8x8 has seen its stock triple in the past five years as they move upmarket and take share from telecom hardware players. Interestingly, this increment is the exact same amount of time its been since ShoreTel acquired M5 to provide cloud solutions to customers.
This is what we said at the time:
Cisco may now be forced to buy 8x8 and Avaya will likely make a move as well. This move could even push Vonage to go after the SMB space. Mitel is an interesting question - they have leading edge tech but a troubled stock to use as currency.
Not only was the last half-decade kind to 8x8, Vonage got into the SMB space and their stock has more-or-less tripled as well. ShoreTel's stock has been stable.
The point worth making is ShoreTel seemed to show the market what they had to do to stay relevant but the two largest players declined to immediately participate in the cloud communications space in a direct fashion.
Sure, they both play around the edges but they needed to take their massive salesforces and apply them to cloud UC solutions and do it then.
Part of the challenge is what GENBAND's David Walsh calls the fish problem - the man was way ahead of his time. The idea is you have to spend an awful lot up front to move from hardware to software - only to see your revenue drop and then ramp slowly, over time. The chart looks like a fish.
Bottom line - investing in cloud takes time to pay itself back as a subscriber business model isn't initially as lucrative as a hardware model.
Now however, its a lot tougher to make this move because cloud marketshare is being sewn up. The time to do it was back then.
This isn't to say it won't be done - it's likely Avaya (whoever will control their assets that is) will now combine its products with a cloud solution and Cisco will have to do the same.
It's just surprising how long its taken. The direction of the market wasn't a secret. Now the question is will it be an acquisition or an organic launch for the companies? No one wants to cannibalize their hardware product lines but there isn't really a choice anymore.
So yes, cloud was a big factor in the Avaya bankruptcy - as is its massive debt - they make payments of between $400M to $600M per year. When you already have such a massive debt load, the fish problem becomes even bigger as you already have massive expenses to contend with.
We're sure you want to hear more about the market. Fortunately, we will moderate a Cloud UC panel on Thursday 2/9/17 at 9 AM with Enzo Signore of 8x8, Curtis Peterson of RingCentral and Mark Straton of Broadsoft. It should be awesome - be sure to come and learn more for yourself about the state of of the market.