Zoom is doubling down on the enterprise in a big way.
Its proposed $14.7 billion, all-stock purchase of Five9 gives the teleconferencing provider a huge presence in the customer service industry, a market in upheaval as companies rush to digitize and automate the human-centric processes of the past, as well as begin to use their call centers to build digital replicas of customers and enable more targeted marketing.
While Zoom profited heavily off the need for businesses and consumers alike to communicate virtually during the pandemic, analysts have questioned how the company would diversify as 2020's sugar rush began to wane and more organizations brought employees back into the office.
Zoom offers some services for free, but has steadily been growing its subscription businesses. It launched its own business phone product in January 2019, for example, a challenger to competing tools from RingCentral and others. But even with the Five9 deal and expansion into the call center, industry experts say more acquisitions are likely.
"Zoom has to do more than Zoom. It makes sense from that perspective," said Valoir analyst Rebecca Wettemann. "They have the opportunity to do more. The smart move is to look more at analytics."
With Five9, Zoom gets access to a fast-growing enterprise software business and industry-leading automation tools that can be applied to its core videoconferencing business. One of the areas Zoom has lagged, according to analysts like Wettemann, is investing in advanced capabilities that harness the power of artificial intelligence to layer on more intelligent features to calls. Rival Microsoft has made it a focus and is adding tools like sentiment analysis to Teams. Five9 offers real-time transcription services, for example, as well as a post-call analysis service. A combined Zoom-Five9 can also offer an attractive option for video-based customer interactions, the next frontier for call centers.
"Enterprises primarily communicate with their customers through the contact center. And this acquisition can bring together best in class video and contact center solutions to create a leading customer engagement platform," Zoom CEO Eric Yuan told investors on Monday.
But Zoom is entering a sector that is still dominated by incumbent providers, namely Avaya, Cisco and Genesys, that are rushing to build out cloud-based offerings to replace the on-premises systems that still dominate many large enterprises. Other Five9 competitors like NICE inContact are also growing at a fast clip as more companies switch to the cloud. And new entrants like AWS and ASAPP are banking on their technology as a differentiator; Five9, for example, uses products from both AWS and Google to support its own AI-based offerings, according to CEO Rowan Trollope.
"We get to stand on the shoulders of giants … with the underlying primitive technology," he told Protocol earlier this year.
AWS is an interesting competitor; it doesn't offer an out-of-the-box service, but rather gives companies the option to build their own call centers using drag-and-drop modules. While the company touts the ability for any organization to quickly prop up their own service department, Trollope said AWS has only seen traction in the most tech-forward firms.
"We don't see them too much because it's apples and oranges," he said. "If we're both in a deal at the final stages, something has gone wrong."
But that divergence gets to the heart of how different contact-center-as-a-service, or CCaaS, is compared to Zoom's core business. Most corporations use several different videoconferencing providers and the switching costs are low. That's not true in the call center.
Organizations have spent years, if not decades, building out their current on-premises systems, including linking them on the back end to other applications like customer-relationship management software or workforce management systems. Many businesses are still stuck in multiyear contracts; Five9 sees the most success when targeting prospective customers who are reaching the end of the current maintenance cycle, per Trollope. And a typical onboarding takes several months.
"It's not like deploying Zoom," said Trollope.
Before the pandemic, enterprises were hesitant to spend too heavily on call center software because there wasn't as much of a return on investment. Now, as the pivot to the cloud opens up new automation capabilities, that thinking has changed.
And with Five9's tech like real-time audio transcription, which Trollope said can now recognize voice better than human agents — along with an expanded customer base that includes some of the world's largest businesses — Zoom could be a juggernaut poised to compete aggressively in a fast-growing market against legacy incumbents and new challengers.
