by Jim Lundy
Summary: Zoom announced an agreement to acquire Five9 in an all stock $14.7 billion dollar deal this week. With a 25X revenue multiple, the deal signifies the beginning of a new era of consolidation between UC&C and Intelligent Contact Center providers.
Event: Zoom announced the acquisition via a press release on Sunday, July 18th. The deal is expected to close in the first half of calendar year 2022. Rowan Trollope will continue as Five9 CEO and become a President of Zoom after the deal closes.
Analysis: The Zoom and Five9 merger will accelerate the shift to an integrated UC&C and ICC offering. While many providers have an integrated offering, this will put many standalone Contact Center providers at a disadvantage.2021 First Cut Zoom Buys Five9
This merger also positions Zoom and Five9 to compete more completely against others such as Avaya, Cisco, Fuze, Mitel, 8×8, and Vonage, which already have integrated offerings.
The Consolidation of UC&C and Contact Center markets
Aragon has been predicting that the UC&C and contact center markets were on a collision course (see Research Note: The Intersection of Unified Communications and Collaboration with Contact Center).
This is due to the fact that for more and more use cases omni channel communications is needed and UC&C providers have strong capabilities in this area that contact center providers can leverage.
For the contact center providers who are still a best of breed provider, expect to see M&A activity over the next 24 months.
Prediction: By YE 2022, 50% of the remaining standalone contact center providers will merge or be acquired (70% Probability).
The Vendors Who Are M&A Candidates
There are a number of providers who jump to the top of the list when it comes to mergers and acquisitions. The contact center M&A candidates include:
- Alvaria
- Genesys
- Nice inContact
- Talkdesk
The UC&C providers who are candidates to buy a contact center provider include:
- Microsoft
- RingCentral
Of these, we expect RingCentral to make a move first. Since RingCentral also partners with Nice inContact, that would take advantage of their current synergies. It is unclear at this time whether Microsoft will feel compelled to make a move.
Benefits of the New Offering for Zoom Customers
Zoom wants to continue to grow and the $29 Billion ICC market is attractive and adds a significant amount of addressable market to achieve that. Zoom will be able to approach each of its midmarket customers with offers to replace an existing contact center offering.
Five9 also has a leading conversational AI platform and this will be able to be offered to Zoom customers who are looking to build out their digital labor strategy.
The Benefits to Five9 Customers of the New Offering
Five9 customers may already have a UC&C offering. The question is will they switch. Zoom Phone is starting to mature, but there are many very strong alternatives so replacing an existing UC&C offering may prove to be a little more difficult initially.
On top of telephony, we do see a use case for more video in the contact center and the combined companies should be able to have a solution in market quickly. This will put pressure on other providers to follow suit.
Why Contact Centers Are Becoming Intelligent—What Happens to Legacy Providers?
Aragon has been discussing the rise of the Intelligent contact center (ICC) since 2017 and we just published our third ICC Globe last week. The reality is that virtual agents—also called chatbots—are here. Five9 is one of the ICC providers that has doubled down on virtual agents, since it bought Inference in 2020.
For contact center vendors that have not yet invested in virtual agents, many partner with Google. That said the valuation for many who have waited will go down, since digital labor is here and virtual agents continue to become popular, at least for the well-designed ones.
Aragon Advisory
- Enterprises should recognize that the UC&C and ICC markets are on a collision course.
- Enterprises should look to gain cost savings when buying an integrated UC&C and ICC offering.
- Enterprises should evaluate Contact Center providers that offer AI–also referred to as intelligent contact centers—powered by human and virtual agents.
Bottom Line
When the contact center market first formed, it was all about connecting it to the PBX for telephony. Now in 2021, more buyers are looking to leverage the combined resources of omni-channel communications and collaboration – UC&C platforms with the power of a contact center. The race to intelligence means that not all providers will be the same. Enterprises will need to examine offerings carefully before making a purchase decision.
Additional Resources:
The Aragon Research Globe for Unified Communications and Collaboration, 2021
The Aragon Research Globe for Intelligent Contact Centers, 2021
The Intersection of Unified Communications and Collaboration with Contact Center