CPaaS Disruption in T minus

It’s now Vonage-Nexmo versus Twilio in the fight to be the supreme leader in the Communications Platform as a Service (CPaaS) market, and we have ring-side seats.

By now you must have heard or read the hubbub regarding the TokBox acquisition by Vonage. Tsahi covered it quite well, with more great points added by Andy Abramson.

This recent TokBox / Vonage event had me remembering very early days (circa 2004) where I found myself arriving onsite at Vonage’s headquarters in New Jersey to assist with their softphone deployment. At the time, my teams were also working closely with Jeff Pulver, on the FreeWorldDialUp project. Jeff was also co-founder of Vonage. Everywhere I turned, I heard “Vonage”.

14 years later, Vonage has continued to grow and expand on their offerings. They know this space well. They have the industry experience to make good use of the Nexmo and TokBox acquisitions. They are now one of the largest CPaaS players in the market, and they will be a force to be reckoned with.

 

The US CPaaS market will soar from $1.25 billion in 2016 to $4.5 billion in 2020.

 

Twilio is the market leader. Their recent posted earnings saw their stock up over 400% since going public in 2016. Jeff Lawson and his team have built a dominant platform and they are the current leaders in the industry, they are the benchmark. Contact centres and call centres are partnering with Twilio at unprecedented levels.

As an organization looking to implement capabilities provided by one of these CPaaS companies you are of course aware of one overarching factor, the more you invest into these platforms, the less choice you have but to stay the course. You make your decision knowing that whichever one you choose, they will be your CPaaS partner for years to come. This is not uncommon in the Enterprise vendor ecosystem and lifecycle of a vendor inside a customers network.

Before you choose, you will be asking yourself some tough questions;

  • Which one of these 800 pound gorillas is innovating in this space?
  • Which one is pushing the boundaries of features and functionality?
  • Which has the capability to move quicker to market with new features that drive ROI for their customers?
  • Which one is most reliable with everything taken into consideration? What is their track record?
  • What is their core technology built on, how much technical debt do they have to deal with before they can become innovative again?

As companies get larger, they amass technical debt and it becomes harder and harder to innovate. The same can be said of technical acquisitions, that code has to be assimilated. As large installations see more and more code layered on top, doing something new that doesn’t fit the mold (eg. unsupported features), in many cases creates a great deal of code refactoring.

This gives executive management heartburn and it becomes rather difficult to move quickly and compete with those that can.

The CPaaS market is ripe for disruption. Twilio and Nexmo are becoming the incumbents they themselves once disrupted many years prior. As they grow, move up market and gobble up other companies, they have to be more careful about how they go about their business. They have to be less agile as to not upset the apple cart. That makes them less competitive for smaller customers, and potentially more attractive for larger ones. It also makes them vulnerable.

As the lead purchaser for your Enterprise organization, you could come to the conclusion that neither of these companies can drive new features and functionality or compete with new entrants to the market in any kid of timely fashion. And you might be ok with that.

Trading off reliability for innovation and new features is what the Enterprise is all about, right? Wrong. New features and functionality is what keeps your business competitive and fresh.

Competition is coming. It could be wise that the contracts you are signing be shorter term, with “out” clauses that could save your company a great deal of money and grief, when the competition arrives.

This market will be disrupted again, it’s only a matter of time. I believe that time will come, sooner than later.

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