My answer is pretty straightforward: I joined be- because Vonage has a powerful set of assets that can be optimized to create incredible value and innovative new services for our customers, along with significant shareholder value.
Can you elaborate on what those assets are?
The first asset that attracted me was the Vonage Brand. The Company has invested more than $2 billion over the past decade to build its brand. The result, not surprisingly, is that the Vonage brand has incredibly high awareness. Based on a study we conducted last year, Vonage’s brand awareness is roughly 80%. This is dramatically higher than our public, pure-play competitors, each of which had awareness levels in the low single digits. And, while traditionally positioned as a consumer brand, the Vonage name extends naturally into the adjacent business markets for Unified Communications (News - Alert).
The second asset that attracted me was Vonage’s opportunity in the business markets for Unified Communications-as-a-Service (UCaaS). UCaaS is a large market that’s now hitting a real tipping point. Frost & Sullivan predicts the UCaaS market for small and medium businesses (SMBs) – which we define as businesses between1- 1,000 seats – will grow 27 percent annually over the next five years. Vonage has already assembled a leadership position in this space, and its 2015 business revenues will be among the largest of the public, pure-play UCaaS providers, and our growth is projected to be about 40% in 2015. By acquiring four outstanding companies – Vonage Business Solutions (formerly Vocalocity), Telesphere (News - Alert), SimpleSignal and gUnify – all collectively now known as Vonage Business, we now have the platform and the management team to serve the entire SMB market. We are also able to go up-market and serve larger businesses.
The third asset that attracted me to Vonage is the competitive advantage and financial flexibility arising from Vonage’s scale, cost structure and high cash flows. We are building on our legacy as a VoIP pioneer as we continue to grow in the business market. We recognize the importance of innovation to create ever greater value for consumers and businesses, so we continue to invest in product development, with an emphasis on mobile, and a focus on accelerating the delivery of new products to market. The Company’s cash flows allow us to invest in growth initiatives that will help to fund our value proposition in business markets as we continue to solidify our leadership position in UCaaS through organic growth and disciplined acquisitions. Our goal is to become the clear leader in the UCaaS space.
What are the biggest challenges to continuing to build Vonage Business as a brand, and what are your expectations for being able to address them? What impact has Vonage’s history in the consumer VoIP space had on building a business brand?
The Vonage Brand is incredibly valuable, near iconic, and it has very high awareness. We demonstrated that the Vonage brand adds significant value in the business market with Vocalocity, which we acquired in 2013 and quickly rebranded as Vonage Business Solutions. The results have been tremendous. In 2014, revenue growth for Vonage Business Solutions accelerated to 50% in just a little over a year from when we first entered the business market.
Our ability to leverage the iconic Vonage brand has been a key contributor to that success. We have an opportunity to further build on the brand to ensure everyone knows Vonage means Business. In June, we launched a new brand campaign, with the tagline “The Business of Better” because developing better solutions for customers is fundamental to everything we do. We also want businesses to know that the cloud is a better way to deliver communications, and that Vonage is a leader in cloud communications for business. We are showcasing how Vonage solutions help companies boost productivity with enhanced functionality, mobility, and scalability to deliver great value to growing businesses.
Growth through acquisition is a significant element of our strategy, and I am focused very intently on ensuring that we optimally integrate these businesses. Having been a part of dozens of acquisitions in my career, I know how important a smooth integration is. We have defined very specific responsibilities as they relate to budget, expectations, culture, etc., and we have a playbook that works.
With the acquisition of Vocalocity finalized and our acquisition playbook established, we completed the acquisitions of Telesphere and SimpleSignal, nearly doubling our addressable market within UCaaS, and securing a platform to serve larger businesses. These three acquisitions provide Vonage a comprehensive and compelling range of cloud-based solutions to address the needs of a wide range of enterprises. Now, we’ve added gUnify, which allows our customers to integrate our communications system with the business applications they use every day, for things like CRM and productivity, whether in the office or on the go.
What do you expect will be the impact of the Telesphere and SimpleSignal acquisitions?
We are already seeing the results. Through Vonage Business, which comprises Vonage Business Solutions, Telesphere, SimpleSignal and gUnify, we provide a comprehensive and compelling range of cloud-based solutions to address the needs of the full range of the business market, from single person companies, to those with thousands of employees spread over many locations, and everything in between. Combined, the Company expects these businesses to deliver category-leading 40% year-over-year business revenue growth in 2015 (Pro-forma revenue growth as if the Company owned these businesses in all of 2014 & 2015).
What issues are your business customers most concerned with today, and how are you helping overcome them?
Our role is to help our customers be successful. A company’s communications system is at the heart of everything they do. Customers want a communications system that is reliable, low-cost and scalable. A robust suite of communications that provides advanced features and flexibility are critical to any business.
Our business customers want to unify their communications so they can stay connected and track the progress of their business from anywhere. For both small and larger businesses, it’s about having the right features and functionality that can allow them to do more for less. Quality and reliability
are a must. And, they want to integrate their communications with their regular workflow through other business applications, like Salesforce, Clio, ZenDesk and Google for Work, to name a few.
Employees, particularly sales personnel, aren’t tied to the office. Businesses require a communications system that is flexible and allows employees to work anywhere, any time. Cloud-based phone systems enable business owners and their employees to work from any location with clear, reliable connectivity and with the same functionality and features as if they were in the office, allowing for increased flexibility mobility and productivity.
Cloud-based communications can help ensure that a business will always be up and running. For example, if there is a power or Internet outage, a cloud-based service, like ours, with call continuity capabilities, will reroute calls to a specified backup number selected by the customer.
Businesses also want to have a system that grows with them. For many businesses, their communication system is the most important tool they can buy and use to service their customers. Although newer businesses might only need a few lines and features today, as they grow, the right communications provider can actually help that process and scale with the business.
How do you handle larger businesses?
Larger businesses tend to want a fully managed, sophisticated unified communications system that integrates telephony, data connectivity, video conferencing and a host of collaboration tools. We can do this for smaller businesses as well.
Vonage’s portfolio of business products can serve single-person companies to those with thousands of employees spread over multiple locations. Vonage provides bring-your-own-broadband (BYOB) cloud products and those that offer carrier-grade reliability and Quality of Service (QoS) across BYOB service options and its private, national MPLS network, so we can cover the full range of business communications needs.
With the Company we just acquired in May, gUnify, we are able to integrate our communications platform with the most widely used SaaS (News - Alert) business applications, including Google for Work, Zendesk, Salesforce's Sales Cloud, Clio, and other CRM solutions. This is important because business customers want to be able to integrate their communications with the other business applications they use every day thereby increasing productivity, accuracy and efficiency.
How do these changes impact your partners?
For our partners, we provide a full portfolio of services so they don’t need to look beyond Vonage for a business cloud solution, no matter the size of their business clients. In addition to offering a robust product suite, we offer our partners user-friendly provisioning and customer management tools. Our proprietary provisioning platform, Zeus, allows partners to monitor customers’ communications services, and to make moves, adds and changes from their PCs, smartphones or tablets as needed.
Vonage has one of the largest indirect channel partner programs in the industry, with more than 30 channel managers nationwide. In addition to providing partners with a robust product suite, we also provide our partners with sales, marketing and engineering support, along with the best possible service and support for them and their customers.
What is the current state of mind in the business market around cloud? How is it changing and how are you helping to shape that opinion?
Five years ago, you had to convince people of the viability of the cloud before you could convince them you had the right offer. Now, businesses and consumers are comfortable with the cloud and used to having their information in the cloud. We just need to convince them of the benefits of having their phone system in the cloud with the added benefits of unified communications and that we have the right system for their business. Frost & Sullivan predicts that the market for UCaaS for SMBs will grow over the next five years to $10 billion dollars, but Frost & Sullivan also notes that, today, that market is only 15% penetrated. There is an enormous opportunity here.
I think we will see rapid adoption of cloud communications as more and more businesses understand the full breadth and depth of how moving their communications to the cloud can positively impact their business. There are no hardware costs like those associated with the PBX system in the closet, it’s fully scalable, there are very low operating costs and more features and functionality. Vonage is helping to shape this opinion by providing products, services and features to help customers conduct business from anywhere on any device. We’ll see adoption faster on the lower end of the market, but we see more and more larger businesses move to the cloud every day.
Edited by Dominick Sorrentino