Vonage CEO sees cloud service opportunities ripening with medium, large businesses

business meeting

Vonage continues to ramp up its presence in the business market, focusing its attention on the burgeoning Communications Platform as a Service (CPaaS) and Unified Communications as a Service (UCaaS) cloud-based segments.

The unified communications provider has taken a two-pronged approach to the business market with its targeted service sets Essentials and Premier.

Leveraging its proprietary platform, Vonage’s Essentials targets small businesses with an over-the-top service that lets users run their voice and data applications over their own broadband connection. The Premier package, which uses the Broadsoft platform, is a managed service Vonage delivers over its MPLS network.

RELATED: Vonage wraps $230M Nexmo acquisition, accelerates position in the SMB cloud service market

Alan Masarek, CEO of Vonage, told investors during the 19th Annual Needham Growth Conference that the company's dual approach allows it to provide the best experience for small and large business customers.

“When we sell Vonage Essentials, we always sell it over the top where voice is an application that goes over the internet,” Masarek said. “When we go up-market it’s always managed service, meaning we bundle the communications service with our MPLS network so we own the problem.”

CPaaS, UCaaS opportunity ripens

As a result of its own internal efforts and acquisitions, Vonage has continued grow its stake in the UCaaS market. This has enabled Vonage to advance to the number two position on IHS' North America 2016 UC as a Service (UCaaS) Scorecard: North America.

Vonage’s UCaaS momentum continued in the third quarter when it reported that UCaaS grew 44% year over year, while CPaaS grew 35% year over year.

As of the end of the third quarter, Vonage had over 80,000 business customers. The service provider said it has been adding 10,000 new business customers per quarter.

“On the UCaaS side if you look at the way the business breaks down we’re growing very nicely,” said Masarek. “About 40% of our revenues are from customers with more than 50 seats, about 20% have more than 250 seats and 10% with above 1,000 seats.”

The service provider has high hopes for CPaaS growth, a segment that is forecast to be an $8 billion market in 2018. Today, CPaaS is a $1 billion market, while UCaaS is $9 billion.

Nexmo is key

A big piece of Vonage’s CPaaS and UCaaS is being bolstered by the acquisition of Nexmo in June.

Nexmo provides application program interfaces (APIs) for text messaging and voice communications, allowing developers and enterprises to embed contextual, programmable communications into mobile apps, websites and business systems, creating better customer engagement and integrated workflows.

“The focus of Nexmo has been more global outside of the United States and it’s been more focused on SMS than on voice,” Masarek said. “The opportunity for us is to bring voice to the mix and then move geographically to North America.”

Masarek added that while it is seeing great takeup of the Nexmo voice API product, he foresees greater growth going forward.

“We’re seeing very substantial takeup of that product,” Maserek said. “If you take the voice programmability of their voice API and marry it with our network, the network has the direct peering relationships with the major carriers so we can terminate voice very inexpensively with high quality.”