Service Provider News

8x8 Buys Cloud Contact Center Vendor Contactual

By Erik Linask, Group Editorial Director  |  November 01, 2011

This article originally appeared in the Nov. 2011 issue of INTERNET TELEPHONY.

In a move that likely came as a surprise to many in the communications industry, 8x8 (News - Alert) this fall announced its acquisition of contact center vendor Contactual. In reality, the merger is more of a logical evolution of a four-year collaborative relationship – 8x8’s contact center customers have actually been using Contactual’s cloud-based services for some time.

8x8 is one of the pioneers of the cloud-based services market, having started its business back when hosted was the term of choice. The company has seen significant growth since, and the Contactual deal not only furthers its commitment to the cloud services space, but truly gives it a full suite of cloud services that address the voice and video communications needs of SMBs and enterprises, as well as their call center needs.

The company has been making a push up-market from its roots in the SMB market and, according to Huw Rees, vice president of business development, has seen similar trends customers buying its contact center services.

“We are seeing growth in both the number of customers buying the services and the size of the customers buying those services,” Rees told me at ITEXPO (News - Alert) West this September in Austin.

The Contactual acquisition also brings with it an international client base. Though Rees said there aren’t any definitive plans for expanding 8x8 services into international markets – yet – he did say there are no plans to shut down any of Contactual’s international operations, which are located in Australia, Canada, Japan, and the U.K.

With a four-year service integration test run, the opportunity for 8x8 to continue to leverage the global cloud movement and move into global markets plays into its continued expansion into the enterprise space, which brings with it a natural international flavor.

“We are very familiar with the technology and have built close relationships with the operations and technical staff,” added Rees. “They have done a great job building reliable services that are in line with 8x8’s reliability standards.”

As discussed in the August cover story in INTERNET TELEPHONY, Virtual Office is the name of 8x8’s flagship business phone system offering, to which it’s added call center and UC functionality, call recording and presence management. Mobility is also a component of the solution, which includes soft clients, web clients, and support for the iPhone (News - Alert) and Android-based smartphones.

 The company also plays in the data and video space.

Last year 8x8 acquired a managed hosting company called Central Host out of Los Gatos, Calif. The company manages servers in data centers on behalf of customers. When they did deal, Central Host had a $1 million a year run rate; its average customer paid for management of about 10 dedicated servers; and each server only supported a single customer.

In addition to Contactual and Central Host, 8x8’s other acquisitions include Zerigo, a Littleton, Colo.-based company that provides virtual private servers, managed DNS services, and monitoring tools for cloud-based server operations. That deal was announced in June.

Before the Contactual deal was announced, Martin indicated in his June 14 interview with INTERNET TELEPHONY that 8x8 has been on the lookout for acquisition opportunities, potentially related to back-up services and/or call recording search tools.

“8x8 has been through a lot and survived,” says CEO Bryan Martin. “Now we feel like we’re in the technological and financial position that’s better than it’s been in the history of the company, and we’re growing aggressively.”

The company has been profitable 13 of the past 14 quarters. 8x8 ended its fiscal year on March 31 with annual revenues of $70 million;  $8.6 million in free cash flow from operators, $7.8 million of which the company used to buy back stock; and $18.4 million in cash (and no debt).

Erik Linask (News - Alert) is Group Editorial Director of TMC, which brings news and compelling feature articles, podcasts, and videos to 2,000,000 visitors each month. To see more of his articles, please visit his columnist page. Follow Erik on Twitter (News - Alert) @elinask.

Edited by Stefania Viscusi