They say all it takes is a spark to cause a fire and yesterday's move by Yahoo to buy six year old Internet phone company Dialpad could be the first of the moves made in the VoIP sector that triggers consolidation.
The reasons are not that hard to figure out.
First the recent FCC E911 decision will make it hard for the small, light, underfunded startups compete with the likes of cable companies and RBOCs who are moving along at their normal pace to sell VoIP.
Next is the fact that many of the surviving VC funded VoIP related companies that were launched in the late 90s before the dot.bomb hit are almost at the end of the funds lives and the investors need an exit play in order to cash out. While some funds may opt to sit still as the market matures, others that need the liquidity will not stand still.
Third is the management teams. The then twenty somethings are now thirty somethings and security becomes something to think about. As a result they want to be in a place where they have the cash in the bank, can move into a more stable future path or want to do another new idea while the VC market is around to fund them by proving their ability to take a company from ideation to exit strategy.
Lastly there are just too many "small" companies that are in a space that is ripe for consolidation. I last heard that there are some 1100 VoIP companies competing for dollars in the USA. How accurate that is, I'm not sure, but every day I find another one announcing their offerings.
I fully expect to see companies like Qwest, Bell South and Sprint from the old guard, AOL and MSN from the new to start playing in this space just as some of them have played in streaming media and content space before. I'm also pre-disposed to believe that some non-USA public sector companies with cash and stock--Telstra, Singtel, KT, NTT, Deutche Telekom, BT, etc. as well as the global upstarts also, begin to feel the need to have something that is different than a Nortel, Lucent, Alcatel engineered and integrated solution. Already on the pure tech side we are seeing companies (Jasomi, Times Ten) which have VoIP enabling technology being bought up by bigger companies as the roll up train starts to go into play.
So while the Yahoo buy of Dialpad may only be viewed as an acquisition, it's more than likely really the start of a lot more to come.