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During the worldwide lockdown inflicted by the COVID-19 pandemic, Zoom grew exponentially and became a household name. Suddenly company meetings and all manner of business, family gatherings, classrooms, high school reunions, and cocktail hours went virtual, and to the extent that people even expressed  feeling “Zoomed Out.” The company knew that as the global economy rebounds and people get back to “business as usual,” its sales will slow. As a result, earlier this year, it shared its intention to expand into the rapidly growing customer experience (CX) market. This strategic direction came to fruition this week with the announcement of Zoom’s acquisition of Five9 for $14.7 billion.

Five9 too has seen tremendous growth, with a 32.3% revenue increase in 2020 and a whopping 45% growth during the first quarter of 2021. Five9 is one of the original and leading providers of cloud contact center software. An excerpt from Frost & Sullivan’s Contact Center Buyer’s Guide states “The Five9 Intelligent Cloud Contact Center initially focused on outbound dialing, but today supports the full spectrum of contact center functionality including inbound, outbound (voice and digital), and blended agent capability for in-house, outsourced, and work-at-home agents and remote experts. The platform also delivers skills-based routing, interactive voice response (IVR), workforce management (WFM), quality monitoring (QM), analytics, and social, mobile, email, chat, and web interactions. Over time, Five9 has transitioned from a North America-based, multichannel platform aimed at the small to medium businesses market (with deep integrations with CRM solutions and other platforms), to a globally distributed, omnichannel customer journey platform supported by global voice architecture to meet the needs of large enterprises”.

I invited our global unified communications and CX teams to give me their take on this acquisition. Is this a good deal? How will it impact the new company and the world of CX? What will be some of the challenges? Read on to see what our thought leaders have to say.

Price – Exorbitant or Deal?

Some gurus believe the price tag is exorbitant, while others feel it’s a steal. Both stocks fell after the announcement. Frost & Sullivan’s research shows that improving CX is still a top corporate objective, with customer-facing departments being the number-one priority for digital transformation budgets. Almost 45% of companies measure their digital transformation success with customer satisfaction rates, followed by revenue growth (38% of respondents). This survey also found that 80% of CX applications are expected to be in the cloud by 2023.

Clearly, there is a lot of growth potential in the CX market. Five9 has achieved 28 consecutive quarters of gross margin expansion at the end of 2019, proving its sustainability and avenues for growth. With ‘ ‘Five9’s and ‘ ‘Zoom’s cloud capabilities, synergies in solutions and corporate culture, and proven capability to grow pre-pandemic, the Frost & Sullivan team believes this will be a successful acquisition.

Competitive Advantages

Elka Popova, Vice President, Connected Work, says, “Zoom now has a really well-rounded portfolio, especially with regard to the possibility to bundle (and potentially more tightly integrate) Zoom Phone with Five ‘ ‘9’s contact center solutions.  Zoom also gains access to the large standalone cloud contact center opportunity, independent of any bundling or integration with its own heritage solutions. Five9 will gain access to Zoom international operations and sales, whereas Zoom will leverage Five9 systems integrator partnerships. Zoom’s marketing machine will also help drive sales of all parts of the portfolio.”

According to Michael Brandenburg, Senior Analyst, Connected Work, “it’s all about the Platform, Platform, Platform. This is Zoom’s opportunity to blur the lines between UC and contact center (CC), ultimately putting the two on a shared platform, and stealing microservices bits of both to enhance the user experience: better video channels for the CC, and selected CC capabilities for receptionists and informal CC’s using Zoom Phone. Standalone UC and CC options of the products will exist for quite some time, but the end state will be a Zoom platform.”

Frost & Sullivan’s 2021 customer research of IT decision makers revealed that 94% of respondents say they will have invested in some level of AI capabilities by 2022 and say that AI will be beneficial to enhancing their business communications and contact center capabilities. These data support CX Industry Analyst Federico Teveles’ comment, “Five9 is a fully cloud-based company, with advanced AI capabilities, and a high-touch approach to their customers. Undoubtedly, ZOOM will gain a lot from Five9’s AI capabilities and its ability to support customers’ digital transformation.”

Challenges for the Combined Company

Sherrel Roche, Industry Principals says “apart from the integration challenges, the combined company’s success will be contingent on how well Zoom exploits/integrates Five9’s automation and artificial intelligence (chatbots, self-service) capabilities. During the integration process, the companies need to optimize synergies and build/execute clear customer, partnership, and growth strategies. Additionally, Five9’s presence in the Asia-Pacific region is negligent. Zoom will need to identify sweet spots to compete in the market and must have a strong go-to-market strategy (sales and partner programs). Zoom also has to strengthen and build on Five9’s existing partnerships for AI, workforce management and optimization, and CRM solutions.”

As customer expectations continue to rise, Ankita Singh, Senior Industry Analyst, Frost & Sullivan, believes the “two will be met with a tremendous amount of expectations from customers given the individual capabilities of the two companies.” The merger will be complex since the product lines are so different.

Juan Gonzalez says “both companies remain highly dependent on direct sales and US-based clients (even though that has started to change a bit in 2021); how they approach this competitive disadvantage is perhaps one of the key aspects to analyze over the next two years.” He also asks “while both companies have several large enterprise clients, that is not their sweet spot. In the hybrid era (which also includes hybrid cloud), will they be able to provide flexibility for clients that don’t want to go all-in into a public cloud environment?”

Impact on CX & UC Market Players

There is no doubt this impacts the CC & UC world. Both Zoom and Five9 have brand equity and robust portfolios. If they can successfully combine their offerings, the new company will be top contender in the growing UC + CC marketplace. Popova says, “This is a threat to everyone else in UCaaS and CCaaS as it creates a powerful competitor with a comprehensive portfolio and a strong brand.”

A recent Frost & Sullivan Contact Center survey revealed that 89% of businesses will have adopted integrated CC and UC solutions by 2022. Key benefits of integrated solutions include: 54% improved customer journey; 52% better agent experience; and 44% optimized business processes.

The survey also revealed that organizations that are not integrating UC and CC solutions cite budget constraints, lack of resources, and difficulty of systems integration as the key constraints.

Teveles adds “the integration period between Zoom and Five9 will be long and difficult, so they will have time to accommodate. Higher R&D and marketing investments and efforts can be expected, along with new mergers and acquisitions following the same path (UC+CC) as well.”

The Last Word

According to Nancy Jamison, Industry Director, “There are great synergies between the two companies. This is great for Zoom, but from a contact center perspective even better for Five9. As a top-tier player in the enterprise contact center market, this solidly rounds out its ability to say it is a single source provider in the growing combined UCaaS and CCaaS market.”

For more information, please check out:

http://frost.ly/62k (update coming soon)

http://frost.ly/62j

Frost & Sullivan Contributors:

Michael Brandenburg, Senior Analyst, Connected Work
Juan Gonzalez, Research Director, CX and UC
Nancy Jamison, Industry Director, CX
Sebastian Menutti, Industry Principal, Latin America, CX and UC
Elka Popova, VP Connected Work
Federico Teveles, Industry Analyst, Europe, CX
Sherrel Roche, Industry Principal, APAC, CX and BPO
Alpa Shah, VP, CX
Ankita Singh, Senior Industry Analyst, CRM

About Alpa Shah

Alpa ShahMy professional and volunteer experience includes business and strategy planning, product and vertical market analysis, growth consulting, event planning and execution, sales and marketing, and most importantly, creating and inspiring teams to be best in class. Consulting projects have ranged from strategy development to white papers to end-user analyses.

I currently lead Frost & Sullivan's global CX (customer experience) research team, run customer surveys on the latest digital transformation technologies, support our customers' brand and demand efforts, obtain customer viewpoints via one-on-one conversations, and moderate webinar and event panels.

Prior to joining Frost and Sullivan, I worked for Smith Barney for 5 years in its accounting division handling incentive compensation plans. Thereafter, I worked as an account executive at Edward Jones, a brokerage company for approximately one year. In these positions, I learned much about the operations of a financial company, financial instruments, and sales techniques.

In my personal and professional life, I have served as the VP of Communications on the boards of PAMP (Parent’s club of 2,000 plus members) and the PTA, as well as within Frost & Sullivan’s GLOW (Growth & Leadership of Women) team.

Alpa ShahAlpa Shah

My professional and volunteer experience includes business and strategy planning, product and vertical market analysis, growth consulting, event planning and execution, sales and marketing, and most importantly, creating and inspiring teams to be best in class. Consulting projects have ranged from strategy development to white papers to end-user analyses.

I currently lead Frost & Sullivan's global CX (customer experience) research team, run customer surveys on the latest digital transformation technologies, support our customers' brand and demand efforts, obtain customer viewpoints via one-on-one conversations, and moderate webinar and event panels.

Prior to joining Frost and Sullivan, I worked for Smith Barney for 5 years in its accounting division handling incentive compensation plans. Thereafter, I worked as an account executive at Edward Jones, a brokerage company for approximately one year. In these positions, I learned much about the operations of a financial company, financial instruments, and sales techniques.

In my personal and professional life, I have served as the VP of Communications on the boards of PAMP (Parent’s club of 2,000 plus members) and the PTA, as well as within Frost & Sullivan’s GLOW (Growth & Leadership of Women) team.

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