Star2Star and Blueface Merger Confirms 2018 Will See Continued UCaaS Market Consolidation
Jan 05, 2018
On January 3rd, 2018, Sarasota, FL-based Star2Star Communications merged with Dublin, Ireland-based Blueface in a deal valued at $500 million. The new entity will be called StarBlue and will be headquartered in Sarasota. For an interim period, the two companies will continue to operate under their original brands.
StarBlue will have a combined employee count of more than 500 with Star2Star bringing in more than 300, and Blueface accounting for the rest. Blueface CEO Alan Foy will become the CEO of Star2Star and StarBlue. Star2Star CEO Norman Worthington will become executive chairman of Star2Star. Nameer Kazzaz, currently CTO at Blueface, will assume the Group Co-CTO role for the merged company with Star2Star CTO Sergey Galchenko. Star2Star President and Chief Revenue Officer Michelle Accardi and Star2Star CMO David Portnowitz will continue to perform their respective functions for the entire group.
StarBlue Market Position in a Nutshell
Both Star2Star and Blueface provide hosted Internet protocol (IP) telephony and unified communications-as-a-service (UCaaS) solutions. Star2Star ranks among the top 10 (out of 120 ) providers in the North American market in terms of installed users. Blueface is a leading European provider with a strong presence in Ireland and operations in France, Germany, Italy, Spain and the UK.
The two companies have considered partnering for at least a couple of years before choosing to join forces as a single entity. Key factors favoring the merger include technology similarities and complementary markets. Both companies’ solutions are based on FreeSWITCH code, the difference being that Star2Star designed its solution as a hybrid architecture with a premises-based element, whereas Blueface leverages a purely hosted architecture.
Star2Star spokespeople report that the two companies have similar company cultures, which is likely to enable a smoother integration into a new entity. More important, the merger should help them consolidate their respective resources and more successfully expand into each other's as well as other regions (e.g., Asia Pacific).
According to Norm Worthington, the merger “creates a combined company with the breadth of capability, reach and innovation to be a true global leader” in unified communications. Alan Foy stated that this was “a game-changing event” in the field of unified communications as a service, creating a company “that can service businesses of all sizes, partners and wholesale customers globally.”
With the US UCaaS market maturing, it has become critical for US providers to expand internationally to scale their operations and sustain high growth rates. The merger with Blueface will enable Star2Star to tap into emerging European markets as well as more effectively serve multi-national corporations (e.g., US-based companies with European presence or Europe-based companies with US presence). Western European markets are also becoming increasingly competitive, which, combined with their smaller sizes, make it imperative for European providers to seek international expansion. The merger with Star2Star is likely to boost Blueface’s market power and help it move faster into new markets.
It remains to be seen whether StarBlue will look to optimize its portfolio. Star2Star’s hybrid solution and Blueface’s hosted offering can be seen as highly complementary, creating opportunities for the new entity to position each in new markets. Star2Star’s hybrid solution has been very well received both domestically, in the US, and internationally. Acknowledging demand for a purely OPEX deployment model, Star2Star is also preparing to launch a hosted solution in 2018, based on Blueface technology.
Overall, in the near term, the growth opportunities and synergies between the two companies outweigh any potential redundancies. In addition to expanding the group’s geographic footprint and diversifying its portfolio, the merger also enables the new entity to capitalize on several sales models – direct sales, via resellers and through white-label partnerships. For U.S. providers, it has been challenging to penetrate the European theater without local channel presence and brand recognition. White-label partners can help overcome these barriers and extend the new entity’s reach into more geographic territories.
The Star2Star-Blueface merger is a clear indication of a strong consolidation trend in the UCaaS market. It is also indicative of UCaaS providers’ acknowledgement of the need for global presence to sustain and accelerate growth rates and augment market positions in the face of increasing competition.
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