Every year I write an Annual Report. It catalogs the year’s adventures around analyst events as well as attempts to pull together some themes and observations. 2020 was a very strange year. Other than a few regional van trips, I haven’t left my home in over 10 months.
I have not missed (work) travel as much as I initially expected. I seriously doubt I will ever return to last year’s 24 conferences a year. I am longing for some vacation travel. To be fair, I have it pretty good. The kids are out of the house and I’ve got a good home office setup.
- I didn’t fully appreciate how much of society relies on crowds. Crowds and crowd size convey success. Crowded restaurants, sold-out events, etc. Crowds and crowding are perfectly normal in transportation (planes, boats, buses), sports (stadiums, teams), entertainment (concerts, plays, theme parks, movies), etc. I was surprised how much social distancing and anti-crowding broke society.
- I also didn’t realize how hard it was to get facts. The pandemic exposed major gaps (how does it spread, what are the symptoms, do masks help, etc.), but facts have become very subjective. We live in a world where we can choose the “alternative facts” we desire. This is more than political commentary: My doctor recommended statins, which seems straightforward until you Google it. Experts are available to validate every argument. This makes solving big problems very difficult. For example, climate change.
- Had this pandemic hit just 10 or 20 years ago, the impact would have been much worse. The internet, the browser, and the smartphone made this pandemic bearable. I think many of us were surprised just how much we could do from home, and how easily. The infrastructure that we depend on also really delivered. Power, water, UPS/FedEx, food supply (for the most part), and more generally worked. Working remotely was really bad just 15 years ago. I understand the pandemic was costly and painful to many people and industries. I’m just saying it could have been much worse.
- The internet was the real star. Not only did it work, but people got really creative with it: online groceries, online meetings, online news, online holiday celebrations, etc. We accelerated the adoption and use of cloud-delivered services by at least 20 years. In 2020, I bought a car online and discovered I could get fresh bagels delivered. Uber now expects that delivery will be a bigger part of its business than rides.
- Although we were all miserable at home, the pandemic demonstrated the value of exactly what the enterprise comms sector delivers. For example, teleworking or work-from-home (WFH), online meetings, digital transformation, asynchronous communications, browser-based apps, and more have been parts of the keynote sermons for over a decade.
- The naysayers converted. The people who thought WFH was silly. The managers who said remote workers wouldn’t be productive. The team leaders who insisted on in person meetings, and so on. It’s amazing how much you can adapt when forced.
- Entire offices shut down. Employers sent their employees home, and in some cases it was a one-way ticket. It was a diabolical WFH experiment that worked far better than anyone expected.
2020 was a year unlike any other. It was a very bad year for most people. A great year for Musk and Bezos, and a decent year for enterprise comms.
The event recap in 2020 is pretty simple, comprising just three events: Avaya Engage, Cisco AR, and CenturyLink AR. I was about to go to a Five9 event when travel stopped. Zoom did an incredible pivot from a physical event to a real event in about a week. Event themes were pretty consistent this year. The UCaaS folks mostly talked about online meetings. The CCaaS folks mostly spoke about AI. Everyone spoke about WFH.
While the pandemic was one of those all-boats-rising situations, a few companies came out of 2020 stronger than they went into it, specifically, Microsoft, Cisco, RingCentral, and Zoom. Only a few ended 2020 weaker than they started it, mostly for not executing on a limited window. We will see several providers disappear in 2021 (see implosion below).
I am not optimistic that 2021 will be very different. It appears we will likely be grounded for the majority of 2021. One of the looking back frustrations of 2020 was the perception that the pandemic would end quickly. Events were initially delayed a few months. That short term thinking prevented us from making longer term adjustments. Had we truly known this thing was going to upend our lives for well over a year, we would have made bigger/bolder adaptations.
That is why I am optimistic about winter 2021 and 2022. Everyone has pent-up energy. Everyone is going to take a vacation in 2022. There will also be some big tech changes in 2022 (starting in late 2021). The attitudes about remote/distributed work have changed, and barriers have been shattered. We know what’s possible, so now, with strategic planning (and some innovation), we can really make big changes.
The Big Changes
It’s terrible, but true: the enterprise communication sector largely benefited from the pandemic. Organizations had to overcome mental and other barriers to make remote work work. We saw a huge acceleration of distributed work, WFH, online meetings, cloud-delivered services, and more.
There’s a common narrative that things will revert post-pandemic — that the world will celebrate the return of what might best be described as 2019. There’s no going back! Yes, social interaction will return, but things will never be like they were. We now know what’s possible. The pandemic was unpleasant, but the toothpaste isn’t going back in the office.
The big shift that’s really going to occur hasn’t started yet. The pandemic was about survival. Keeping the virtual doors open. While some companies, like Microsoft, Zoom, and Amazon, clearly did well, the vast majority of firms were under a lot of pressure. Industries such as travel were devastated. Education largely failed. Healthcare’s failure to embrace digital transformation (and telehealth) was obvious to all as the industry desperately scrambled to catch up with the innovations that have been urged on it for a decade.
2021 and especially 2022 will be huge years for digital transformation. Disney provided us a sneak peek. Normally, when we talk about digital disruptions, it’s some upstart taking on mature vendors. Here, a traditional vendor found a new digital path while its competitors in films, parks, cruises, and hotels struggled. The Disney+ streaming service launched in 2019, and Disney predicted 60-90M subscribers by 2024. In December 2020, it hit 86.8M subscribers, and the company revised its 2024 prediction to 155M subscribers.
This is more than just starting a new division; it’s about a direct-to-consumer shift that leverages its existing assets and brand equity. The company will bypass a train of intermediaries by taking its content directly to its customers. Imagineer that! The notable takeaway is how Disney avoided the incumbent pitfall of simply digitizing an existing product or service. Records-to-CDs was digitization, but on-demand personalized entertainment is digital transformation.
The pandemic exposed half-assed digital transformation. My bank couldn’t do an international “wire” transfer without a signed form, and since the branch was closed I instead learned about Transferwise.com. There are so many examples like this.
Online grocery shopping, at least for me, was a success and a failure. The grocery chain pivoted quickly and the service mostly worked. However, the shopping portal didn’t take inventory into account, so half of the shopping experience is dealing with substitutions via text messaging. Yay for enterprise comms, but seriously? They presumably have inventory information and certainly had my address, so why show me items I can’t buy?
Starting in 2021 and continuing for several years will be a massive rush of digital transformation. Entire industries will be reimagined as bottlenecks are removed. Do we really need manual processes to check into a hotel or rent a car? I’m particularly impressed with the Ikea and Wayfair iOS apps on the new iPhones. Forget instore furniture shopping, the app uses augmented reality to show exactly what the piece will look like in your home. Amazon is now offering custom-tailored T-shirts, and that concept will clearly expand to other articles. That’s far better than dressing rooms. Most of these upgrades rely heavily on smartphones which is steadily removing barriers to digital/distributed work, entertainment, commerce, education, and more.
Though technically it happened in 2021, social networks and their role in free speech came to a boiling point. Several issues are at play here. Social networks, and the internet as a whole, have steadily become more important to our daily lives. The internet is now used for the majority of communications, entertainment, and commerce. Yet it is largely controlled by a handful of private companies.
Freedom of speech, content moderation, Section 230, net neutrality, antitrust, and probably more all came to a head when Twitter and Facebook banned the president. My first post of the year was about content moderation. TL;DR: social networks are behaving in accordance with what their executives feel is best for their communities. That is reasonable, since they are private companies. Without Section 230, they would moderate much more content. The free speech angle doesn’t directly apply because these are private services.
Free speech is complex. It’s more restricted than many realize. It is only protected in certain conditions, such as public spaces (town square), and only the government guarantees it. Private places are under no obligation to facilitate free speech. There are also lots of rules about what free speech is protected and when. Even town squares have noise ordinances.
The core issue is that the internet doesn’t have public spaces or virtual town squares. It’s all private. Even worse, it’s largely controlled by a handful of giant companies. The resolution is probably antitrust, which could lead to breakups or regulation; however, some of these companies are far bigger than the US. It’s pretty hard to see the US forcing Facebook to split with WhatsApp when it’s a central piece of its global strategy.
For the past several years, the US has been very hesitant to control the internet. There have been no antitrust efforts, Section 230 protects providers, and without net neutrality rules carriers are free to block or slow traffic as they desire. Many are now questioning this lackadaisical approach to such critical infrastructure. Suddenly we have multiple antitrust suits, and there’s a growing desire to revisit major web acquisitions.
We have been through this all before, and it’s why Bell became a regulated monopoly. Last time around we deemed telephony as critical infrastructure. It’s complex, but the simple deal was that Bell gave up many of its rights including setting prices and being able to refuse services in exchange for very limited competitors (monopoly) and regulation. As consumers, we tend to prefer competition, but realistically we don’t have much. Few have choices regarding internet access and realistically Facebook, Twitter, and Google (Search) have no competitors.
There are many variables here, and who knows how this will play out, but over the next few years, we are going to see some huge changes regarding the internet — or not.
The Decline of Portability
This is not new, but it’s accelerating and bleeding into enterprise comms. It is a tough one to describe. Let’s start with portability. Books are portable, and not because they are easy to carry. Books are unencumbered. There’s no terms of service agreement to use a book. After buying a book, the owner can share it, and when finished with a book, the owner can sell it, gift it, or donate it. Kindle books are not so portable. People buy long-term rights to view them, but don’t own them. As a result, they can’t share (unless Amazon says they can), sell, or donate them when finished.
Many portable things are becoming encumbered into larger, proprietary systems. Remember when we used to buy aftermarket car stereos? They had a near-universal, rectangular format. Today, car stereos are proprietary in shape and interface. They are integrated into steering wheel controls, the HVAC, and navigation systems. Car stereos, engine parts, and other car parts are no longer portable. This is related to the right-to-repair controversy. Cars have become closed systems.
The value of data is less about the data and more about the system. An excellent example is cryptocoins. The crypto wallet doesn’t store money like a traditional wallet; it serves as an index to where the coins are.
Enterprise comms are rapidly moving from portable and dumb to integrated, proprietary systems. We are replacing the standalone PBX concept with voice-as-a-feature in other systems. The call made within the Uber app is logged, with some caller ID trickery to protect privacy. That’s just one example of how our conversations are increasingly part of larger systems that catalog, transcribe, and analyze them in various ways. Key features of team chat apps are searchability, discoverability, and shared history (knowledge base).
We are well down this path already, and it’s accelerating. The motion and strategy is to eliminate standalone communications. We are just beginning to realize the potential of this trend with analytics that will uncover patterns. Microsoft Productivity Score is an example, currently positioned to help with well-being, but there’s more where that came from. What about an attitude score that looks at sentiment across channels? How about a collaborative score that measures one’s ability to harness talent from colleagues? The potential is huge.
The Great Implosion
We often say the pandemic accelerated things, but it very likely delayed a few things, too. I was writing about a predicted video industry implosion just prior to the pandemic. That’s still coming, but it’s expanded now: There’s going to be a comms implosion, particularly UCaaS.
It’s basically a careful-what-you-wish-for scenario. The adoption of UCaaS has been doing well for two decades, but now we have hit a tipping point. Cloud-delivered comms is clearly the logical, default solution. Congratulations, UCaaS providers.
The bad news is that it’s caught the interest of a few major providers, including Microsoft. Microsoft has dabbled in enterprise comms for well over a decade, but its effort has been pretty weak. Plenty of room remained for UC and UCaaS companies to create a complementary service. Microsoft is now a competitor. In the case of video, it’s happy to give away the service as a loss leader. So is Google. These are no longer minimum-viable products, but services that will meet the needs of many organizations.
We are going to see a major implosion post-pandemic. It’s going to be very hard for some UCaaS and video companies to justify their existence. The larger providers (Microsoft, Cisco, RingCentral, and maybe Google) will do well or OK at the expense of smaller providers.
The ones that are successful will have a clear differentiated value proposition. Potential examples include: RingCentral just announced compliance with Germany’s data residency requirements; Zoom announced E2EE; 8×8 has a combined UCaaS and CCaaS. These are capabilities that are not (currently) available from Microsoft or Google.