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RingCentral Idea Proposal (RNG)

RingCentral Idea Proposal (RNG)
 

Will RingCentral’s new video services and key partnerships keep it at the top of the communications software landscape or will it be hobbled by Zoom’s push into voice?

Report Available: January 21, 2021

 

Blueshift’s initial research found RNG growing at a very healthy 30% clip as it moves enterprises and mid-market businesses to its cloud-based voice and chat platform. The company faces a major threat, though, as ZM has aggressively targeted the voice market to go along with its now ubiquitous video conferencing tools. RNG is fighting back with both a bundled video app and a standalone version. Potential competition from MSFT also complicates matters, but RNG believes it is well positioned because of its partnerships with on-premise vendors and phone carriers.

 

Observations

  1. RNG, a developer of cloud-based communications software for businesses, continued its momentum in Q3 with another quarter of more than 30% revenue growth. The strong performance led RNG to raise its full-year guidance for subscription revenue to about $1.07 billion, which would represent 31% year-over-year growth. The company—which provides voice, messaging, and video services geared toward enterprises and mid-sized businesses—believes it is only just getting started in the $50 billion market for Unified Communications as a Service (UCaaS). RNG says its deployments to date cover only about 2.5 million seats out of more than 400 million users of on-premise voice systems that have yet to move to the cloud.
  2. RNG’s rosy outlook, however, has been clouded by the historic rise of ZM and its video conferencing app. The two were partners, with RNG reselling a white-labeled version of ZM’s video app to its voice and chat customers. But ZM has ambitions to push further into the enterprise with voice capabilities, launching its Zoom Phone cloud service in 2019 and becoming a direct threat to RNG. ZM’s CFO said in December, “In terms of key growth drivers, Zoom Phone is one of the key drivers for next year. It was absolutely the fastest-growing product in Q3, so [we are] excited to see that momentum.” For their part, RNG executives continue to claim that ZM’s push into voice has not dimmed their prospects: ARPU has remained steady, suggesting the competition has not dented pricing, and the company says it expanded its UCaaS market share in Q3. Its chief operating officer said RNG added “substantially more seats than the numbers you’ve seen from Zoom Phone” in Q3.
  3. As part of its efforts to fight off ZM, RNG ditched ZM’s video product and launched its own video service to bundle to its customers in April. In December, RNG took the fight up a notch with the unveiling of a standalone video conferencing and chat app, Glip. It will be free for up to 100 users and for meetings as long as 24 hours, a shot across the bow for ZM’s 40-minute limit on its free version. Glip allows participants to create groups, share files, and start meetings right from a messaging thread. The expansion into standalone video and chat also pushes RNG into competition with Alphabet Inc.’s (GOOG) Google Hangouts and with Slack, which is being acquired by CRM.
  4. RNG could also face competition in the enterprise from MSFT’s Teams app, whose usage has skyrocketed this year. The company said in October that Teams had surpassed 115 million daily active users, a 50% surge in just six months. RNG announced an integration with Teams in August that it hopes will help its enterprise expansion strategy, but it is not clear what MSFT’s long-term plans are for voice capabilities within Teams. The high-end E5 version of MSFT’s Office 365 includes a phone system add-on. In Gartner’s most recent Magic Quadrant for UCaaS, RNG and MSFT were far and away the leading vendors, with CSCO, ZM, and EGHT the only others in the top quadrant. However, the Gartner report pointed out that RNG’s bundled video app has some functional gaps around webinars and room meetings, and said RNG is not as flexible as some competitors with its licensing options.
  5. Much of RNG’s success in recent years has come at the expense of vendors of on-premise PBX phone systems like CSCO, AVYA, and Alcatel-Lucent Enterprise. Several have decided that if they can’t beat RNG, they’ll join them. RNG’s partnerships with AVYA, Alcatel-Lucent, and Atos (AEXAF) in Europe—as well as major phone carriers like AT&T (T) and British Telecom (BTGOF)—have given RNG direct access to an estimated 180 million seats to try to move to its cloud platform. RNG said it landed a 10-figure deal from its partnership with Atos less than a month after launching this summer and its Avaya Cloud Office product has garnered “multiple” wins with total contract values of more than $1 million.

 

How big a threat does ZM represent to RNG’s enterprise sales prospects? Will ZM’s aggressive pricing change the market and damage RNG’s margins or ARPU? Will the launch of Glip change the market dynamics? How do RNG’s video tools compare with ZM’s? How close is ZM to RNG in functionality for voice services? How are enterprises thinking about the relative value of voice and video in making buying decisions? How much do RNG’s partnerships with on-premise vendors give it a leg up with the customers of those vendors? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: RNG customers, ZM customers, Channel partners, and Industry specialists. 

 

Companies: RingCentral Inc. (RNG), Alphabet Inc. (GOOG/GOOGL), AT&T Inc. (T), Atos SE (AEXAF), Avaya Holdings Corp. (AVYA), BT Group Plc (BTGOF), Cisco Systems Inc. (CSCO), Microsoft Corp. (MSFT), Salesforce.com Inc. (CRM), Zoom Video Communications Inc. (ZM)

 

Research Begins: December 28, 2020

 

To see other ideas Blueshift Research is currently working on, please click here.

 

 

 

Blueshift Research’s sister company, Intro-act, has launched the Intro-act Scorecard, the C-suite’s standard, ongoing measure of corporate investor engagement.

 

The Scorecard optimizes the ROI on corporate access by measuring: Concentration, Directionality, Breadth, Impact, Depth, and Duration

 

See the sample Scorecard. Watch the Scorecard video.