After a few years of joint sales that benefit from both technology and go-to-market synergies, Zoom Video Communications Inc. is purchasing Five9 Inc. in an all-stock deal worth $14.7 billion. For context, the deal value is less than Salesforce’s purchase of Slack ($22 billion) and in the same ballpark as Microsoft’s acquisition of Nuance ($16 billion). I bring these diverse operating areas (collaboration platforms, AI and speech processing) because, in the cloud, they are all vying for the same “total available market” which Zoom, in a slide deck, quantifies at $86 billion annual recurring revenue.

The deal will close “sometime in the first half of 2022”. In the mean time, the two companies will continue to operate independently and, according to Zoom’s CFO Kelly Steckelberg, continue to invest in personnel and resources across all departments. When asked by investment analysts why Five9 settled for such a small premium over its market cap on July 16 (the day the valuation was agreed upon) Rowan Trolllope (who will serve as president of Zoom and CEO of Five9 after the merger is complete) explained “because this is not an exit.” Both he and Eric Yuan, founder and CEO of Zoom, expect the combined company to experience dramatic growth by fulfilling the demand for a complete solution that puts what Trollope calls “the Five9 brain” (routing) over Zoom’s best-of-breed, global infrastructure that made video meetings part of 500 million users’ daily lives.

Objective: To Revolutionize Customer Engagement

Eric Yuan is a long-time believer in delivering “happiness” to the users of his company’s technologies. He used that spirit to win the battle to set up informal video meetings. In so doing, they politely elbowed aside long-standing efforts by Cisco/Webex, Avaya, GoToMeeting, Bluejeans, Amazon (Chime) and others who sought to make their icons into fixtures on the systray or carousel that displays frequently-used applications and resources. To win the battle for enterprise video-based communications Zoom evolved its offerings by starting with Meetings and then adding Rooms as a construct, Phone service on an international basis and then a marketplace for Apps that serve as a staging ground for introducing AI-infused capabilities and other resources to make meetings easier to schedule and more productive.

Adding Contact Center (CCaaS) to Zoom’s range of services is what Eric Yuan calls (in this blog post) “a natural fit that will deliver even more happiness and value to our customers.” Yuan also says that the acquisition is inspired by customers who request a single, cloud-based platform with capabilities that Zoom and Five9 bring to market. In the coming six months the two firms operate jointly but separately to leverage both technological and go-to-market synergies. For Zoom, it is bringng Contact Center solutions to its global base of subscribers represents adding “the missing part of the UCaaS full stack”. For Five9 it is leveraging a global communications network that has demonstrated its ability to deliver video-based services around the world.

On a conference call with analysts, Rowan Trollope called it a “Back to the Future” moment. He noted that the customers of premises-based solutions had long called for contact centers to be separated from enterprise communications and collaboration infrastructure. As the “front door” for communications with customers, it could be optimized to integrate basic routing with IVR, CRM, WFM and the whole alphabet of three-letter acronyms that streamlined communications with customers and improved CX. In the cloud, Trollope observes, “they are all coming back together, and this is about the future.”

Zoom is now a Well-Funded Roll-up of CPaaS, CCaaS and UCaaS

The all-stock deal leaves Zoom with over $5.3 billion in current assets. It’s largest acquisition to date was in mid-2020 when it acquired Keybase, an end-to-end encryption specialist, for an undisclosed sum. CFO Steckelberg expect the company to use its cash to invest in growth by adding engineering, marketing and sales resources. For its part, Five9 has been leveraging the technologies and personnel that drove innovation in the areas of workflow management (Whendu) and intelligent virtual assistants (Inference Solutions). With the backing of a profitable company that generated almost $3.3 billion top line revenue in the past 12 months, expect the engineering, marketing and sales resources at Five9 to have additional swagger as they confront direct competition from the CCaaS category leaders Genesys, Nice-InContact and TalkDesk. Also expect heightened competition from the likes of Vonage, 8×8, Twilio and Amazon Connect as each articulates different value propositions that respond to the expressed preferences of enterprise buyers.

Zoom has already humbled the likes of Amazon, Microsoft and other cloud leaders in the video meeting domain. Opus Research sees this acquisition as a signal event that obliterates once-and-for-all the UCaaS/CCaaS distinction. Changes in enterprise organizational structures will be a much slower burn. Contact Center administration and CX specialists will continue to be promising career paths; but so will digital transformation and cloud infrastructure specialists.

As Zoom and Five9 sort out where their combined value proposition is most effective, we will see which combinations of solutions have the most traction. With “Happiness” as the cornerstone of its value proposition, it will be educational to see the organic appeal and cross-pollination opportunities presented when a well-healed, global, profitable entity brings a “full-stack” of UCaaS, CCaaS and Video Communications to market.

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