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Cisco’s Huge BroadSoft Buy Signals End of ‘On-Prem World’

Cloud UC

**Editor’s Note: Please click here for a recap of the biggest channel-impacting merger and acquisition news from August.**

Cisco on Monday announced an agreement to acquire BroadSoft in a deal worth $1.9 billion, or $55 per share.

Cisco's Rob Salvagno

Cisco’s Rob Salvagno

In announcing the move, Rob Salvagno, head of Cisco’s M&A and venture investment team, wrote that Cisco chose BroadSoft not only for its portfolio of cloud collaboration platforms and business applications – assets Cisco already holds – but for BroadSoft’s partnerships with more than 450 telecom carriers in 80 countries, including 25 of the top 30 globally, and some 19 million BroadSoft business subscribers.

Salvagno called BroadSoft’s portfolio “complementary” to Cisco’s Hosted Collaboration Solutions (HCS) line as well as its overall investments in cloud-based collaboration solutions.

“Following the close of the acquisition, Cisco and BroadSoft will provide a comprehensive SaaS portfolio of cloud-based unified communications, collaboration and contact center software solutions and services for customers of all sizes,” he said.

Co-founder and president of Avant Communications, Drew Lydecker, sees Cisco’s move as a big validation of SaaS.

“This is the biggest validation that we’ve seen that the on-prem world is officially over,” he told us. “Cisco’s acquisition of Broadsoft is also a validation that everything is moving to a software-defined, subscription-based economy.”

Avant's Drew Lydecker

Avant’s Drew Lydecker

Scooping up Broadsoft also demonstrates that there’s a shortage of IT talent — and Cisco is recognizing it. “So, to have managed UCaaS platforms globally, Cisco is saying, ‘We want in that game,'” Lydecker told us.

BroadSoft employees reportedly will join Cisco’s unified communications technology group, led by Tom Puorro, VP and general manager, with the goal of expanding the appeal of the combined suite of collaboration capabilities across all market segments.

“We believe that our combined offers, from Cisco’s collaboration technology for enterprises to BroadSoft’s suite for small and medium businesses delivered through service providers, will give customers more choice and flexibility,” said Rowan Trollope, senior vice president and general manager of Cisco’s Applications Business Group, in a statement.

“We are excited about this transaction, which represents the culmination of a robust process undertaken by BroadSoft’s board of directors to maximize shareholder value,” added Michael Tessler, president and CEO, BroadSoft. “As businesses continue to move toward the cloud in search of simplicity and speed, joining Cisco will allow us to deliver best-in-class collaboration tools and services. BroadSoft’s hosted offerings, sold through the service providers and aimed at small and medium businesses, are highly complementary to Cisco’s on-premises and enterprise-centric HCS offerings.”

Cisco’s pending acquisition of BroadSoft proves that companies with a singular focus, like BroadSoft, 8×8, RingCentral, are big disruptors in the market.

“These vendors don’t do routers, they don’t do on-prem hardware, they don’t do carrier network services, they don’t do infrastructure as a service — they do UCaaS and they do UCaaS only,” Lydecker said, adding that he’s finding that companies with a singular focus are extremely successful. He points to Cisco’s acquisition of Viptela Inc., an SD-WAN company, announced in March.

Industry analyst Jon Arnold, principle at J Arnold & Associates, is at the BroadSoft Connections conference this week and says BroadSoft is happy with the deal — although it’s not clear what other offers were being considered.

“Announcing this at the start of their Connections conference changes the focus here, and as we hear about their road map, it will be interesting to see how all this gets folded into Cisco’s collaboration business unit,” said Arnold. “Considering that Cisco paid much more for WebEx, we need to closely watch whether BroadSoft’s portfolio remains in place, or if it becomes absorbed by platforms like Spark.”

This latest acquisition is expected to close during the first quarter of 2018, subject to customary closing conditions and regulatory review. Prior to the close, Cisco and BroadSoft will continue to operate as separate companies.


4 comments

  1. Peter Radizeski October 24, 2017 @ 7:59 am

    It’s wishful thinking to say that On-Prem is dead. Microsoft was eating Cisco’s lunch in UC so for $1.9B they buy BSFT. That doesn’t validate anything as BSFT wasn’t exactly crushing it, when you examine that most of the lines are trunks not seats.

    PBX sales have not cratered. CallManager has not gone EOL.

    The problem is that UCaaS is a solution for a problem that doesn’t exist; and our industry pushes product not solutions. We don’t sell change. We sell replacement. More accurately, we take orders for replacement; hence, the rise of cable.

  2. Lorna Garey October 24, 2017 @ 9:44 am

    I don’t think the BroadSoft buy will make a whit of difference in Microsoft eating Cisco’s lunch in UC, but who knows? I hate to underestimate Rowan Trollope.

    As PBXes EOL, how many of your customers are buying the same old hardware? Then tell me, how many of those really SHOULD be moving to UCaaS? Saying we sell products not solutions is an indictment of business as usual.

  3. Peter Radizeski October 25, 2017 @ 7:24 am

    WHY should they move to UCaaS? They have Slack and Office365. When was the last time you sold telecom to SMB? They all don’t want to move to cloud. Quite a few companies (especially in the 75-150 seat range) won’t go cloud comm; they want to own the PBX.

  4. Michael Bremmer October 25, 2017 @ 10:57 am

    Candidly, I disagree Pete, most SMB and midmarket is buying UCAAS/CPAAS while I watch former lead gens that were huge PBX vendors move to cloud because their clients don’t want to own PBXs. This may just be my customer base or a California thing, but I am seeing it every day.

    The improvements with hosted tech and cheap bandwidth along with mobile first users are pulling out old pbxs.

    The millennium gen doesn’t want a phone with a cord and they expect it all to work on their iPhone.

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