Zoom’s contact-center future is on hold after the Five9 fallout

Zoom is charging ahead on its call-center ambitions, but without Five9 the journey gets more difficult.

Empty call center desks
Photo: Pixaba /Pexels

Zoom's $14.7 billion deal to acquire Five9 seemed like a slam dunk.

The videoconferencing company had massive success during the early days of the pandemic but was facing questions about its growth potential as more workers returned to the office this year. It was also under pressure to take advantage of a surging stock price, spend a $4 billion cash war chest and diversify beyond the core business.

But that ambition fell apart Thursday evening after Five9 shareholders rejected the proposed deal. One likely reason is that Zoom's all-stock offer suddenly became much less attractive after its shares declined by 29% in the weeks following the announcement of the deal. The deal was also facing increasing federal scrutiny given Zoom's ties to China, a relationship that is under federal review in New York and California, according to a recent regulatory filing.

"We believe that the opportunities for Five9 to continue to create value for shareholders on a standalone basis are significant," Five9 said in a statement.

The question, of course, is how much more money Five9 demanded — a hurdle that Zoom alluded to in its statement on the vote.

"While we were excited about the benefits this transaction would bring to both Zoom and Five9 stakeholders, including the long-term potential for both sets of shareholders, financial discipline is foundational to our strategy," said Zoom CEO Eric Yuan.

Zoom had already laid the groundwork for its next step into the enterprise. In 2019, the company launched Zoom Phone, a logical extension of its videoconferencing product and one that Microsoft is now trying to replicate with its own tool. While Zoom says it's sold over 2 million seats, there's skepticism over how fast it can scale.

So Zoom decided to try to tackle the call center. In theory, acquiring Five9 would have given Zoom access to the customer base of one of the market's top players — a small group that also includes Genesys and NICE inContact. The company's own noteworthy growth (Five9 revenue grew 44% last quarter to $144 million) would also help quiet investors while Zoom executed on its longer-term vision.

"It's going to take a while to get this Zoom telephony business really humming," Gartner analyst Drew Kraus previously told Protocol. "So one of the things it could do is buy a strong growth contact center company like Five9 and use that to show Wall Street: 'We're still dynamic, we're still growing.'"

Zoom's initial attempts to sell the deal, however, raised questions in the industry. The vision was to combine Zoom's video tools with Five9's contact-center software to create the customer engagement platform of the future. But industry experts believe it's unlikely such a product ever becomes widely used.

"That has been the next frontier for 25 years," said Kraus. "Companies that do pursue those projects end up abandoning them in the first year. The actual value of a customer service agent and customer to be able to see each other's faces ends up not being that significant."

The beat goes on

Zoom is still marching forward with its plans for the contact center. But without Five9, the strategy seems less clear.

Zoom has faced questions over the security of its conferencing platform. That could be a concern for enterprises thinking about deploying the tool in an area of the business that would result in a major PR nightmare should any breach occur.

And selling a contact-center product is far harder than convincing an enterprise to use Zoom's videoconferencing services. "It's not like deploying Zoom," Five9 CEO Rowan Trollope told Protocol prior to the announcement of the merger.

Companies often use multiple videoconferencing tools, and switching costs are low. Pivoting to a cloud-based contact center however, is one move that large enterprises don't take lightly. Gartner estimates that, by the end of 2021, contact-center-as-as-service, or CCaaS, will account for just 32.3% of the total cloud contact-center market.

Many are also locked into long-term contracts with on-premises software providers like Genesys that are now selling their own cloud-based products. And given the increasing importance of the call center in organizations, there's more attention on the tools being used to support the operation. That can ultimately benefit a legacy vendor that has a longer relationship with the customer.

"The larger your contact center, the more financially challenging it is for you to move away from whoever you're working with today," said Kraus.

Zoom, however, remains very confident it can succeed without Five9.

It plans to combine video with cloud-based contact-center software with a new product slated to launch in early 2022, though the company acknowledges it will need to maintain existing partnerships with the likes of Five9, Genesys and NICE inContact. Investors also appear bullish on a future that doesn't include Five9: Zoom's shares were up a little more than 2% in trading on Friday.

"We have also looked to acquire capabilities through M&A. Five9 was one such opportunity, as it presented an attractive means to bring to our customers an integrated contact center offering," Yuan said in a statement. "That said, it was in no way foundational to the success of our platform nor was it the only way for us to offer our customers a compelling contact center solution."

It's clear Zoom is willing to shell out a lot of money to buy revenue and quickly grow a new line of business. But without the infusion Five9 promised to bring, Zoom faces a much more difficult path forward to jumpstart its second act, particularly since there aren't many other companies with the prevalence of Five9 that it can look to acquire.

The company may be preaching financial discipline as the cause for the collapse, but in enterprise software, fortune favors the bold.

Correction: This story was updated to clarify that Zoom's stock declined after the announcement of its proposed deal.


Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

Keep ReadingShow less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

Keep ReadingShow less
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

Keep ReadingShow less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

Keep ReadingShow less
Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.


Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

Keep ReadingShow less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories