En masse adoption of videoconferencing technology during 2020 created a financial windfall for Zoom. In the fiscal year ending January 31, the company brought in revenues totaling $2.65 billion, a whopping 326% year-over-year increase.
Leveraging the financial upswing and exploding adoption during the pandemic, Zoom will acquire customer service tech provider Five9, the two companies announced Sunday. The all-stock transaction is valued at around $14.7 billion, and is expected to close in the first half of 2022, pending approval of the deal by Five9 stockholders and regulatory bodies.
Zoom's acquisition of Five9 — its largest acquisition to date — delivers an additional toolset to retain enterprise customers and expand its footprint as a tech provider for contact centers. It will deliver a "leading customer engagement platform that will help redefine how companies of all sizes connect with their customers," said Zoom CEO Eric Yuan in a statement.
In 2021, the company has focused on expansions to its slate of offerings, from upgrades to its hardware and software combo, Zoom Rooms, to its phone line, Zoom Appliances.
With Five9, Zoom gains "a more complete portfolio that allows Zoom to actively compete against the largest players in the unified communications and collaboration space," said Mike Fasciani, senior research director at Gartner.
"This was a missing element in Zoom's strategy," said Fasciani. "A good move, and in some ways, a predictable move," said Fasciani.
The collaboration staple's interest in the contact center technology space comes after tech leaders across verticals prioritized cloud migration during the pandemic. But cloud migration was a trend already playing out in contact center technology prior to COVID-19, Anand Chandrasekaran, EVP of Product Management at Five9, told CIO Dive in October.
In pandemic times, executives came to grapple with issues of scalability and reliability in their contact centers, according to Chandrasekaran. "If a system is the front door of your business, you probably want that door to be open all the time," he said.
The contact center tech play
For a provider such as Zoom, the financial motivation is clear. Gartner expects contact-center-as-a-service (CCaaS) revenue to reach $17.9 billion by 2024, at a compound annual growth rate of 29%. The sector makes for an attractive target as part of a broader strategy for the enterprise customer.
Five9 will add to Zoom's finances due to its consistent revenue and profit growth, said Art Schoeller, VP and principal analyst at Forrester. But existing relationships and expertise in the area sweeten the deal.
Though the average subscription value in contact center technology is higher, it requires subject matter expertise, "You need a company that has a well-established ability to sell, and also a partner ecosystem," said Schoeller.
After the deal closes, Five9 will become an operating unit of Zoom. Rowan Trollope — a former Cisco and Symantec tech executive — will continue on as CEO of Five9 and will become a president of Zoom, reporting to Yuan.
An acquisition of this size is a first for Zoom. Usually integration of systems is a challenge for merger and acquisition deals, especially among larger transactions. In Zoom's case, its stance as a well-known collaboration platform helps ease integration fears, as customers would have likely already chosen Zoom for its widely-adopted collaboration capabilities.
Where the challenge may lie for the Zoom and Five9 deal is in the rationalization of common functions such as human resources, marketing and financial systems, said Schoeller.
"All signs say that this is a good thing," Schoeller said. "Now, let's see the execution."
