Thursday , September 9 2021

The popular videoconferencing firm may be looking to move beyond video with the purchase, which gives it a new way to expand services.

Zoom buys cloud contact center Five9 for $14.7B

Zoom yesterday announced plans buy cloud call center service provider Five9 in a $14.7 billion all-stock transaction. Subject to shareholder approval, the acquisition is expected to close in the first half of 2022.

The acquisition could allow the company to hedge its video bets after 18 months of unprecedented growth as both companies and individual users turned to the videoconferencing platform to stay in touch with co-workers, family, and friends. While the need for videoconferencing is unlikely to go anywhere, even with offices re-opening, Zoom appears to be looking to capitalize on its growing customer base by expanding services.

Steve Blood, a VP Analyst at Gartner, raised questions about the move, noting that Five9 and Zoom operate in completely different markets. He sees a “disconnect” between the two companies and a potentially risky acquisition.

“We recognize that a part of the market that Zoom targets is an IT leader in a mid-size business or smaller that has responsibility for all communication,” Blood said. “In that segment, it is very feasible that there will be a responsibility for buying contact center technology.

“However, when you look at Five9’s business, they focus on a higher end of the market and a lot of their business is dealing directly with CX leaders who, from our experience, have nothing to do with enterprise collaboration whatsoever.,” Blood said. “That’s where the disconnect is for us.”

Zoom CEO and founder, Eric Yuan, in a statement, pointed to the push for “hybrid” workplaces, and said Five9 would position Zoom to grow.

“The trend towards a hybrid workforce has accelerated over the last year, advancing contact centers’ shift to the cloud and increasing demand by customers for customized and personalized experiences,” Yuan said. “Today, enterprises not only need to enable customers to engage via their preferred channel, they need to empower their teams to accomplish more, and do so with empathy, purpose, and connection. We truly believe that together, we will enable customers to reimagine the way they do business and deliver exceptional results.”

Five9 is slated to become an operating unit of Zoom after the deal closes.

Yuan said earlier this year that Zoom would be looking to expand its range of communications services. Although videoconferencing has remained its mainstay, the company has also launched office collaboration products including Zoom Phone, a cloud phone system, and conference software, Zoom Rooms.

In an interview before the Five9 acquisition was announced, Magnus Falk, CIO Advisor at Zoom, said Zoom Phone is becoming an increasingly popular offering, with the company selling 500,000 units in the last quarter. By comparison, it took seven successive quarters to sell 1 million units.

Rowan Trollope, the CEO of Five9, put it this way in a statement: “Businesses spend significant resources annually on their contact centers, but still struggle to deliver a seamless experience for their customers. It has always been Five9’s mission to make it easy for businesses to fix that problem and engage with their customers in a more meaningful and efficient way. Joining forces with Zoom will provide Five9’s business customers access to best-of-breed solutions, particularly Zoom Phone, that will enable them to realize more value and deliver real results for their business.”

Blood said he will be looking closely for several things to see whether the acquisition ultimately works to Five9’s benefit.

“We will be looking for continuity of leadership, continuity of people in the product development space, and seeing that they can continue offering the things that [Five9 has] been previously delivering,” Blood said.

He argued that a name change or a rebranding effort that moves Five9 toward the collaboration space  could be a turn off for customers. Five9 regularly scores highly in terms of customer satisfaction, Blood said, and has been rewarded with good ratings and solid growth.

“If the whole Zoom thing becomes more of an emphasis, and Rowen [Trollope] gets dragged off, that loss of momentum could be the real turning point,” he said.

The contact center-as-a-service space is growing, Blood said; it’s up 38% a year overall, with some vendors growing more than 100% — a level of growth he’s never seen in 30 years. 

“If the Five9 business is able to focus on building out and strengthening its capabilities in customer experience, and where there is an opportunity, build something that would enable them to sell to small and mid-sized businesses as well, that would be good. If they lose that focus that’s gotten them to where they are today with CX leaders, then it’s not going to be a great thing,” Blood said.

This Article was first published on Computer World

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