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CPaaS market maturing but rocky times ahead for Twilio May 3, 2017

Posted by Dominic Black in Uncategorized.
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Two interesting news stories have emerged in the last week showing how the CPaaS market is maturing, and how providers need to move beyond transactional services in the future.

The first story relates to the acquisition of TeleSign by BICS, driven by the desire for BICS to transform from a traditional Wholesale model to a CPaaS one, through the acquisition of TeleSign’s authentication and mobile identity services. Worth $230m, the transaction is equal to what Vonage paid for Nexmo in 2016. This highlights the value that Service Providers and Wholesale providers see in CPaaS, evidenced by such investments.

Cavell Perspective:

  • The first iteration of CPaaS has mainly followed a Wholesale model, with tight margins based on services like authentication, messaging and minutes. This means that significant scale is required to drive large revenues.
  • During this first iteration of the market, global wholesale traffic has declined, and as end users look for different ways to communicate, CPaaS platforms began to gain traction as a way to integrate communications within applications. However, CPaaS providers were only able to generate marginal revenues per transaction.

The second story concerns Twilio, generally considered the “poster boy” of CPaaS. Having made a lot of noise in the last few years and grown an impressive client list, the company is experiencing problems as its reliance on transactional services starts to bite. On the latest earnings call, Twilio’s CEO announced that Uber, representing 12% of revenue, will be reducing its use of Twilio’s services over the next year. In after-hours trading, its share price fell by around 30%, wiping close to $1b off their market cap. Twilio is constantly acquiring new accounts (4,000 added in the last quarter), but this has only accounted for quarterly revenue growth of $2m. It will be difficult for the company to find new customers with the user base of Uber.

Cavell Perspective:

  • This will become a growing concern for CPaaS providers, and highlights the need for them to move beyond basic authentication, minute or message services, to stickier solutions that drive customer retention.
  • The BICS acquisition solves the first part of this by enabling them to offer new services, but will this be enough to secure long-term customer relationships and repeat revenues?
  • Companies like Genband, RingCentral, Cisco and Vonage have started to move beyond simple transactional services, and begin to integrate CPaaS services into their cloud voice or contact centre solutions.
  • Service Providers need to understand what is happening in this market: the role of the Service Provider is coming into question, and key vendors are making significant investments in building or buying their own CPaaS platforms.
  • The ability to offer integrated services into applications is likely to be the best way to differentiate in an increasingly competitive landscape.

Cavell’s report “CPaaS: Market Opportunities for Service Providers” studies the dynamics of the industry, profiles key players and offers insights into the threats, and the opportunities, facing Service Providers. If you would like to purchase the report, or speak with one of analysts about the impact of CPaaS on your business, please get in touch with Dominic Black at dominic.black@cavellgroup.com

Telcos missing out on Digital Disruption opportunity whilst CPaaS providers act October 27, 2016

Posted by Matthew Townend in Uncategorized.
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You cannot help but read about how digital disruption is helping revolutionise existing businesses and enable new businesses to establish and disrupt complex industries. I think most people would also agree that at the heart of most business models are communications of different types.

So why is it that we find that Traditional model and fixed Telecoms companies are in general leaving this market opportunity to the CPaaS and development market to address?

Today, Cavell launches a report co-authored by Matthew Townend, Research and Consulting Director at Cavell, and Mike Wilkinson, one of the most respected senior marketing figures in the Technology market, former VP Product Marketing at Broadsoft and a pioneer in the whole UC and VoIP marketplaces.

In the report “The Communications Platform as a Service Market – Market Opportunities for Service Providers”, Cavell are exploring why companies like UBER, AIRBNB & WhatsApp all have chosen CPaaS providers like Twilio to power the transformation we are witnessing.

The paper addresses why the longstanding traditional Service Providers have not been able to embrace this opportunity, and what they might have to do in the future to be relevant both to these large scale global players, but also to their traditional national Enterprise customers who seek to establish new business processes and value propositions.

Matthew Townend, commented:

“As we move into a period of Digital transformation, we want to have real-time communications embedded into all sorts of business and consumer applications, and users want communication delivered in the context of their business and personal lives, however, not in the way vendors and communications providers prescribe it. Communications providers are going to have to deliver CPaaS platforms and capabilities that enable this change. “

“We are already seeing Business customers who demand their communications be imbedded in their vertical applications, as in their business they spend their life in say a hospitality business process tool. They do not want to receive it in the PBX or Cloud vendors UC all singing all dancing portal.”

For more details on the report please click here.

Cavell are Co-Hosting an industry dinner with the Internet Telephony Service Provider Association (ITSPA) in London, where we will be exploring these issues with a group of different service providers whilst also enjoying a great dinner and networking opportunity. Matt and Mike will both be at the dinner. For more details and how to book tickets please visit our website.

Broadsoft Xtended Connect could indicate a major change in the wholesale market! October 30, 2012

Posted by Matthew Townend in Uncategorized.
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On October 22nd BroadSoft  www.Broadsoft.com announced Xtended Connect with its partner Intelepeer www.IntelePeer.com . Xtended connect is in practice a federation which its customers can join to share traffic both HD Voice and Video, without having to use a wholesale partner.

So for example if a Broadsoft Service Provider customer in the UK (Provider A) and a Broadsoft Service Provider customer in India (Provider B) joined the federation, any voice or video traffic which was going between an end customer on Provider A and an end customer on Provider Bs network could pass for free, and therefore avoid traditional whole providers networks. Also because both service providers are utilising the Broadsoft platform they could pass the traffic as HD Voice or Video as they utilise the same applications. In order to make this work they have chosen to partner with Intelepeer who will provide the points of presence and the registry capability which will identify if traffic is On-net between Broadsoft federation customers.

This is not the first federation we have seen but is significant that a major vendor should embark on such a strategy. Xconnect (www.xconnect.net) who are one of the other pioneers in this market, have been empowering federations between VoIP and other players for a number of years and recently announced a NGN exchange with DE-CIX in Germany. Indeed Xconnect have demonstrated very strong growth offering these services both on a national and international basis.

What’s interesting is in their announcement Broadsoft highlighted the service benefits that customers will receive, rather than any financial benefit.

“Today, service providers are primarily limited to supporting high-definition calls for customers within their own network, which means that the vision of a superior communication experience has yet to be realized,” said Michael Tessler, president and CEO, BroadSoft. “When every BroadSoft service provider customer leverages Xtended Connect, BroadSoft powered users in more than 70 countries will experience high-definition voice and video calling, creating a truly high-definition network.”

For a global or national federation to work there must be enough On-net traffic to demonstrate real value. Broadsoft do have a significant global market presence which could drive enough global and local traffic.  At launch however the pops are limited to the US and 1 in the UK, in the coming months Intelepeer will extend that reach and only then will we really see if this has a significant global impact. The commercial model for such services will develop other the coming months; however it appears that a provider will have to commit to take other services from Intelepeer, in order to benefit from the free On-net federation services.

We would also expect this to encourage global teaming between Broadsoft customer. For instance if a partner in the UK had a multinational customer with site requirements in India, he may work with a Broadsoft federation provider in India to provide that site. Then he will be able to offer his customer a HD Video and Voice experience.

Will Wholesale Providers Loose Sleep !!

I don’t think this announcement will make wholesale players, loose sleep yet. However it is a clear demonstration how the future requirements for delivery of Voice/Video and other UC services elements, maybe a key driver of what the future wholesale offering may need to be. Also we may start to see closer teaming between vendors and service providers in these market spaces and the delivery of applications becomes more and more important.

illume and Cavells customers are looking for both research and consulting assistance on this area of the market, so if you are interestd in where we could help please contact matthew.townend@cavellgroup.com