There is a hot topic in the IT world right now and our partners at Evolve IP decided to break it down and share their insight on this new big merger.

On the opening morning of Broadsoft’s User conference (Connections), they dropped a bomb.  Cisco has agreed to acquire Broadsoft. The Interwebs immediately caught on fire.

The commentary that followed on Twitter, LinkedIn, on nerdy message boards and in industry (tech and channel) publications ranged from slightly self-serving to moderately alarmist to downright irresponsible.

Take a breath.

The company largely credited with powering and securing the Internet (Cisco) and the company that pioneered communications over the net (Broadsoft) have decided to come together.

Evolve IP has been a very large customer and partner of both companies for over 10 years and have some thoughts around the hyperbole and commentary coming from the acquisition news.

1. “This indicates the death knell for premise-based PBXs”.  Verdict: MAYBE (just not tomorrow).

Avaya’s bankruptcy and Cisco’s purchase of the born-in-the-cloud UC software leader, certainly demonstrate that the tide has turned.  But according to Frost and Sullivan’s most recent North American Hosted IP Telephony and UCaaS Market Forecast, Hosted IPT and UCaaS currently make up only 9.9% of the addressable market in the US (and likely significantly less worldwide).  With an annual expected CAGR of between 20-30% YOY for the foreseeable future, cloud wins the sales war, and premise companies WILL HAVE to change strategy, but the game is not yet over, and there is plenty of territory to be won for every type of offer.

2. “This is somehow a validation of the “built on open source / in-house” model”.   Verdict: FALSE.

First off, nothing is built 100% in house. Every popular platform leverages SIP stacks, media servers, SBCs and UC platforms that are both paid for and open source.  Somewhere, under the covers, is someone else’s code.   It may be deep, but it’s there.

However proprietary / open-source software has been demonstrated to create interoperability challenges (also noted by Frost and Sullivan in the same paper mentioned above).   As it relates to UCaaS, proprietary / open source can and has meant scale and geography challenges and enterprise support issues.  These platforms would argue that they are quicker, more nimble at addressing customer’s requirements.  Consider that Broadsoft is based on standards and open APIs too, but it is supported by a community of application providers with deep integrations at the ready and service providers, like Evolve IP, who have invested millions in creating valuable IP that sits on top of Broadsoft’s stable underpinnings.

Lastly, consider that several of these open source platforms are very publicly “exploring strategic options” as we speak. Cisco, with a massive enterprise base, could have picked any of them, but Broadsoft got the nod.  Think about it.

3. “Enterprises will not be constrained by the pace of large companies like Cisco”.   Verdict: FALSE.

To highlight further on the above point, Cisco purchasing the largest deployed UCaaS base in the world and its entire community is directly in line with their strategy AND with the buying habits of enterprise IT.  Enterprise IT wants options, interoperability, stability and scalable big iron.  Every UCaaS player out there, talks about “going up market”.

Will enterprise IT be more comfortable buying services based on Cisco, or on open source?  We can argue the merits of the decision all day, but we know what Enterprise IT will decide.

4. “This will be disruptive to the channel”.   Verdict: TRUE.   BUT it depends on what channel.

VARs will need to cozy up to the idea of hosted and perhaps give up the dream that they’re going to build a cloud in their data closet.  Traditional carriers may have to embrace the fact that they live on Cisco / Broadsoft infrastructure or will just leverage Broadsoft to do it for them.  There may be channel conflict between private labelers and Broadsoft’s own Broadcloud efforts.

But let’s be honest, if hardware and software companies were really good (or interested) at selling and servicing their own stuff, they wouldn’t need the channel.  You only need to look at the history of Microsoft’s and VMware’s cloud expeditions over the last decade to see that every strategy required someone else to sell, service, host, run or deliver it in some way.  That’s why both of these companies have remained extremely relevant to the channel (and to Evolve IP) as they’ve changed and adjusted their cloud strategies to new market conditions.

There are a few things we all CAN agree on:

  • This transaction is an endorsement of the cloud for business.
  • A 9.9% market penetration will become something MUCH larger in the coming years.

The organizations who take advantage of that market opportunity will be the ones who are honest with themselves,  who take a breath before they react to this news, and who respond to the needs of their target buyers with cost-effective solutions that make sense for them.   For a lot of businesses (particularly large ones) those solutions will be based on Cisco.