Earlier this week the VoIP industry learned that Simple Signal, led by dear friend and former client, Dave Gilbert was picked up for $20 million plus some stock. This is very similar to the 75 percent cash, 25 percent stock deal done for the other former Comunicano client, Telesphere was sold for but for a lot more in cash. The two deals follow Vonage's purchase of Vocalocity just about 18 months ago.
In essence Vonage is buying enterprise business but in doing so, they are buying very different business who have pretty much the same customer type targets, two or three different sales models and somewhat very different technology platforms.
Last I heard Vocalocity wasn't a Broadsoft platform, preferring to have their own, open source based switch and another essential of the same ilk, the Session Border Controller. Telesphere is Broadsoft as is Simple Signal, but when it comes to the SBC Simple Signal runs the cloud leading platform from Sansay, while Telesphere uses the Acme Packet (now Oracle) solution. Vocalocity was an OTT player, much like market leader in the mid market space, 8x8 (another former client) and their nemesis, RingCentral who like Vocalocity is running their own technology and also an OTT play. As OTT plays, much like the Vonage model, there's no assurance of the call quality. This begs the question, will Vonage go all Broadsoft, which makes it a win for Broadsoft or use the internal smarts from Vocalocity to eliminate the licensing costs associated with paying Broadsoft, much the same way that Craig Walker's Switch operates. But more on this point later. The second question is will they be a managed service, one of the core strengths of both Telesphere and Simple Signal or be a pure OTT play? There again there are winners, Vonage, and losers, the underlying carriers and last mile providers who won't see the interconnection revenue.
Vocalocity being OTT paid almost nothing in delivery costs, other than termination. Simple Signal and Telesphere's both had or have extensive relationships with the underlying providers (the carrier's carriers) like Level3, as well as relationships for five 9's deliver with the last mile providers. This, like licensing costs, bites into profitability, and while the Vonage consumer model is more a churn reduction and minimization game, the enterprise demands five 9's and companies like 8x8 have worked hard to deliver that and actually taken years to get the delivery and call quality, using their own home brewed technology, not Broadsoft, to make it all work.
So off the bat Vonage has three challenges at least with the buys:
1) Platform integration on a technical level
2) Sales channel management/conflict cleanup
3) Network delivery
Thus if you're a customer of Simple Signal or Telesphere you have to be asking yourself will you have the same level of service (both were excellent) while all of this integration occurs, and more importantly, what will it look like in 12 to 18 months.
On the business side of money, if you're Craig Walker at Switch, you're sitting back pretty happy so far. With 18 million dollars invested by Google, Firespotter and A16Z (and I predict a lot more coming soon) watching the competition become consolidated at Vonage makes for an easy target to be better than. What's more, Switch has no licensing costs, limited termination and origination overhead and far lower cost of customer acquisition so far.
But back to Vonage. The company is doing all this because they won a big contract with Dell to sell to the business market. Dell has a direct model to sell. That sales model will more than likely decimate the existing sales channels already in place with Simple Signal and Telesphere, making Clark Peterson, CEO of the combined enterprise play's job all the tougher as he likely has to shed some long established relationships in place.
At the end of the day, the sale of Simple Signal was a nice "win" for Dave Gilbert and some of his partners, but the real winners and losers are months away from being known, but as the roll up of VoIP players continues, the only known winners are the investment banks and lawyers, with business customers possibly losing out.