Are Users Connecting with Circuit?

Jan 28, 2016

Last week during Unify’s analyst conference in chilly Bermuda, the company highlighted a number of changes and success stories from the past year; my colleague, Michael Brandenberg, has posted on those announcements. But one point stood out for me: the number of Circuit users, which stands at 15,000, despite the fact that the product has been available for more than a year.

One of my other colleagues suggested that when compared to hosted voice, those kinds of numbers aren’t bad; that in fact, it’s typical for CaaS providers to see net new customers number in the thousands every year. But every company in the developed world already has telephone service, so for a hosted voice provider to grow sales, it's looking at getting companies to switch vendors or delivery models, or at a relatively small greenfield opportunity. Whereas, products like Circuit are entirely new--no one has them yet, although some companies have project-management tools--making the opportunity wide open.

Also, there must be thousands of voice providers in the world. So far as I know, Unify has two enterprise competitors for Circuit--Cisco and Microsoft--and a handful of consumer apps (Slack, HipChat, etc.). So not only does Unify have an open runway, there aren’t too many other airlines getting in its way. Again, everyone needs voice; the only question is how and from whom they get it. The same could be said for conferencing, presence and chat. But the market for products like Circuit and Spark has not been proven, and so these vendors are trying to create the (enterprise) market in the first place. These vendors are convincing IT managers to buy into a concept, not toss a product or service they already have in exchange for something better. And it would seem that in the case of Circuit, at least, they are not doing that. (The market for the consumer services seems clear, and indeed, it may be that companies are perfectly content to “buy” into that one instead.)

Unify won’t reveal how many of those 15,000 users are on the fermium client, which the vendor unveiled late last year, along with a new three-tiered pricing model ranging from $3.95 to $14.95 per user per month. Even if we give the vendor the benefit of the doubt and say that all its users are paid, and that they are paying the maximum list price, that's less than three million dollars in annual revenue. Unify as a whole makes more than $1.3 billion a year, making those Circuit dollars a rounding error. Unify is not a start up. How long will the company support an offering that comprises 0.002% of its revenues? (Unify expects the number of users to double by March, although presumably some of those will also be paying nothing for the service.)

Cisco, which claims several magnitudes more users for Spark (thanks, no doubt, to its offering the product free), will presumably have the same problem. Indeed, they’ve had the same problem, which is why in the past decade we've seen Spark's predecessors come and go. They simply don't make business sense.

If the past 18 months have shown us anything, it’s that the only way these products fly long term is if Cisco, Unify, Microsoft, and any other enterprise vendors include them free with their bread-and-butter offerings. If users like the tools enough, vendors may be able to charge for them downstream; but more likely, they are simply so sticky that they serve to protect the vendors from customer churn in other, core areas. Leave one telephony provider for another, and now you also have to change your social collaboration platform--and suddenly your employees are unhappy about a change they might never have even noticed in the past.

Of course, Circuit is more than just a product to Unify, it's the basis of their industrial design. Indeed, developing cool new toys like this makes Unify look a little hipper than it might otherwise seem. And don’t get me wrong—I really like the look and feel of Circuit, especially; and it appears that the company has done a lot right in the past 12 months to get the business overall back on track.

But is that enough for the bean counters in the back office to keep investing in social collaboration? I’m not putting my money there yet. And, it seems, neither is anyone else.

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Melanie Turek


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