Insider Report November 2024

Curated Enterprise Communications News and Insights from November 2024

Featured

I, Dave Michels, am not the Industry Influencer of the Year. Nominated, but the UC Today award went to Zeus Kerravala. Disappointing for sure, but at least it went to a well-regarded colleague. 

A growing portion of my content is behind a paywall, and that hurts me in the influencer category. “Influencer” is an odd title. It’s separate from but related to influential. For example, Drew Krause is probably the most influential person in CCaaS. Drew isn’t professionally active on any social network. Almost everything he does, including the CCaaS Magic Quadrant, is behind a paywall. It might sound like sour grapes, but the modern “influencer” seems to be about social media activity and following. 

Analysts customize a blend of services and channels, including research, posts, newsletters, media, events, and social outreach. The big firms, like Gartner and Forrester, focus on research. Gartner analysts are (mostly) prohibited from participating on social in their subject areas. At the other extreme, influencers prioritize social and may not produce any research. In between are analysts (firms and independents) creating various concoctions of paid and free content. 

I do papers, podcasts, blogs, media, and social, but my research notes and newsletters are behind a paywall. To be more of an “Influencer” with a capital “I” means being more active on social media. That has a domino effect of requiring a broader coverage area, because feeding social all day requires lots of content. It also means paying X so that my 47.1K followers can see my posts again. 

I am conflicted about social media. On the one hand, I love it. I joined Twitter long before it took off. It’s been a powerful professional tool. I’ve learned a lot and enjoy the interaction. On the other hand, I can’t ignore that social media amplifies political polarization, foments populism, and is associated with the spread of misinformation. Even if my content is strictly professional, it’s still contributing to a dysfunctional machine. 

I did appreciate being nominated, and I take pride in my social content. I now have a presence on X, BlueSky, and Threads, but most of my social content is on LinkedIn. I guess my hopes are to be an influencer with a small “i.” Some of my business comms videos hit over 10k views in 2024. Small numbers for a Kardashian, but pretty good for enterprise comms. — Dave Michels

General News

Microsoft Ignite: Microsoft hosted Ignite, its IT and enterprise developer-focused event, along with its customer-facing event Inspire this month. News from Ignite will be spread throughout this Insider issue. Normally, corporate events receive contained Insider coverage, but it’s a Microsoft Teams world, and we are thankful to be in it. The enterprise comms industry has shifted so much to Microsoft Teams that Ignite is now on par with Enterprise Connect. As in, the vast majority of the comms companies TalkingPointz covers were in Chicago for Ignite — many with announcements. Ignite will be even bigger in a few more years as Microsoft continues to expand its CX offerings. 

Ignite in a word: expensive. Microsoft recently raised its telephony pricing by approximately 20%, and then it announced that a number of features that used to be free will require Teams Premium licensing. Millions of users paying an additional $2/month is a nuclear explosion in revenue opening up three miles of renewed ideas to power AI. 

Users Reconsidering on Price: Metrigy Research’s latest “Employee Engagement Optimization: 2025” global study of 400 organizations shows that the unbundling of Teams from MS 365/Office licenses is causing about a quarter of customers to consider alternative vendors. Current customers were excluded from price increases until renewals. The Metrigy Research validates the EU complaint that bundling the licenses swayed buyers to select Teams. 

Turning Gray Skies Blue: Bluesky saw a major surge post-election. Perhaps it was inevitable: Truth Network was created after Twitter banned Trump. At that time, the idea of a political social network seemed odd, but perhaps it foreshadowed the future, when everything will be political. X has shifted to the right, so the left is adopting Bluesky. Since Musk took over Twitter, users are replacing its various features with unbundled and differently bundled services at Reddit, Discord, Meta, and Telegram. 

Bluesky is doing something unique: giving users control and choice in what they see. Threads and X use a master algorithm to serve content. Bluesky users can see posts by people they follow on the app (this default is like old Twitter). Users can also select other algorithms, such as what’s popular with friends, or curated views, such as posts for scientists — and many more. 

A public benefit corporation owns Bluesky. It currently has a small user base compared to Threads and X but has significant momentum. Its codebase is open source, and its mission is to promote open and decentralized (not there yet) public conversation. 

Google Sans Chrome: Last summer, the DoJ successfully argued that Google’s payments ($20B to Apple and $10B to others) were anticompetitive (in digital advertising). The DoJ this month made its first offer to remedy, which included banning such payments, prohibiting restrictive contracts with Android OEM partners, limiting further acquisitions in the search sector, and (the big one) requiring Google to divest itself of its Chrome browser.

But are there any buyers? Microsoft, OpenAI, Perplexity, and Anthropic are potential bidders. However, such a sale raises additional questions, such as the fate of Chromebooks and whether Google would need to develop a new browser specifically for the Android operating system.

Chrome has become a problem for Google. The current cookie situation is ridiculous. End users feel trapped by them, and Google gave up on its promise to improve matters. Apple, Microsoft, and others have enabled better privacy on their browsers. Most browsers are now based on Chromium open source, but Safari is not, and lots of (Google and Microsoft) apps don’t work there. The remedy phase could take years to play out. But does it matter? There are some interesting new browsers on the market, such as Arc, and AI may change the whole notion of search (and advertising and the internet) in the next few years.

AI Killed the Video Star: Zoom finally did it: It changed its name from Zoom Video Communications Inc. to Zoom Communications Inc. This was clearly coming for some time, and I’m relieved they didn’t go with Zoom AI Inc. When Eric told folks he was starting a video company to take on Webex and Polycom, many critics said he would never make it in video. I guess they were right. Eric describes Zoom Communications as an “AI-first work platform for human connection.”

It’s a reasonable change. The Zoom Workplace App does the usual UCaaS apps (voice, meetings, chat), plus CCaaS, workspace reservations, digital events, meeting rooms, tasks, notes, email, calendar, Docs, whiteboards, intranet — oh, did I mention AI? It dabbles in that, too. Zoom also announced a 20K-agent CCaaS implementation in Spain. 

A while back, Zoom acquired zoom.com, though it still relies on zoom.us. 

Microsoft Ignite — Places: Microsoft Places was announced to be GA. Places is Microsoft’s expansion into hybrid workspace management. This is a crowded sector and a logical expansion area for UCaaS providers. Cisco and Zoom are already there, and more UCaaS providers should come. See the new TalkingPointz research note on Cisco Spaces and Zoom Workspace Reservation here. Microsoft’s aim is to streamline and optimize hybrid office space management with features like managed bookings, which automate room scheduling based on availability and requirements. Personalized recommendations suggest in-office days tailored to team activities, while presence updates from connected devices indicate whether colleagues are working remotely or on-site. Most of the advanced features of Places are only available as part of a Teams Premium license, which means enterprise users will need to upgrade to Premium to get full value out of the features.

Roam-Free Global Cellular: The FCC has given the green light to a plan that will allow Starlink to provide cellular service to T-Mobile USA in areas where there is no existing cellular coverage. However, this service will only be available outdoors in areas with a clear line of sight to the sky. Currently, the service is limited to text messaging. Starlink aims to have over 3,000 satellites supporting this service by 2025 and has applied for an additional 22,000 satellites. While this may seem like a large number, most major cities have a greater number of cell towers than the proposed number of Starlink satellites.

Sneak Preview of TalkngPointz Coverage in 2025: Of course, TalkingPointz will be covering UCaaS, CCaaS, and CPaaS in 2025. This includes widening/deeper coverage of remote work and meetings. We also expect expanded coverage in the following specific areas: Agentic AI, AI automation, AV & meeting room tech, wireless communications (Wi-Fi, cellular, and satellite), European news (providers, events, and trends), mobility (UCaaS Mobility 3.0, RCS), CCaaS > CX, and the return of SP voice. You’ll be seeing us covering and/or presenting at all the major conferences, including CES, ISE, Enterprise Connect, InfoComm, and many more.  

AI News

Copies of Copies: OpenAI is reportedly developing new strategies to address the slowdown in AI advancements. Traditional methods of scaling models with more data and computing power are apparently yielding diminishing returns. To overcome these limitations, OpenAI is exploring techniques that mimic human-like thinking, such as “test-time compute,” which enhances AI performance during the inference phase. 

This development aligns with predictions made by both Daves regarding the slowdown in AI improvements and the challenges posed by AI systems training on their own outputs. This self-referential training can degrade the quality of AI models over time, similar to how photocopies of photocopies progressively lose clarity. As AI models increasingly rely on data generated by other AI systems, the risk of compounding errors and diminishing quality becomes more pronounced.

Ignite Announcements — AI: Microsoft unveiled significant advancements in Microsoft 365 and Copilot, showcasing a shift from basic AI assistance to robust business integration. Expanded capabilities include Biz Chat, a secure AI-powered collaboration tool connecting data across Teams, Word, and SharePoint, alongside Copilot Studio for configuring custom agents and workflows. The new Copilot Dashboard offers metrics to track employee engagement and AI adoption, providing insights into impact. First-party agents also debuted, such as the SharePoint Agent for intuitive Q&A-style content access, the Facilitator Agent for automating meeting tasks, and the Interpreter Agent for real-time multilingual translations in the speaker’s voice. Security enhancements include dynamic sensitivity adjustments, sensitive content alerts, and advanced phishing protections.

AI Catching Threats: OpenAI claims it thwarted over 20 foreign influence campaigns using ChatGPT and DALL-E, mainly involving actors from China and Russia. Although these efforts didn’t lead to significant criminal discoveries, OpenAI implemented new detection tools, highlighting the importance of data privacy on AI platforms. Importantly, users should remember that any data shared on AI platforms like ChatGPT is not private, even if you’re not a hacker or spy. 

The End of Prompt Engineering? “Prompt engineering” as a side hustle for techies may soon end. Open-source projects and startups have emerged to help developers automatically optimize LLM prompts using other LLMs to write them. These systems use scoring systems to evaluate LLM outputs and AI to experiment with different prompts to maximize those scores. 

A few tools of interest: DSPy, a popular open-source prompt optimization software, suggests several prompt options and common phrases to optimize LLM outputs. Other open-source systems like TextGrad and AdalFlow ask the LLM to reflect on its mistakes and suggest better prompts. Zenbase, a startup based on DSPy’s tech, allows users to show an LLM examples of “good responses” to reverse-engineer a “good” prompt. 

Is AI Free? Conflicting anecdotes suggest that the generative AI party is just getting started, as are the hangovers. It isn’t clear if users are willing to pay for general-purpose AI copilots. This month, RingCentral joined the AI-should-be-free party by including its AI Assistant in RingCX. Google’s new Pixel 9 Pro phone comes with a year of Gemini, but only for Gmail users (not Google Workspace subscribers). 

A recent six-month trial by the Australian government found that only 1 in 3 used Microsoft Copilot daily, and the primary use case was summarization and rewriting content. These are valuable services, but not price-doubling value. A Gartner survey found only 3% of IT leaders find that Copilot offers significant value. 75% said employees are struggling to integrate the tech into their routines, and 53% find the results are too inaccurate to be helpful. 

The more immediate concern is that tech is embracing generative AI too much, or at the cost of other important aspects such as a pricing, hardware, and improved workflows. Generative AI will likely be more impactful to the tech vendors for creating product improvements than adding AI to their products. 

Meetings and AV

Microsoft Ignite — Meetings Announcements: Microsoft Teams now offers a unified interface combining chats, channels, and teams under “Chat,” along with features like automatic file summarization and Copilot-powered, 360-degree meeting recaps that integrate transcripts, shared content, and chat messages for comprehensive summaries. The Interpreter agent enables real-time multilingual communication by simulating the speaker’s voice — a great example of AI that actually improves the meeting experience, not something adjacent to it (see David’s video comment here). Security enhancements include CAPTCHA bot prevention, sensitive content alerts, and email verification for external participants to reduce unauthorized access. The CAPTCHA news offers another way for Microsoft to prevent uncertified interoperability solutions from joining Teams meetings.

MDEP Not Here Yet: November has come and gone, and Microsoft Ignite, too, but the promised AOSP version of Intune is still not ready. Q4 2024 is still the published promise, but we’re not holding our breath. New MDEP partners were announced: AudioCodes, Lenovo, MAXHUB, and Shure. Android-savvy providers, such as Cisco, HP|Poly, and Neat, are still silent on MDEP.

Cisco at MS Ignite: Teams Rooms on Cisco Devices received upgrades including a unified management platform through Cisco RoomOS, dual-screen sharing with 4K resolution, and new tools for meeting equity in large spaces, such as Cross-view and PresenterTrack. 

HP|Poly Reorgs: A quiet reorganization returns Dave Shull, who led Poly pre-acquisition, to the helm of a newly expanded organization called HP Solutions. Shull continues to head the Workforce Solutions division, which now also includes the Poly collaboration units and the Advanced Compute Solutions division (HP’s AI development software). Oddly, the only place this was announced was on Shull’s LinkedIn page.

New Poly Firmware: Poly released its OS 4.4.0 for the Poly Studio X30, X50, X70, Studio X52, and Studio X72, as well as enhancements to the Poly G7500, Poly TC8, and TC10 touch controllers, and integrations with Poly Lens software. The update includes a new Poly Labs program (for experimental features).

Pexip Secures Nordics and Adds Private AI: Pexip has introduced a Secure and Sovereign video meeting platform, developed in collaboration with Kinly and Orange Business and hosted entirely within the Nordic region. This solution ensures that data remains within the Nordics and offers seamless integration with Outlook. It should appeal to confidentiality-minded sectors such as government, health care, and defense. 

Separately, Pexip introduced a Private AI platform for secure video meetings, enabling AI-powered features such as live captions and translations while maintaining full control over meeting data. This self-hosted solution, powered by NVIDIA’s Automatic Speech Recognition technology, is designed for organizations with strict privacy and compliance requirements, such as government agencies and large enterprises.

Racing to Sponsorships: Neat, which has been hiring new people and growing market share, is now going after growing mindshare. A few weeks ago, it announced a very visible sponsorship of the LA Clippers, and this month it announced it is now the exclusive hardware partner of Red Bull Racing (a role that Poly had before joining HP). 

Digital Events: TalkingPointz previously published a note on how Digital Events represents a UCaaS adjacency. RingCentral, Webex, and Zoom are leading the charge. Microsoft includes webinars with its Advanced Teams license, but lags in digital or hybrid events. This was abundantly clear with Ignite. Last month, Cisco and Zoom hosted major digital/hybrid events (Webex One and Zoomtopia) using their own platforms to successfully address the needs of in-person and remote attendees. Ignite, a much larger event, had a subpar digital experience for remote attendees — for example, remote attendees can see the presentations (screenshare), but could not see the speakers (live video). 

Customer Experience

RingCentral and Verint: RingCentral has partnered with Verint, integrating Verint’s workforce engagement management (WEM), CX automation, and knowledge management tools with RingCentral’s native AI capabilities. This collaboration aims to boost employee productivity and enhance customer experiences. Verint is the Swiss Army knife of CCaaS. The company has partnerships with most providers. RingCentral seems highly focused on RingCX.  

Dialpad Introduces Dialpad Support: Dialpad launched a new contact center solution called Dialpad Support. It is powered by its proprietary LLM, DialpadGPT. The platform includes omnichannel support, AI CSAT, AI Agent, and WFM, enabling enterprises to elevate customer experiences. It’s hard to know what’s real at Dialpad: The company has been known for both cutting-edge technologies and exaggerated claims. Dp does seem focused on CCaaS. 

Agentic AI Is the New Thing: Several companies are announcing versions of agentic AI. Agentic AI is an attempt to improve machine-based empathy and judgment. This month, we saw announcements from Cognigy, Five9, and Microsoft. The idea is powerful, and the approach is groundbreaking, but the reality is that most of these services have such high/strong guardrails that they behave similarly to rules-based systems. More coming in a December NoJitter post. 

AWS Expands Amazon Connect: AWS now enables Amazon Connect users to create personalized outbound campaigns using dynamic customer profiles from over 80 integrated data sources, enhancing customer engagement. This is essentially an expansion of the Customer Profiles announced four years ago. It’s nice to see AWS innovating again. It’s also surprising how far Amazon Connect is behind Genesys and NICE in the Gartner Critical Capabilities (see TalkingPointz Research Note on the CCaaS MQ). Perhaps they lost some momentum as the only CCaaS provider that forced engineers back into the office full-time. More news is expected in December during AWS Re:Invent. 

Vonage Airtel: Airtel Business, in partnership with Vonage, has launched Airtel IQ Business Connect, a device-agnostic communications platform aimed at simplifying customer engagement for enterprises in India (Bharti Airtel). The platform offers a multi-channel unified communication experience with continuity across smartphones, tablets, and laptops. This solution is designed to enhance customer loyalty and reduce data loss risks without requiring hardware investments. This is a big win for Vonage. Since its acquisition by Ericsson, there hasn’t been a lot of news on its UCaaS and CCaaS products. 

Mitel Launches Mitel CX: Mitel’s new customer engagement platform, Mitel CX, integrates omnichannel interactions with AI-driven capabilities like workflow automation, virtual agents, and advanced analytics. It supports hybrid cloud models, with features like customizable workflows, GenAI virtual agents, and seamless omnichannel engagement. Mitel partnered with Zoom earlier this year and agreed to also resell Zoom CCaaS, so the company now has both private cloud and public cloud CC solutions. However, the Mitel solution may be more attractive to many of its customers that prefer the known security model(s) associated with private cloud. For example, Mitel has a strong vertical in health care. Mitel’s Common Communications Framework ensures seamless interoperability with Mitel CX across its ecosystem, providing the same security, compliance, and resiliency as Mitel’s hybrid UC solutions. 

8x8 Rebranding: I liked the solve-for-x, XCaaS, but 8x8 thought it was time for something new. The provider launched a new brand image this month centered on CX (not CCaaS or UCaaS + CCaaS). The brand promise is to empower CX leaders to unlock better CX with its CX platform. The provider also got rid of the box around its logo, symbolic of breaking free from limitations or driving CX forward without limits. 

It’s a good time for 8x8 to rebrand. 2024 is the year of the big reset. We are seeing huge changes across the industry. Lots of leadership changes, but the transition from CCaaS to CX is more significant than many realize. 8x8’s changes seem reasonable, but Jack-in-the-Box getting rid of the clown was a mistake. Also this month, Jaguar died. 

Talkdesk Embedded: Talkdesk launched Talkdesk Embedded, a solution that allows its CCaaS solution to be implemented directly into third-party applications, including custom and popular SaaS solutions such as Zendesk, Salesforce, and ServiceNow. Using no-code and low-code tools, agents can access Talkdesk services — including call controls and live transcriptions — within a unified workspace, reducing the need to switch between screens and enhancing productivity. 

Td seems to be emerging from a post-pandemic hangover. It also announced that Windstream has added Talkdesk Express to its CCaaS Portfolio. And the company hosted an analyst event, its first in five years or so. 

UC and Messaging

Microsoft Ignite — Messaging Announcements: Microsoft Teams has a series of new features as part of its November 2024 release. The most notable change is a major redesign consolidating the separate “Teams“ and “Chat“ tabs into one unified “Chat“ tab, merging individual, group, and channel conversations. This change aims to increase user engagement and enhance organization. Users can now filter conversations by type and organize channels and chats within customizable sections. To be initially available in public preview.

The Qs app within Microsoft Teams now allows for local administration to add and remove users from queues. For branch offices, Teams is updating its Survivable Branch Appliance (SBA) features to support seven days of telephony resilience during internet outages, ensuring better connectivity for remote sites. 

ServiceTitan and Ooma: ServiceTitan has unveiled Contact Center Pro, a new UCaaS and CCaaS solution for the trades, built on technology from Ooma’s subsidiary, 2600Hz. Announced at its Pantheon 2024 user conference, the platform integrates phone, email, web, and social channels into a universal inbox, guided by a virtual assistant powered by ServiceTitan’s Titan Intelligence AI. By leveraging 2600Hz’s open-core solution with over 300 APIs, ServiceTitan quickly delivered multi-device features for contact center agents, front-office, and field teams.

The Business Section

Benchmark 

Dmitry Netis (LI, email) of The Benchmark Company provides Insider subscribers with financial insights quarterly. Dmitry leads M&A advisory and serves as a Managing Director and Co-Head of Technology Investment Banking at Benchmark. Mr. Netis has been immersed in enterprise communications for over 15 years as one of the first Wall Street research analysts covering this space, serving institutional and private equity clients. Benchmark offers VC investment, minority recap, and M&A services.

With 2025 approaching, we reflect on the current macroeconomic backdrop, equity markets, and their implications on M&A and IPO activity, followed by a short recap of key technology sector trends from the earnings season (in other words, AI, AI, and more AI).

November is a month where the stock market returns tend to be higher than in other months. The so-called “November effect” has proved itself out once again this year, where public equities, and particularly small-cap stocks, outperformed other financial products. Year-end optimism into the holiday season, tax-loss harvesting, and increased buying of true winners as investment portfolios are being reshuffled, often coinciding with year-end window-dressing. Major economic factors — buttressed by a typically strong third-quarter earnings season this year due partially to easy year-over-year comps — including interest rate cuts, improved consumer sentiment, which in November reached a seven-month high (10.5 points higher than a year ago), and the infamous Trump rally, following a multiyear-long election overhang, are boosting the economic rally.

Based on the most recent University of Michigan Consumer survey, more consumers are anticipating a strengthening economy which began in April 2024, pointing to the prospects for the economy to continue along its upward trajectory. The labor market conditions remain strong with slight easing being felt in the technology and telecom sectors, which were hit particularly hard in the last few years. The unemployment rate is holding steady at 4.1% with only about one-third of consumers expecting unemployment to increase in the year ahead — a new low. Views of business conditions in the long run, while unchanged in the past four months, are considerably more favorable than a year ago.

Retailers’ earnings in the last few weeks indicated that consumer spending remains at very healthy levels. Walmart, William Sonoma, and Target reported that consumer behavior is better off than people think, even though some consumers say that their budgets remain stretched and they’re shopping carefully. As long as consumers are employed, however, these retailers believe the spending environment will stay relatively healthy.

The economic implications of a Red Sweep can be characterized by a pro-business approach, lower corporate and capital gains taxes, reduced labor costs, and continued investment in infrastructure while less regulation and reduced government spending are expected to spur increased business activity. Less oversight and the prospects for removing some environmental and consumer protection regulations are expected to lower the costs of doing business. The equity markets appear to be pricing that.

Are the days when you look at the market and start to wonder again whether things are too overheated upon us? If you witnessed the dot-com bubble run of the mid-to-late 2000s or the post-financial crisis run of the 2010s, when bull markets lasted 10+ years, you would be piling into the equities again. This has caused the Dow, S&P 500, and Russell 2000 small cap index to climb 26%, 32%, and 35%, respectively, versus a year ago. 

And what about inflation — still too high? The inflation index (CPI), which measures costs across a spectrum of goods and services, edged up 0.2% from the prior month, ending at 2.6% in mid-October. While significantly reduced from its highs (9.1% in June 2022) and the prior year period when it registered 3.1%, CPI has been showing signs of stalling. An expected interest rate cut in December (with markets pricing in 25 basis points), however, could bring another leg down to CPI.

Recession seems to be a worst-case scenario for about 90% of Americans now, even though some argue a recession is better than ballooning prices or inflation. Is there still a chance for recession given massive federal spending, the federal budget deficit, and mounting national debt — $35T!? The Fed at a recent meeting indicated less of a concern, using multiple tools to avoid deflation through coordinated monetary and fiscal policy. Gold, as an inflation hedge, continues to outperform most stocks and has rallied from just $300 in 2002 to about $2,700 today (up over 30% year-to-date) while the purchasing power of the US dollar has fallen much more than what conventional measures of inflation would suggest. And let’s not forget that crypto, the newest currency hedge, has done best over the past decade — Bitcoin nearing a $100,000 mark (up nearly 125% year-to-date).

The final macro topic I’d like to address is generational wealth, which is helping growth in the economy. Specifically, the baby boomers and millennials have accumulated a lot of wealth, which helps drive new consumer experiences rather than just buying plain goods. As Delta Air Lines CEO Edward Bastian put it: “Today’s millennials have 36% greater wealth than Gen Xers had back when they were in that same age range or boomers had — 20% higher than boomers had. So, real wealth … not all inflation-adjusted. So, our millennials not only have the desire and capability more than ever, but they also have the execution. They’re the fastest-growing generation.”

Shifting gears, one can’t help but wonder if a wave of pent-up demand for M&A is upon us? Moderating inflation is a most significant measure. According to Morgan Stanley economists, markets are pricing interest rate cuts for another 75 basis points, and 10-year treasury bond yields are now projected to be at just above 3.5% levels by the end of 2025. With other economic drivers appearing better-than-feared relative to the start of this year, the election overhang in the rearview mirror, and the outlook for 2025 shaping up favorably for strengthening business activity and jobs market, we believe that next year will mark the start of a significant uplift in M&A activity. 

The global M&A volumes currently are still unusually low relative to their historical trends, despite the U.S. economy humming along, but the supply and demand sides are shifting. Sellers are motivated due to aging private equity portfolios, maturing venture capital pipelines, and expanded valuations/multiples in recent times. Buyers, on the other hand, are sitting on $4T of private market “dry powder” and $7.5T of cash on corporate balance sheets. Strong capital markets provide the ability to finance deals, helped by the market confidence around rate cuts from the Fed, the ECB, and the Bank of England.

IPOs and M&A go hand in hand, and both will be required for corporate consolidation and growth to continue. A stronger case for renewed activity could be seen in the TMT software and communication services universe, with many sector-related stocks rushing toward their 52-week highs after U.S. elections. The Red Sweep is helping drive more animal spirits while a push for globalization and a multipolar world equally support more M&A as more companies vie to compete on the global stage.

But what about tariffs; are their potential implications on business activity cause for concern? The popular view is that global companies are now better prepared in mitigating and managing most of the tariff exposure with many processes and systems put in place since the first Trump administration. The learning from past experiences suggests companies will be more proactive in pricing their goods on a global scale. Many companies, it seems, will also seek to reduce dependence on China. For consumers, however, prices of certain products with outsourced manufacturing will inevitably go up.

On to a TMT sector buzz, which is all about AI. The world’s most valuable company, NVIDIA, reported earnings a few weeks ago and showed that data center spending on GPUs continues to show explosive growth. Demand for foundation models and inference is booming. CEO Jensen Huang said: “AI is transforming every industry, company, and country. Enterprises are adopting agentic AI to revolutionize workflows.” Insisting that there is a long runway for GPUs, Jensen continued: “I believe that there will be no digestion until we modernize $1T with the data centers. If you look at the world’s data centers, the vast majority of them were built for a time when we wrote applications by hand and we ran them on CPUs. It’s just not a sensible thing to do anymore … we have to modernize the data center from coding to machine learning.”

The infrastructure build-up theme has not taken a breather this quarter. The first phase of building infrastructure to train and deploy AI models continues unabated. Beyond the chips, the entire semiconductor value chain is gearing up to participate in this phase. Data center operators, traditional FAANG hyperscalers (with a vertical play across their cloud franchises), and next-gen network infrastructure are all converging once again. A new breed of GPU-on-demand or AI compute-as-a-service is emerging (companies like CoreWeave, for example) to participate in the AI revolution through infrastructure positioning. Phase two will be about applications and commercialization of AI, which still feels some years away, though prep is underway — with nearly every software company embracing it. This is akin to the cloud computing trend, starting as a phase one in infrastructure build-out (i.e., 20 years ago) followed by the momentous SaaS transformation (in the last 10 years) — each a decade-long cycle.

How does this all translate to the cloud comms, customer experience, and engagement sector? An interesting change with respect to CCaaS we have noticed this quarter is that the “replacement of the human agent with an AI agent” is no longer a thing of disturbance for CCaaS business models. Well, but it is, isn’t it? First, the vendors are beginning to embrace it — denial is not just a river in Egypt. AI autonomous agents are front-and-center in agent augmentation tools like intelligent virtual agents, co-pilots, etc. Those who can do the work of a human agent faster, more efficiently (with accuracy and human safety in mind), and with greater experience and resolution with significant cost advantage, will ultimately win the race. While we’re still early in that race, it appears that NICE and Five9 are leading the way of AI by a mile. This is a very positive outcome for the CCaaS group, which has hit a material roadblock this year given a slowing pace of growth. 

The largest investment into the CX space we are aware of is funneled to Cresta. Cresta, the company behind agentic AI as it brands human-central AI for contact centers, raised a whopping $125M Series D round, which was co-led by World Innovation Lab (WiL) and Qatar Investment Authority (QIA), with participation from existing investors Andreessen Horowitz, Greylock, J.P. Morgan, Sequoia, and Tiger Global as well as strategic capital from Accenture, EnvisionX, LG, Qualcomm, and Workday Ventures. WiL’s partner Rob Theis is no stranger to the UC/CX sector with prior board roles at Avaya and RingCentral. The new round brings total funding to $282M at pre-money valuation of $660M. Cresta created a unified platform for human and virtual agents building conversational intelligence (real-time insights, coaching, quality management), human agent augmentation software (agent assist software based on behavioral best practices and knowledge assistance, and summarization tools) and virtual agents (full-automated GenAI agents serving as human replacement). Suffice it to say, both CC/CCaaS and the legacy WFO/WFM (WEM) vendors developing AI-powered agent augmentation/automation solutions need to be aware of this approaching threat.

Three CCaaS IPOs on deck. It will be interesting to watch Genesys, Dialpad, and potentially Talkdesk’s IPOs — which are far from being viewed as true AI companies, especially Genesys, though it is trying to rebrand itself that way. Talkdesk’s woes continue with executive leadership overhaul now a recurring issue — the latest departure revolving around its president, Bill Welch, who joined only a year ago. 

Genesys had a $21B valuation in 2021 after a funding round led by Salesforce Ventures (it has raised $7.2B in total capital to date). Dialpad had a $2.2B valuation in 2021 after raising $200M ($450M in total) in a round led by ICONIQ Capital with strategic capital from T-Mobile. Talkdesk was valued at $10B after raising $230M ($490M in total) in a Series D round led by Alpha Square Group, TP Management, and institutional investors Whale Rock and Franklin Templeton, among others. Its valuation was partly triggered by Zoom’s $15B bid for Five9 (at $200/share), which occurred around the same time — Zoom and Five9 broke their deal shortly after, and Five9 is trading at a fifth of the proposed deal value today, $3.1B. None of those three are likely to reach their prior valuations in the public market, due partly to much tighter growth valuations and multiple contractions in the sector versus 3 years ago.

Other IPO candidates in the Cloud Comms/CX/Sales & Marketing Automation/CRM space we are watching are Airtable, Gong, Infobip, Intercom, Outreach, Pax8, Workato, Zapier, Salesloft, and Seismic.

Five9 delivered a much better September-ending quarter after its revenue growth slowed dramatically earlier in the year after the company gave guidance for 11-12% annual growth in its June quarter (down from 17% YoY growth in 2023 and 28% in the previous year). In August, the company reduced its headcount by ~7% in a move that revealed slowing bookings and validation that AI is causing a structural headwind to sales pipelines and sales cycles. Acquisition of Acqueon, which was announced in the same month, was done in part to fill the revenue hole and enable greater automation of sales, though it wasn’t cheap at ~8x revenue multiple. The company paid $167M in cash for about $20-$25M of revenue, which can be derived from its goodwill accounting charge. We would expect the company to continue its aggressive stance toward strategic bolt-ons in the areas of agentic AI and sales automation companies, with nearly $1B of dry powder on its balance sheet. Its September quarter surprised to the upside, with growth reaccelerating to 15% YoY, subscription revenue growing 20%, adjusted EBITDA margin ending at 20%, and operating cash coming in at a record 16% of revenue.

Do Twilio’s woes appear to be over? Twilio deserves a mention this quarter, with the stock up ~75% in three months. Twilio has always been the darling of Wall Street, going back to its founding years and IPO — a classic story of strong VC backing, Silicon Valley culture spearheaded by an articulate founder CEO, and an enormous amount of money going into blitzscaling its marketing and sales. The company that pioneered API economy in the communications vertical had hit a rough patch post-COVID, looking to re-emerge as a better-run, more accountable business that’s still capable of building good products. I’d say, and the market agrees with me here, the business has clearly begun to improve. Most of the key metrics steered in the right direction in the third quarter. Organic revenue grew 10% YoY, bouncing off the bottom from just 7% in the last six months. Dollar-based net expansion rate improved to 105% versus staying flat at 102% over the last four quarters. Gross profit margin improved slightly, and free cash flow margin (17%) was guided higher for the December quarter. Most of this upside came from the Communications/CPaaS sector, while Segment still struggled, however. Segment, which has about $300M run rate and which the company paid $3.2B in 2020 for, showed no growth. Revenue declined slightly from prior quarter, gross margins slid to 69.8%, and revenue expansion rate was 91% (down from 93% last quarter), while the segment shed nearly 200 customers. 

After a challenging three years, it appears management efforts to improve Opex efficiency and maximize the value of its Comms/CPaaS business — guided no less by the new Board members and activist investors — are paying off. Contributing to a strong bull rally are real-time API integration with OpenAI, RCS enablement at Apple, integrations with leading data warehouse platforms (Snowflake and Databricks), and the return of crypto customers as the space regains its buzz. Nonetheless, with low-hanging fruit being picked (Comms/CPaaS business trading over 20x 2025 P/E ex-cash), investor sentiment is likely to shift to improving gross margins and organic growth that is far less reliant on the strong seasonal performance related to political campaign messaging. In comparison, Twilio’s closest peer, Bandwidth, delivered top-line growth of 28% in the third quarter (15.6% ex A2P fees) with gross margins of 58% and net revenue retention rate of 117%.

Zoom is turning a new page. In addition to dropping Video from its name, Zoom announced it is sourcing its GenAI technology from OpenAI, Meta, Anthropic, and its own in-house development. Zoom will allow users to personalize their AI Companion for $12/user/month starting in 1H25. Zoom also enhanced its GTM reach with new solutions tailored for frontline workers and the health care and education industries.

The company spent over $1B on R&D over the past three years, which is beginning to show results in its expanding AI-first product portfolio. The company is sitting on top of a $7.7B war chest, aiming at acquisitions. Its CCaaS product continues to make strides in the market, while Workvivo registered three net new seven-figure ARR deals. Zoom delivered top-line results in the F3Q (October) that were slightly above the Street’s expectations (revenues growing at 3.6% YoY) while revenue guidance for the next quarter (and a proxy for FY26) called for 2.7% growth — a subdued (or conservative) outlook which sent the stock lower. Enterprise sales grew 5.7% YoY, the best in the last four quarters, and online monthly churn reached an all-time low of 2.7%. 

Sector beginning to show increased propensity for M&A. Several acquisitions in the space are witnessing decent multiples. 

1) Evolve IP, which was owned by Great Hill Partners for about eight years, has sold to ATSG at an EBITDA multiple that’s just shy of 10x, based on several sources. ATSG, an onshore enterprise IT managed services and consultancy company and a Cisco reseller, is based in NYC and backed by private equity, RunTide Capital. The company raised $120M of Series C funding just this month, putting its post-money valuation at $419M. ATSG, while little known, is following a classic EBITDA arbitrage roll-up strategy, followed by many PE-backed MSP/IT Services companies in the sector. It has acquired 11 tech consultancy and IT outsourcing services businesses since 2015, and we believe this aggressive stance continues in the future. The combination with Evolve IP is said to deliver $230M in combined revenue, of which Evolve IP is likely contributing about $130M. ATSG has been listed as a Leader in Gartner’s Magic Quadrant for Managed Network Services for three consecutive years and as a Challenger for Gartner’s MQ for DaaS for two straight years. ATSG’s primary focuses on Cisco UCaaS and HUCS, Infrastructure-as-a-service (Citrix-based DaaS, IaaS, and DRaaS), managed network access and connectivity (SD-WAN/SASE, MDR) are strong complements to Evolve IP’s core focus on cloud comms (via Cisco Broadsoft-based hosted PBX and Microsoft Teams), CCaaS (Mtel assets), cloud management portal (OSSmosis), and identity and authentication management services (Clearlogin) while similar cloud computing services like IaaS, DRaaS, DaaS, MDM, and RMM could see some cost rationalization. In addition, ATSG’s mainly North American presence could see strong expansion into Europe, where Evolve IP has a strong presence following its acquisitions of UCaaS provider thevoicefactory and Netherlands-based Mtel. In 2022, Evolve IP partnered with Anywhere365, which is one of the few Microsoft Teams-focused CCaaS vendors on the market. It also inked partnerships with Tango Networks (mobile UCaaS) and BroadSource (secure online credit card payments and PCI compliance). 

2) Brightcove announced an agreement to be acquired by Bending Spoons — a $233M all-cash transaction, which indicates a price that is a 187% premium to its 52-week lows (12% below its 52-week highs) and registering a TTM valuation of 0.9x revenue and 12x EV/Adjusted EBITDA (11x 2025 EV/AEBITDA), when adjusting for diluted shares (unvested RSUs and stock options).

Bending Spoons is a unique company many people have never heard of before, based in Italy and managed by the Italian leadership team. It hails itself as a “developer of mobile applications designed to be both functional and aesthetically pleasing.” The teams of software developers it houses are highly skilled, carry low cost of labor, and maintain highly efficient sales and marketing engines. 

Dare we compare Bending Spoons’ aggressive PE-led animal instincts to Bernard Arnault’s LVMH? Bending Spoons had a private equity valuation of $2.76B in July of this year and has raised about $700M to date (a combination of debt and PE growth equity) from Eagle Capital Ventures, OTB Group, top institutional investors like Baillie Gifford, Neuberger Berman and Durable Capital Partners, and strategics like Cox Enterprises, among others. At the end of 2023, it had revenue of roughly $390M, now likely approaching $1B. In 2024, it has embarked on an acquisition spree, picking up eight companies, including Brightcove. Among them were Evernote, StreamYard and Events assets (from Hopin), WeTransfer (a whopping $760M buyout), Ossii, Apalon, Mosaic Group (Digital Assets), and Meetup.

3) Ingram Micro holding up well since IPO — a good sign for the market. Ingram Micro, one of the world's largest technology distributors founded in 1979 and a Platinum Equity portfolio company, raised about $409M in its IPO and began trading on NYSE in late October. The offering was priced within its targeted range at $22/share and valued the company at around $5.2B. Ingram will mainly use the proceeds to repay debt, while Platinum remains Ingram's controlling shareholder post-IPO. The market for PE-backed IPOs is heating up with pent-up demand and buoyed by the Fed’s interest rate cuts and long-anticipated easing cycle.

We are aware of several other UCaaS/CCaaS, MSP/tech-enabled services assets, and adjacent application ecosystem companies that are being prepped for sale. Multiples are currently hovering in a 6-12x EBITDA range for the CPaaS/UCaaS/CCaaS ecosystem, skewing or exceeding the top end depending on top-line growth, gross margin profile, and size and quality of customer base. Companies with strong elements of AI/ML capabilities (e.g., Five9/Acqueon, Genesys/Radarr, Puzzel/SupWiz) are trading at multiples of ARR or an EBITDA range that could exceed 15-20x. We see strong interest from both well-capitalized strategics and private equity players seeking platform or bolt-on investment opportunities in the MSP/IT-services sector.

Afiniti Files for Bankruptcy: Afiniti filed for Chapter 15 bankruptcy (UK), highlighting the risks of pre-generative AI AI-powered CX. This marks another fall of a legacy AI company, and there will be more. Yes, Afiniti, LivePerson, and Amelia had some other problems, but they are also all carrying a legacy AI anchor. Legacy AI is all the AI that came before generative AI. It may be doing a lot of the lifting, but it has no street cred. It’s a blow to Avaya as Afiniti has been a strategic partner. 

ATSG Combines with Evolve IP: ATSG has announced its merger with Evolve IP, creating a combined entity with over $230M in revenue and a customer base exceeding 950,000 end users across 1,700 global clients. The transaction, backed by RunTide Capital and Morgan Stanley Private Equity Secondaries, strengthens ATSG’s capabilities in desktop-as-a-service, unified communications, and contact center solutions, with a focus on long-term recurring revenue. This merger positions the combined organization to tackle increasingly complex technology challenges with an expanded portfolio of cloud and managed services.

Bending Spoons Nabs Brightcove: As Dmitry noted above, Bending Spoons, out of Italy, has become quite acquisitive — at least in terms of tech, not employees. The lovely folks at Brightcove will soon be unemployed based on B.Spoons’ M.O. Spoons acquired Brightcove, used to manage and monetize video content, for $233M in cash. Clients such as Marriott Hotels, Ford, and J&J use Brightcove for streaming. Bending Spoons acquired WeTransfer (laid off 75%) and Filmic (laid off 100%) earlier this year, Evernote (laid off 129) and Meetup (“significantly reduced headcount”) in 2022. 

Leadership Changes

Avaya promoted Tony Lama to SVP & GM of Product. David Funck was named Chief Architect and Global VP. Both came to Avaya from its acquisition of Edify earlier this year. There’s been a tremendous amount of change at Avaya. More than half of the execs in a group photo taken at its analyst event last April are gone — not uncommon after a CEO change. Neat named Tormod Ree as its Chief Product & Engineering Officer. Ree, previously CEO and Co-Founder of Ava Unified Security and a senior leader at Cisco, will lead Neat’s product development, engineering, strategy, and design initiatives. Relatively new CTO Kevin McMenamy is no longer with the firm.

Sprinklr named Rory Read as its new President and CEO. Read was CEO of Vonage when it was acquired by Ericsson. Founder Ragy Thomas has transitioned to the role of Advisor to the CEO and remains Chairman of the Board. RingCentral appointed Abhey Lamba as CDO. Lamba, formerly Vice President of Finance for Global Infrastructure at AWS, has experience from roles at Cisco Systems and Autodesk. CEO Bill Welsh is no longer at Talkdesk. Shezza Carter was appointed VP of Human Resources at Alianza. Invoca named Teresa Dietrich as CTO. 

Canva named Kelly Steckelberg as its CFO. Steckelberg was previously the CFO at Zoom. Spectra7 named Omar Javaid as CEO. Javaid was the Chief Product Officer at Avaya and previously worked at Vonage. Xyte appointed Randy Klein as President of the Board of Directors. Klein was previously President and CEO of Crestron Electronics. NUSO named Ralph Mora as VP & GM for the EMEA Region. Mora has experience from Mitel, Ribbon Communications, and Lucent Technologies.

Goodreads

1. OpenAI reportedly developing new strategies to deal with AI improvement slowdown — As we predicted, training AI with AI output is concerning.
2. New Windows 11 feature will help prevent BSOD disasters — Something to prevent the next CrowdStrike outage.
3. Widespread Microsoft Outage Takes Email and Videoconferencing Offline — We’ve lost count of the number of MS outages this year. 
4. Zoom 2.0 relaunches as an AI-first company without video in its name — AI-first replaces video-first.
5. Understanding MDEP — The basics and background explained about Microsoft’s new Android platform.
6. The Cable TV Business Is Dying. Is It Worth Saving? — Comcast wants out of the dying cable TV business.
7. Why we’re experimenting with advertising — Surprise, Perplexity, the new approach to internet search, is looking at ads, too.
8. Inside Microsoft’s Struggles with Copilot — Customers are dissatisfied, rivals are circling, and company insiders are skeptical. 
9. Generative AI’s Potential to Improve Customer Experience — Bain’s research identifies five design principles for deploying generative AI in the customer journey.
10. 5 Minutes On - The AI granny scamming the scammers - BBC Sounds — The UK mobile operator O2 is testing an AI-powered tar pit for phone scammers — a virtual granny who answers the phone and wastes their time. 
11. The Fall 2024 Slack Workforce Index — Executives and employees are investing in AI, but uncertainty is holding back adoption. 
12. Why the Guardian is no longer posting on X — X is a toxic media platform, and its owner, Elon Musk, has been able to use its influence to shape political discourse.
13. Artificial Intelligence and the Future of Work — The US National Academy of Sciences published a long report on possible economic consequences of LLMs.
14. The confusing state of RCS — RCS is now indistinguishable from an OTT service but controlled almost end-to-end by Google.
15. Amazon’s Moonshot Plan to Rival Nvidia in AI Chips — Amazon won’t dislodge the incumbent anytime soon but hopes to reduce its reliance on the chipmaker.

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Recent Insider Reports (only new Insider Reports are behind the paywall) 

1. Insider Jan 2024
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Dave Michels is Founder and Chief Protagonist at TalkingPointz and Editor in Chief of the Insider Report. [email protected]. David Danto is AV Aficionado at TalkingPointz. [email protected].