The Argument for Verticals
After my last column (Why Hasn't UCaaS Taken Off?) was published, Garrett Smith, former VoIP blogger and current marketer, commented: “Because what's unified for one business is not for the next. True UC requires vertical comms unification, not mass market standardization.”
The strategy of verticals and niches was a theme of consulting calls in the fourth quarter last year. Only one provider took it to heart, and it is busy executing on that strategy.
In the scheme of things, UC hasn’t done much really. Ten years and still less than 30 percent penetration with more than 2,000 providers trying to raise that ocean.
8x8 has 48,000 customers. RingCentral has more than 300,000. There are more than 25 million SMBs in the U.S. That pie is large.
But apparently going global is easier than continuing to penetrate the U.S. market. Could the price of customer acquisition and ROI on that cost be too high? Or is it the marketing?
With few exceptions – Fone.do, Dialpad, Verizon One Talk – the service offerings of UC look similar. Dial-tone and key system replacement are the main sales triggers. Unfortunately, that isn’t what hosted PBX or IP Centrex was designed or built for.
Worse is that true UCaaS and UC&C are about change. For the business to get an outcome of efficiency and productivity, it has to change the process and how it interacts with comms, customers, and vendors. However, people resist change. And frankly UC isn’t sold as change; it is sold as a product replacement. So full circle that’s where we are.
To change the business workflow, the communication platform should integrate with other systems like CRM, help desk, and the like. Ideally, it would integrate with the practice management software the way Fonality does with Allstate’s eAgent.
If integration is one of the key functionalities business owners are looking for, it would seem that a vertical approach would yield good results, like 70 of the top 100 Allstate agencies. With an understanding that integration takes some time, effort and money, it would be less of an effort if the provider focused on a handful of verticals.
Some UC providers now have subject matter experts based on verticals. For the major verticals like financial and health care, this makes sense. This needs to replace the mass market approach to marketing. The sector does a lousy job of marketing anyway. Targeted marketing would be a better approach. In today’s world of automation and on-demand printing, targeting 100 businesses with a message is just as easy and costly as targeting ten thousand. It just takes effort.
According to the U.S. Bureau of Labor Statistics, there are 285,000 agencies and brokers. Ten percent of that market is 28,000 customers. Even five percent gives you 14,000 billing customers who you have customized the software for. With custom software shops and freelance programmers, couldn’t a provider throw resources at this to take and win market share inside a vertical?
664,532 is the number of active CPAs in the U.S. There are plenty of verticals to target.
There is upside to verticals. They mean less price pressure because specialization means a luxury tax. Word of mouth inside a silo like a vertical is louder. And referrals would be easier, so sales would get less expensive over time.
The cost of integration will be the roadblock that executives throw up. With open APIs coupled with platforms like Zapier and IFTTT, scripting is getting easier. There are a number of freelance programmers that can be hired to bang out integration quickly. The Vonage API Platform has 249,000 registered developers. That should result in a bunch more integration in theory. The providers using homegrown or open source software probably have a leg upon this, but it hasn’t happened yet.
The other roadblock from the C-Suite: “We appeal to a wide audience. We want 1 million customers.” Yeah, good luck with that since what you are really saying is: “We will take all the revenue we can – good, bad, or underwater.
Also, we have no idea who our target audience is. In addition, if we tell investors that the market is just 300,000, we won’t get endless VC money.
For some perspective, consider that Vonage Business has 659,000 seats as of May 2017 after acquiring Vocalocity in 2013 and then Simple Signal, Telesphere, and iCore. That is seats, not billing customers. 8x8 is at 48,000 billing customers. Cbeyond was at 60,000 when it sold itself to Birch. Only the duopoly companies get millions of subscribers and only after hundreds of millions in advertising and millions more in sales.
Despite my banging this drum often, UC providers continue in the parade line behind all of the rest. Two thousand of them are marching to the same drummer.
Peter Radizeski is president of Tampa, Fla.-based telecom consulting firm RAD-INFO INC. (http://rad-info.net). He is also author of the book, SELLECOM2: Selling Cloud Services.
Edited by Erik Linask