Unified Communications Featured Article

Fonality's Market Adaptations Mean Record New Revenue

February 25, 2016

Fonality's recent performance in the unified communications as a service (UCaaS) market underscores both the size of this market and the incredible performance Fonality turned in overall. The company reported achieving new records in growth and profitability for 2015, selling over 22,000 new seats and bringing in 85 percent of its 2015 revenue from subscription income.

Fonality deals in not only UCaaS, but also cloud-based voice over Internet protocol (VoIP) phone systems, a combination that means impressive revenues and a foothold in a rapidly-growing market. Formerly, Fonality focused on the traditional private branch exchange (PBX) system, which could produce some impressive orders but not very often. Its shift to a more cloud-based approach means that the company's income stream has now flattened and become more regular, drawing a lot more from subscriptions than from one-shot capital purchases.

Big new gains in subscribers are great, but Fonality topped this with a spectacular customer retention rate, holding on to 99.6 percent of its customers for the fourth quarter of 2015. Better yet, more than half of those customers—as related by Fonality CEO David Scult—bought services beyond what they had originally contract for. This reflected added staff, better equipment, and greater productivity that drove a demand for more of what so clearly worked.

All of this was impressive, but the company had more to reveal. Its Channel and Referral Partner Programs grew to over 650 organizations, and made up a combined 70 percent of seats sold, and brought in over 2,000 customers in just the insurance sector, which was the company's largest vertical market. Fonality didn't stop there, bringing in new customers in other industries like the Borrego Community Health Foundation and National Staffing Solutions. Just to top it off, it took home PCMag's Editors' Choice award for business VoIP service in 2015.

All this means that Fonality is a much better business now than it once was. Where before, it was dependent on new business making one big purchase and then having to find other businesses to do likewise until the first business needed upgrades, it can now offer subscription services, with monthly income repeating routinely. The cash flow therefore becomes more regular and less subject to interruptions that could hamper growth. Fonality can more effectively plan in terms of staffing and equipment upgrades as it will have a better idea what its likely cash flow picture will look like even six months or more down the road. Throw in a clear commitment to the best in service and it's likely that Fonality will both hold its current customer base and augment it with new customers down the line.

Things are looking pretty good for Fonality these days, a company that has made the move from large-scale equipment sales into subscription operations. That's following a trend that doesn't seem to be going away any time soon, and one that should keep Fonality near the top of the heap

Edited by Maurice Nagle

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