There’s an increasing demand for multi-service providers, as businesses seek to consolidate their IT resources for simplified management and billing. In fact, many are headed in the direction of complete converged managed IT and communications services from a single managed services provider. This service convergence mirrors the internal consolidation trends the market has been experiencing for several years now.
“Ten years ago, you had a telecom and an IT staff, but today that doesn’t exist,” says NetFortris CEO Grant Evans. “Today, there is just an IT staff, and we think this convergence is very important in the market.”
More specifically, Evans says the greatest value lies in the control of intellectual property, when it comes to being able to deliver these converged business solutions, which is one of the driving forces behind NetFortris’ acquisition of UCaaS provider Fonality (News - Alert). With the deal, NetFortris will be able to combine its existing network and communications offers with a proven UCaaS solution, allowing it to expand services to existing customers of both companies. The acquisition comes at a time when businesses continue to invest in cloud resources, a trend highlighted by every keynote speaker and countless conference sessions at the recently concluded ITEXPO in Ft. Lauderdale.
Since 2014, when Evans and Spire Capital invested in then Telekenex, the company has focused successfully on the enterprise market, winning multi-year contracts with Fortune 200-level companies that have helped it realize a current ARPU near $4,400, according to Evans.
Evans says he looked at more than 40 companies before coming across Fonality, but most had one common problem – they didn’t own intellectual property, which Evans says has been and will continue to be a key to the company’s growth. Certainly, by owning its platform and service portfolio, NetFortris has the ability to customize more rapidly and is able to avoid white labeling costs. He also feels the path Fonality has chosen, moving from on-premises to hybrid to cloud, is something NetFortris can help accelerate, given its ongoing belief and investment in cloud technologies.
Of course, no one vendor is able to provide every piece of business IT resources – there are CRM, ERP, and other elements that are already in place and beyond the domain of IT and communications providers thanks to industry giants like Saleforce, SAP, and Oracle (News - Alert). As such, it becomes incumbent upon MSPs to be able to easily integrate with those existing systems. Fonality’s built-in integration with third-party applications is part of why Evans believes the acquisition will position NetFortis well to be the sole IT and communications provider for its customers.
Of course, there’s also the practical side – the customer base. Fonality has done well to this point but, like Telekenex, seems to have stalled more recently, largely due a lack of service diversity. With the combined entity, NetFortis will look to take those customers to the next level by offering them the IT services in addition to its existing Fonality platform.
“There are some unpolished diamonds in the Fonality customer based we see as a ripe opportunity for us to harvest,” says Evans. “If we take some of their customers and add connectivity, we can pretty much double revenue from those customers, and then we can add other services, like security.”
He also believes strongly that the reverse is also likely to happen – many of its networking customers will seek to consolidate vendors and the proven Fonality platform, combined with the trusted IT and security services it already provides, will give NetFortris the edge. Both scenarios are part of Evans’ goal of having the highest ARPU in the market.
The combined businesses will boast operating centers in three countries, with more than 11,000 customers and 300,000 users in 41 countries.
Fonality has traditionally focused on the SMB market and, while Evans plans to extend that business upstream, he is adamant the company will not turn its back on its smaller customers. He says they will likely increase automation of some of the services and support – but, frankly, that’s the only way to effectively handle, in particular, the very small end of the market.
He also reiterates that the Fonality platform is equal in quality and scalability to any enterprise application, despite having been focused on the SMB space thus far.
Edited by Alicia Young