Enhance Communication and Collaboration with Fusion Connect for Your Team and Customers with Jaime Zarate
Microsoft has been growing in Teams, specifically, at a 40% cadger rate, double the industry average of 20%. So the opportunity is that there's roughly less than, I would say, 20, 15% of Microsoft Office Teams environments are PSTN enabled, meaning that there is a large market of 80 plus percent of people that are gonna look at it and evaluate it sooner or later.
Max:Jamie, do me a favor. Can you give me an official introduction? Who are you? What do you do? Who do you work for?
Max:What is the if I looked you up on LinkedIn, the real answer to those questions?
Jaime:Absolutely. Well, good morning. Thanks for having me. My name is Jamie Zarate. I'm a senior channel manager at Fusion Connect.
Jaime:I have what's called the Tola territory, which is Texas, Oklahoma, Louisiana, and Arkansas, and I work with our strategic partners.
Max:And Fusion Connect has gone through a pretty big evolution in the last few years or my perception of it at least, you know, Fusion from a few years ago versus Fusion now has evolved a lot. So I think it's just like a starting point. Like, what is Fusion? What do you guys do? What are you focused on?
Max:Where do you sit in market? Like, how should somebody like me think about Fusion?
Jaime:That's a great question because there is, I think, a lot of history with Fusion Connect. Because there was a prior company called Fusion, and a lot of people associate us just with them. But it was that prior company that literally fused with 2 other companies to form what's Fusion Connect today. So one of them was Megapath, and the other one was Birch. And the thought then, and this is three and a half years ago, was to leverage Fusion's network as a service delivery platform for advanced applications.
Jaime:And the Birch acquisition brought in a very large POTS practice, which up until recently, you know, was still a very needed thing from a technology perspective. And now that there are replacements available, it's not as, I guess, as driving force within our company. But through the mergers and acquisitions, and then almost immediately, we're hit with the pandemic. It really changed the forecast of where business was going. Even if you look at things like the Gartner IT forecast from North America changed, you know, significantly from 2018 to 2022 and 2023.
Jaime:And with that insight is where we find the story of where Fusion is today. So initially, the idea was to merge these 3 companies together to create something that differentiated us from about 60 other like competitors with a myriad of offers around SD WAN, UCaaS, network management, security, you know, all of the typical characters that we see in the product portfolios today of carriers and carrier like companies. And it was with the insight of, really, our parent company, which is Morgan Stanley, that brought in a lot of analyst research and said, no, the delivery model of these complex business applications is changing dramatically. And before, the idea of having kind of a closed loop secure network to deliver these things was critical. And now, really, with the advancements within what I would call web based security or SSL security, we can really deliver business applications over Internet with all the security that is really enjoyed by having a private connection to that data center or that application hub.
Jaime:And so that kinda turned our focus to what are the strongest applications out there and ones with the greatest amount of growth. And the data came back really with UCaaS leading that market. COVID really forced that conversation and that issue. Companies were, oh, goodness. We can't go into the office.
Jaime:How do we continue business operations? And so the idea of how do we create an extendable fabric of communications and security and application delivery for people to work at home because it's unsafe for them to come into the office? And we saw incredible growth, especially around communications applications. On average, about 20% CADGAR across all of the major providers of that technology, except for 2 standouts. One of them was Zoom, which everybody now, uses that word synonymously with web conferencing.
Jaime:You know, it's kinda like the Kleenex of tissue is, let's do a Zoom. Nobody even thinks about, you know, what that really means anymore. And then the other one was Microsoft. Both of them grew at double the industry rate at 40% CADGAR. So something different was going on with them in this explosive market than the rest of the competitors.
Jaime:I think the best way to kind of explain how dramatic the shift was is RingCentral was the undisputed leader from not only a technology, but a market share perspective. And in the latest Gartner report that came out in October of last year, Microsoft assumed a leadership position within technology and market share. And then the the you know, the questions are why, and why are companies like Fusion chasing this, what we call, technological gold rush that's happening right now? And it's because of history. So when we look at Microsoft and when they've developed everything from you know, I'm kind of an older technologist, so I was around when DOS came out, and had a lot of fun learning how to command line in DOS, and that kind of stuff.
Jaime:And if you remember back in in those days, you know, you bought Microsoft DOS, but then you went out and bought all these third party applications to actually do anything, including the PCs and stuff. Right? So if you wanted to network, you bought Novell software, and you threw it on top of DOS, and you had to open that up to network. If you wanted to, you know, write a letter or something like that, you had to go get WordPerfect, a third party application to set on top of DOS. And slowly but surely, as Microsoft evolved from this operating system, they started incorporating their own applications that pushed out the need for these third party applications.
Jaime:Namely, the first one was networking. Novell, half the technology world doesn't even remember who Novell was. A lot of them weren't even born when Novell went out of business, basically. And the reason is Microsoft embedded networking within the OS, and there was no need for it. It was super simple.
Jaime:Administrators could just completely spin up a computer with all the productivity somebody needed and deploy it very quickly. If we take that to the next grandeur scale, which was really the advent of open source and service oriented architecture, that's where Microsoft went big and created their own flavor of open source called dotnet. Dotnet took that same concept of the operating system and said, well, we're gonna use the Internet as an operating platform and use open source as our OS and be able to call in and out all these disparate applications and make them work as a singular application anywhere, anytime. And that's really what's striving UCaaS today and market share growth for Microsoft is we now have a $100,000,000,000 company that's saying, we wanna take UCaaS and literally turn it into a feature set within the Microsoft world. And I think one of my favorite sayings is, look is when opportunity passes the path of preparedness.
Jaime:Fusion Connect is very lucky that Morgan Stanley also had an interest in Intrado, and basically said, hey. You know, there's a lot of synergy between these two companies. Let's have Fusion Connect acquire the Microsoft Intrado assets, bring them into the Fusion Connect portfolio, and now be a leader in these, you know, delivery of these advanced Microsoft applications around UCaaS. And, you know, in a nutshell, that kind of explains our journey over the last 3, 3 and a half years, and one of the reasons I'm really excited to be here.
Max:Okay, Jamie. I wanna back up. First question. First thing. So MegaPath, for people that don't know, MegaPath was a dominantly a DSL provider competing with COVID.
Max:And then Birch was a circuit reseller. And then both these companies pushed into voice, you say POTS, but, I mean, you know, traditional voice PRIs and then sub trunking. So with those acquisitions, is Fusion still active in circuit delivery? I mean, are you I mean, you you talk about POTS and POTS replacement. I mean, you know, phone companies don't wanna deploy POTS anymore.
Max:They want something else deployed. But in that world, I mean, are you still doing circuit based business where people are taking and buying Internet circuits or MPLS circuits or, you know, point to point networking or whatever the technology named Azure is? Is that something that Fusion is still doing?
Jaime:Yes. We are. And we really see it as an enabling technology or an enabling service to the broader portfolios we have now around managing and delivering software as a service solutions for companies, including UCaaS. But as a standalone business, all carriers have been struggling leading with it because of 2 major factors. 1, the decline in the cost of bandwidth, called the race to 0.
Jaime:Right?
Max:Of
Jaime:course. So as sophistication comes up, pricing is going down, expectations are still going up, and the whole sector is getting compressed from being able to deliver a standalone service that's profitable for companies. So we use it as an enhancement to our broader offering to say, let's really understand what it takes to deliver a great experience to somebody that's using software as a service. And it includes making sure that the network is working in synchronous, you know, kind of a really tight understanding of what the software requires from a experience and user perspective, and making sure that the network's adapting to that in real time. And that technology is called software defined networking, or SD WAN, as a lot of people kind of use the acronym for it.
Jaime:And so that's really kind of driving our network business is really more around managed networks, where we're aggregating multiple parties networks. You know, it could be a Lumen circuit, an AT and T circuit, a Comcast circuit. We're providing the management of all of that, normally layered with SD WAN on top, so there's visibility and control, with a focus on application performance, and ultimately user experience. So that's kind of our network focus. When it comes to POTS, there's I guess the best way to call it, there's a chasm in POTS right now from a cost performance versus technology performance in POTS replacement.
Jaime:So copper is extremely expensive to maintain for the Lex that's still generated. Right? So they have to maintain a whole separate network, the old TDM network, central office switches, all those things. And POTS kinda reminds me of the bicycle. It was so well indented that it's really hard to create a better bicycle.
Jaime:Yeah. You can change the handlebars around, stuff like that. Same thing with POTS. It's just it always works, and it's great for alarms and elevators and, you know, what I would call mission critical phone lines that are used in the event of an emergency. So that's really the focus of POTS today.
Jaime:POTS replacement is trying to deposition traditional POTS by offering SIP based alternatives. The issue is the cost of the technology to give it the redundancy, the resiliency, all of the things that we enjoy with POTS for that, you know, terrible situation where somebody needs it because they need a fire rescue call or an elevator rescue call. Everybody, I think, is still struggling with how do you create a device and a service around it that emulates POTS perfectly or if not better at a cost and price point that works. So that's where our business is today with that.
Max:Well, I mean, phone companies increasing the cost of a POTS line to, you know, 500, $800,000 a circuit. It changes the cost performance equation pretty significantly, very fast, and and what to compete with. So in in the SD WAN space, what platforms are you offering? Are you deploying for customers? I mean, is this a singular focus, like, with VeloCloud, or do you have a suite of tools?
Max:What are you guys doing for SD WAN?
Jaime:So that's actually a really good question that exemplifies what we mean by being a managed service provider versus a carrier technology provider. And when it comes to SD WAN, we decided that the best thing to do is have all 3 industry leaders at our disposal from a fabric perspective, and really listening to the requirements and saying, okay. So, for example, you know, the differences between Velo, Meraki, and Fortinet, the 3 market leaders, are fairly substantial from where their focuses are, what they're really good at, and what they're not good at. And I'll give you an example in the sense of, you know, a client that has a large contact center, and every call has monetary value to it. It's a very strong requirement that an outage costs a lot of money, you know, by the minute, by the hour, by the day.
Jaime:And of the 3 providers of SD WAN technology, of the leaders, Velo has the ability to twin the call on 2 different circuits simultaneously. Contact center based, you know, client would gravitate to that versus one that has, let's say, a lot of retail endpoints, and security is a big factor, and they want to have, you know, one of the best security fabrics integrated into the edge device, the SD WAN device. That that would be a Fortinet. And then, you know, Meraki being the Cisco kind of premier platform has a lot of its advantages of this kind of integration into the broader Cisco network management platforms, like OpenView and things like that. So IT departments that are very ingrained with that would gravitate to that, because it's a common toolset that they can already pull in.
Jaime:So that kind of explains how we go to market around SD WAN. It's really requirements and client driven from a business case. And then we really let the client kind of select, you know, which one is best for them by helping them catalog how many of their requirements are met by one of the 3 platforms.
Max:Now in the Velo space, are you running against the Velo gateway infrastructure? Have you deployed your own gateways?
Jaime:We deploy our own gateways, both not only at the client edge, but at our network edge. So that, you know, there's a one to one ratio from a tunneling perspective. And it's been very successful. We just had a a large bank with 10 sites with a large contact center go that route, and they're just extremely happy with the performance of it.
Max:Yeah. Absolutely. I mean, it's a good combination. You know? So Velo is a pure play SD WAN, you know, in that world.
Max:I mean, you can do lots of things in the SaaS space and integration with different, you know, cloud based firewall options. When you look at, like, Meraki, you know, on a Meraki MX firewall, you know, with SD WAN gets implemented or a Fortinet FortiGate firewall where they implement their SD WAN. That then creates a it creates an interesting question. Right? Because you still have network infrastructure behind that firewall.
Max:Right? So you have switches and access points. And Meraki is of course, sell switches and access points. And then Fortinet also sells switches and access points. And part of the, you know, nice thing about having an all Meraki infrastructure stack is you have a single console, and you can see everything on your network.
Max:You can see users to what AP they're connected to or what switch they're connected to on firewall and and, you know, in Fortinet the same way. So when you're doing a managed Meraki or you're doing a managed Fortinet and you're bringing that infrastructure into the firewall or to the, you know, this SD WAN firewall edge, you know, perimeter layer, are you going deeper into the client's environment with that? Or how do they integrate, you know, what you're managing and providing with what they still need, you know, behind that box?
Jaime:So we describe that as we inside or land side management and capability. And last year, we actually launched our land management capabilities. So, you know, we can go beyond the firewall, and it's really a a managed services offer. So it's not like a, you know, here's a skew and a price for it. It's scope of work driven.
Jaime:So we would look at the whole context of what the client wants us to do. And then in some cases, you know, we do a complete managed service program, or we do a jointly managed, where we actually kind of catalog all of the duties and responsibilities and actions that, you know, happen on a daily basis. And basically just go through and say, client, would you like to lead with this one, or would you like us to lead with this one? And create a flexible support plan around that.
Max:Are you seeing a lot of push? I mean, you know, thanks to Gartner Sassy or SSE, and now Sassy is, you know, one of the rages in terms of marketing.
Jaime:Do you
Max:see a lot of interest and push to provide a unified SASE solution for clients who are getting into your managed security edge?
Jaime:I do. When we started, I I talked about my favorite story, and that is, you know, how we went from basically a physical operating environment to a virtual one using the Internet as, you know, a platform for an operating system. A very similar scenario to this, and that is that the secure access service edge, to me, is less of a technology, more of a strategy. And the strategy is to address the most difficult thing to work with in that kind of open source operating environment using the Internet as a platform, and that is the Internet itself. You know, the Internet is very unpredictable.
Jaime:You know, it's been a wonderful tool for business. I would just say, you know, human evolution as a whole, but there is no class of service. There is no no management of, you know, how things go and when and where and how. And Secure Access Service Edge is kind of an an alternative architecture that says, let's take the Internet out of play and basically, you know, use a private network or backbone to manage that traffic all the way to its delivery point for better security, better visibility, packet management, application performance, and ultimately, user experience. And so, SACSC, you know, there's companies that specialize in it, and that we compete against that have global presence and do it very well.
Jaime:So I wouldn't say that, you know, we compete directly against, you know, the Palo Altos and the Caio's and, you know, those kind of companies, because we do have our own network and service delivery platform of it. We are able to do a Saxxy, you know, like configuration, and, basically, only use the Internet for very short hops from originator to the edge of our network across our backbone, and then another little hop off the other side. So, physically, you know, we're able to do that Saxi like configuration. What we don't have is some of the application intelligence that Palo Alto's, you know, developed and things like that. So, again, it's a use case, requirements driven.
Jaime:I would say 80% of the time, we're able to do everything that know the client needs from a SAXI configuration, but we're not going to say that we're, you know, a SAXI leader like, you know, the Palo Altos, Ariakas, you know, Cadiz of the world.
Max:So also going back, did Fusion end up acquiring the Intrado Microsoft infrastructure? Was that an interest that or was that actually that took place?
Jaime:No. It was an acquisition of that. Physically, the biggest part of it was the a session border controller array that Entrado had already certified within the Azure cloud. And there's some nuances in that because of the type of Microsoft Teams enablement we we do because of that, and it's called operator connect. It's the latest iteration of PSTN enablement of teams.
Jaime:And what Intrado had done is co located their session board controllers within the Azure data center framework, otherwise known as the Azure cloud, and it had an integrated SLA with them. Them. And so we wanted that asset just like that because it is a giant differentiator that while we have this exploding market, then also resonates very well with the people that are looking within that market. They're like, you know, what is the latest and greatest capability around this, and who's providing it? And we're actually seeing a lot of interest coming to us directly from a Microsoft site, because we're listed as one of those providers, and on a daily basis get, you know, dozens of inquiries on, hey.
Jaime:Can somebody talk to me about this capability? So it's very exciting. It's very different than having 60 competitors within a different, technology space. You're not getting that kind of interest because there's so many choices.
Max:Let's dig into this. Operator Connect, what is it, and what does it actually mean for a client looking at Microsoft Teams voice infrastructure? What do they get with operator connect?
Jaime:What they get with operator connect is true carrier grade PSTN calling capability in and out of a team's environment. So as teams is deployed today, and we're both on teams clients anywhere in the world, we can collaborate, communicate, do all kinds of different things. But if you're like, hey, let's call Joe on his cell phone, you know, just a PSTN call. Unless he had PSTN enablement of teams, you can't make that call. It's closed, you know, because you're just within Microsoft, and then there's the PSTN network, and and they're not talking to each other.
Jaime:So the solution has been to have a third party application to provide that integration, and it's fairly expensive. So Microsoft kind of tipped their toe in the water a long time ago. Well, I guess about 4 and a half, 5 years ago with calling services, which was a VoIP based kind of scenario for Teams. And while it gave PSTN access, it wasn't commercial grade as VoIP is. You know, VoIP is an Internet voice protocol, not really a commercial protocol.
Jaime:And so they evolved to what was called direct routing, which was using SIP and session border controllers to do this. But because Microsoft is a software company, they really didn't understand the nuances of the carrier strategy of doing this, and they came to it from a well, it's just a development effort. So if you can open up the development environment underneath Microsoft Office, which is called PowerShell, you can go in and basically write code to associate PSTN DIDs with the team's users. And it works well, but it's expensive, and it's hard to administrate. So what OperatorConnect did is looked at all of those issues and said, how do we improve this experience?
Jaime:One is instead of a development environment, let's have a GUI environment, you know, an application that does a lot of stuff for us. And that's really where the operator connect portal came from. And so it takes all of the, you know, hard, you know, coding and development required to just, you know, provision a user, change a user's permissions, all those kind of things, are now application driven. And the best story about this is there is no cost difference between direct routing and operator connect from a licensing perspective. The biggest cost difference is in delivery and deployment, where direct routing, I've seen scopes of work in the 30, 40, $50,000 range, where because of the simplicity of operator connect, there's fixed scope.
Jaime:So it's a $3,000 deployment training and delivery cost, regardless of the number of users. And so what we're seeing is a technological enhancement with a giant economic advantage. And that's kinda rare. Normally, you have to pay for new stuff. And so it's a very different world.
Max:Doesn't this just create a lot of confusion, though? I mean, if you look at voice enabling Teams, you can voice enable Teams by paying Microsoft for a calling plan. You can use a direct routing partner. You can use a operator connect calling partner. So now you're talking about you have to make a decision between, do you voice enable Teams by a Microsoft calling plan?
Max:Do you use direct routing and then figure out which partner you're gonna use in the direct routing ecosystem? Do you go to operator connect and then figure out which partner you're gonna use in the operator connect ecosystem? So how does a company make those decisions? I mean, how do you make the first decision about whether or not, you know, hey. We're using Microsoft Teams.
Max:We're paying Microsoft for Teams. Why shouldn't we just pay Microsoft for calling plans because we're already paying Microsoft for Teams? And, like, why would we go to a 3rd party? Right? So that's the first question.
Max:Right? And then the second question becomes, why direct routing versus operator connect? You kinda answered that already, but I'll let you expand on it. And then the third part of it is, you know, why Fusion versus somebody else in that decision train?
Jaime:The decision process. You know, if you kind of think through the headspace of a IT executive or manager within a company, and you explain, you know, what the experience is like deploying and managing calling services, versus direct routing, versus operator connect, it becomes very apparent. And also, you know, the thought process behind the offer. So calling services from a procurement perspective is fairly simple. You just go to the Microsoft website and, you know, kind of self-service to deploy it.
Jaime:But, you know, think of it from a corporate perspective, Microsoft won't send you a bill. You have to buy Microsoft credits, Microsoft money on the website to pay your Microsoft bill with. And if you really think of it from an enterprise perspective, that's not a typical procurement process for technology services. And so it was really meant as kind of a almost an SMB offer, something, you know, to that point. And then from a technology and experience perspective, you know, you're talking about a VoIP non SLA experience.
Jaime:It's very difficult for a company to say, yes, we're going to take our voice channel and put it on this kind of platform with a lack of control, visibility, and management, and really flexibility around how to acquire it and how to pay for it. So it kind of explains why direct routing happened. Right? Let's have a commercial grade offer. And it kind of solves all those problems, but adds a new one and new level of complexity because of the PowerShell scripting and management of that.
Jaime:So as an IT executive, you know, going through your decision process and decision tree, it's like, so this one is gonna cost me SLA issues, and ultimately, my client, my internal users are gonna come back and go, what are we doing? This is not, you know, built for our business, where direct routing is built for the business. But then there's a kind of a large, you know, burden put on the IT department to manage and administrate it from a scripting perspective. You literally have to hire, you know, a folks to person to do that. With operator connect, changes all of that.
Jaime:You don't need a dedicated resource to manage the telephony environment.
Max:I mean, also, I think what I would add to that that you didn't touch on is has you have you ever called Microsoft for support? And what was that experience like? And do you wanna have your phone system be part of that as well? I mean, you know, not knocking on Microsoft here more than anybody would, but they're not a support organization for end users. I mean, they just aren't.
Max:So then, you know okay. So you've had I mean, more than likely, you've probably had some experience with Microsoft calling plans and Microsoft support and flexibility and billing structure or, you know, international points presence or a whole slew of things. Right? And then from there, you decide, okay. We're gonna go to operator connect, and you end up with, you know, the operator connect portal, and there's a whole bunch of logos on that portal.
Max:As a company is looking at that and trying to figure out, you know, okay. We know we need Teams Voice, and we know we wanna go operator connect because we can't use Microsoft for this. It was a bad experience for us already, and it's just too much of a nightmare. And they're looking at this portal with a lot of different logos on it, and Fusion's there. Why Fusion?
Max:You know? And what does Fusion offer and bring to the table that would make this a no brainer for a client to use?
Jaime:So if you look at specifically that ecosystem of operator connect partners, you can really almost segment them immediately in thirds. Those that kind of really focus, I would say, at the Global 500. So, you know, the IBM is the American Airlines of the world, you know, Deutsche Bank, those kind of things. And you have large global systems integrators that focus at that very top echelon of user. And then Fusion's focus is really mid market, you know, kind of small enterprise.
Jaime:And our offers and support infrastructure are really geared to those types of clients and IT departments that are really defined by one thing, and that is typically the IT department is chasing the business because the business is growing, and they just don't have enough resources to keep up. And so they need a managed service provider that understands that and can supplement them. And that's what we do very well in this environment. So we took that concept and said, how do we really build an offer around that that resonates and differentiates us from those other operator connect environments? And, what we came up with was, what are the typical things that create fear and risk in an IT decision maker.
Jaime:And a lot of it is around, well, how fault tolerant is this? How strong is this, you know, against other offers from an outage perspective, things like that. That's where that telephony carrier experience became very critical to us and how we deployed against Microsoft. So we did buy the Entrado SBC array, but when we recertified, we also did something, and that is we pushed our class 4 switches into the cloud also, into the Azure cloud. So our class 4 switches give other telephony services that can be commingled with operator connect.
Jaime:Namely, the biggest one is fill over and fault tolerance. So in the event of an Azure outage, and, you know, Azure is fairly stable, but, you know, it does happen. So those companies, again, with mission critical voice processes, you know, contact centers, you know, sales, those type of things, they can't afford an outage like that. So what we're able to do because of those class 4 switches is provide DID failover uniquely, you know, versus our competitors that allow for voice continuity in business operations. And because of this capability, we're able to extend a 100% SLA if the client chooses this configuration.
Jaime:That's a very strong statement, to say that we're gonna be financially obligated to a 100% SLA in this kind of deployment. So I think that's a strong statement of what differentiates us from other providers. And then we layered other kind of guarantees around that. The other one is in kind of customer satisfaction guarantee and SLA that says if a client isn't happy with our performance, we do ask them to, you know, allow us to try to remedy it at least once. And then if we can't, we will pay to move that customer to the provider of their choice.
Jaime:So, again, a very strong statement around how comfortable and, you know, really committed we are to customer support and the user experience of our clients. And then, you know, there's other guarantees around delivery. If we publish a date on average from contract set insured to full enablement, it's about 60 days. If we miss that date though, we're financially obligated to the client. So, again, focused on delivering and making sure that everything is operational as quickly as possible.
Jaime:The technology really enables a lot of that, you know, the operator connect environment. And in the example of POTS, you know, with cost increases driving the market to find a new solution, we wanna make sure that this also had a level of protection around that. So there is rate lock guarantees that, you know, the cost of the service will not go up during the duration of the agreement. So, you know, all these different offers and guarantees and the technology itself, we feel that when we get evaluated, true differentiation is shown between us and what our competitors provide. Now to your point, if you call Microsoft, if you can call Microsoft, there's a per call charge.
Jaime:And some of our competitors charge also for support. We're talking, like, $60 a call kinda thing. We don't charge for support. And so we're able to, again, analogous to what we're doing within the SD WAN environment, create custom support plans that say, alright. So we give you all the self-service tools to, you know, provision and manage your environment.
Jaime:But again, mid market, small enterprise, IT departments are chasing the business. Sometimes they're like, we just don't have the bandwidth. Send us an email. Call our support. We'll do it for you as an extension of your department.
Jaime:And so those, I think, are the kind of things that really set us apart from our competitors.
Max:So there's something else on your website we should talk about because this is not something you see with everybody, and you're listed as a Microsoft CSP, a cloud solutions provider. Can you talk about what that means for Fusion and what you can do as a result of it?
Jaime:There was a minor acquisition about 3 years ago within that kind of Birch, MegaPath, Fusion integration of a CSP, and and we've had this capability for a while. It's really blossomed now with, you know, the operator connect focus. And as a CSP, we're able to resell Microsoft licenses starting at the OS, so like m 365, to Teams licenses, you know, your typical e 5, e 3 type of configuration, and then, you know, ultimately, Teams and operator connect. So what this allows us to do as a full blown CSP is manage the full Microsoft experience with a integrated SLA from OS to front office suite to calling services, and all integrated together. So if there is an issue, you know, we have the eye in the sky, look down and say, is this a user issue?
Jaime:Is this a team's issue? Is this a Office 365 issue, or is this an OS issue? And resolve it from that perspective.
Max:Well, I you know, it's also a little bit more basic than that. Right? Because in order to voice enable Teams, first, you have to buy the Teams PBX licensing and enablement from Microsoft. Like, you just don't go out and find an operator connect partner and say, okay. Great.
Max:We wanna use Fusion for I mean, you have to license functionality for Microsoft first. And, you know, as a CSP, you can provide the entire thing end to end where you're gonna help the client you're gonna help the company license it, enable it, administer it, turn it on, make sure it's working, configure it, you know, and the whole chain versus saying, hey. Go out and get your licenses first. And once you have your license, come back to us, and then we'll turn on the voice side of things.
Jaime:You're absolutely right. And it's having that kind of complete portfolio capability around it that allows us to really meet the customer where they are. So if, most of them already have a CSP relationship and are getting those licenses from somebody else, and so we're just adding incremental licenses for operator connect and a phone systems license if they don't have an E5, for example. But as time kind of goes on with that specific client and an engagement, they start seeing the value of, well, when our CSP licensing comes up for renewal, let's see if it makes more sense to use Fusion for everything. And we're we're seeing a lot of that migration.
Max:Okay. Let's talk about bundles since you opened that up. I mean, what are you seeing right now in terms of enterprises with the e three plus, you know, and, I mean, what are the different suites? Right? It's you can do e 3 plus calling.
Max:You can do e 3 plus security. You can do e 3 plus compliance. You can do but all these things get up being wrapped up into e 5. So what are you seeing in terms of actual adoption and uptake of e 5 just as a standard base globally licensed thing for a, you know, for a Microsoft customer?
Jaime:Going back to the discussion around Microsoft and their historical trend of absorbing industries and turning them into feature sets, this is the same story, different technology endpoint. And namely, endpoint security firewall is kinda driving this conversation, at least, you know, what we've seen over the last 12 months. And that is, as companies are starting to evaluate, what is our endpoint strategy here as part of a bigger holistic strategy? Yes. Traditionally, people have gone out and had third party applications for endpoint security.
Jaime:And Microsoft was seen as, nice try, but, you know, these are really, really much more enhanced and enterprise grade. That's not the story today. The story today is Defender is actually a very strong endpoint solution. So again, IT departments are saying, how do we simplify things? How do we get rid of, you know, this ominous vendor management that we're doing, you know, with all these application providers when we could pair down and use fewer providers and simplify our lives around it?
Jaime:If there's technological and cost performance around it. Right? They're not gonna do something that's not gonna give them what they need from a result. And so that's really the evaluation process we're seeing now is, does the offering around the E5 make more sense for us Because we're getting much more bang for our buck, and are able to kind of include our endpoint security strategy, our PSTN calling, you know, all of the other features to come versus doing an a la carte, either on an e 3 with components or an e three with third party components. It's that simplification that I think is really what's driving the market and driving IT departments to evaluate it.
Max:We talk about COVID and the acceleration of COVID and this adoption of this technology. I mean, teams, you know, went through the roof with COVID. And you also mentioned, you know, some of the traditional or, like, the, you know, I would say, like, the, incumbent UCaaS vendors and, of course, where they were. But, you know, today, you know, January 23, you know, what have you seen and and, you what did the last 6 months look like for companies? I mean, they had to figure out what they were doing during COVID.
Max:And, you know, now we're kind of in this, like, post COVID kind of we don't really know what's going on phase. And some companies are going back to office, and some are staying remote, and people are looking at office space. You know, budgets being reevaluated. You know, belt tightening is out there. So, you know, what are you experiencing with customers?
Max:What are people telling you? You know, what's the last 3 months look like? What do you think this quarter looks like? What do you think this year, you know, has in store for companies?
Jaime:So I feel there's 2 major factors in the market that are driving, you know, what you're talking about, and that is kind of the business perspective of, you know, how have things changed for us going through COVID, and what's it meant to us financially and from a productivity perspective? And most companies are looking back and seeing, because of the tool sets, we really didn't lose a lot of productivity and a lot of revenue opportunity, because we're still able to work in a team environment, and collaborate, and move information around, and see each other's spaces. I started at Fusion in August of 2020. And it wasn't until the following year that I ever met a fusion person in person, but I formed a lot of good friendships and relationships through this. And I was kinda shocked.
Jaime:I kinda really understood how my kids developed and maintained friendships globally just, you know, through their phones. And so I think we we all became accustomed to a different way of doing business. And then when we look back at the numbers, we're like, wow, we didn't need to have everybody together for water cooler talk to be productive. The new water cooler is the UCaaS environment. Right?
Jaime:So it's kind of interesting to kinda look at that and how companies are reevaluating. You know, we quickly changed our business operations format, and really, if anything, saw improvements and process productivity and employee happiness. So you you take that, you know, as kinda one big component. And then the other one, and one we're really excited about is because a lot of this started in 2019, going in 2020 and 2021, a lot of the early agreements are coming up for renewal right now. And a lot of those agreements were made in a rush.
Jaime:Because it was like, get it done. You know, we need to have business continuity, and, you know, Brand X sounds like it's gonna work because we just need something now. And so now that people have a little more breathing room to kinda evaluate, alright, if we had to do this over again, how could we improve? And is our technology provider the right one for us to see this improvement? And that's the conversations we're looking for right now, is, you know, how can we really look at aligning with, you know, starting a strategy to workflow and process, and then bring in the right technology to address these type of things of where a company is now and where they wanna go, and how we, as a solutions provider, can eliminate the roadblocks of getting there.
Max:Teams, you know, obviously, people understand Teams as like a an application on the desktop. Right? There's a good mobile client. But Teams also supports physical phones. And, actually, one of the things that's incredible at Microsoft is they control the user experience or, you know, the software on the phone just like they do with Windows and a desktop.
Max:Outside of, you know, Teams Rooms where people are deploying, you know, conference room hardware, you know, I mean, are you seeing a lot of companies actually sticking with physical endpoints and physical devices for their staff? You know, as, like, a rough number, what percentage do you think are actually deploying some sort of device that, you know, somebody can go push buttons on or, you know, push the screen on and lift a handset up and talk on it?
Jaime:I would say and these are rough numbers. About 90% deploy some phones. And then of that 90%, you know, you have some that do go all phones and then, you know, hybrid, and then also, you know, software based. This is a great example of what we're talking about. So this is actually a Teams enabled headset.
Jaime:So it goes beyond, you know, having a desk phone with really all of the same features and functions that you see on your desktop or your mobile app. All those features are now also embedded in here, but they're touch based features. So we're seeing some really cool stuff happening around this just to kinda match the use case. I think if I had a a nickel for every time I heard from an IT professional, I'm gonna get everybody phones, but can I return them? Because I know after 6 months, people will say, I don't know why I got this phone.
Jaime:I never use it. You know? What's beautiful about Teams is I could be on a Teams call on my cell phone, pull into the parking lot, walk into the office. As soon as I get close to my desktop, my desktop will ask me, hey. Do you wanna transfer this call to the desktop, or you wanna stay on your mobile, or do you wanna transfer it to your desk phone?
Jaime:So it really makes end endpoints agnostic to the experience. And I think hardware based devices will not go away because there's certain use cases for them. You know, headsets, for example, and, you know, high volume areas. Kinda hard to emulate that, you know, from an experience perspective, you know, having all the functionality. Right?
Jaime:So I think we'll see greater evolutions, including VR. I mean, I think that I'm seeing a lot of, you know, VR implementation for collaboration now, and I think we'll start seeing that world move in. So we'll see devices and Teams' devices for VR.
Max:That'll be interesting. That'll be really interesting. So, I mean, teams had just a absolutely meteoric rise. I mean, people talk about, like, hockey sticks of, like, adoption. And, I mean, it it just kinda feels like it just went vertical, like, not a hockey stick, just vertical, and then, like, a rocket ship was strapped to it.
Max:And, you know, this time next year, I mean, what percentage of companies are running teams or running voice? I mean, what's your expectation? What's your prediction on this?
Jaime:I would default to what I've read as the analyst predictions. You know, those guys were paid to be really accurate. So just, you know, some rough numbers to digest from a front office perspective. You know, in front office being defined as applications, you know, people that that work within process and workflow use on a daily basis. You know, starting with email, you know, word processing, spreadsheets of financial applications, those kind of things.
Jaime:Microsoft enjoys a 90% market share of that in the world today. So 9 out of 10 desktops are running Microsoft Office and already have Teams to pull. It ships with it. So when you have that kind of visibility and presence on the desktop and people are starting to evaluate, well, what are we gonna do from a communications perspective? Someone's gonna raise their hand because, well, should we look at Teams and and see if this thing is actually gonna work for us?
Jaime:So there's some a lot of organic interest there. And that momentum is now turning into velocity of people migrating to Teams. And when you really look at the history of how Microsoft has done this time and time again with networking, front office, security, you know, all of the other things that started out as third party deployments on top of their OS, and then now are just features, that's really what's driving the team's adoption. It's because it's there. It's familiar to the IT department, and they don't have to, you know, learn a whole new environment to integrate into their Microsoft and Microsoft Office environment that's already there.
Jaime:So that's again, that term that I hear a lot and I keep using is simplicity. People are going, wow, this is just so much more simple. And you can see, you know, they start beaming about it because they're like, wow, we're gonna have time to do the stuff we wanna do. Because, you know, that that is what IT departments really struggle with is, you know, how do we actually deploy against the IT roadmap when we're constantly patching things and fixing things, getting crazy new requirements from marketing, and they go out and get their own stuff, but we don't do it fast enough. You know, those kind of things.
Jaime:So if we look at what the analysts are predicting, you know, Gartner, IDC, Forrester, Boston Consulting, no. And you kinda average their predictions. Microsoft has been growing in Teams specifically at a 40% CADGAR rate, double the industry average of 20%. So the opportunity is that there's roughly less than, I would say, 20, 15% of Microsoft Office Teams environments are PSTN enabled, meaning that there is a large market of 80 plus percent of people that are gonna look at it and evaluate it sooner or later. You know, if it's not this month or this year, it will be within the next 24 to 36 months.
Jaime:And once that great evaluation happens, we'll see market dominance again where Microsoft has taken a UCaaS industry and turned it into a feature set within their empire.
Max:We were talking about circuits at the beginning. He used the phrase of, you know, race to 0 with circuits. And, you know, it's true in some sense that the, you know, cost of circuits are decreasing. But then the other side of it is the speed is increasing. And, you know, from a carrier backbone standpoint, you know, 100 gig, 400 gig, 800 gig, you know, 800 gig is widely available if you're running backbones and big, you know, big data centers.
Max:But the average company doesn't need a 100 gig of bandwidth delivered to their office. Right? So they've stayed relatively static. You know? You see office environments where, you know, they put a GigE circuit in and, you know, every year that GigE circuit gets less expensive, but they don't need to upgrade from, you know, GigE to 10 gig to deliver Internet to their office.
Max:And with, you know, a a push away from office based, you know, work to, you know, remote work, I mean, that even, like, compounds that. Right? When we talk about, like, Teams and this Teams ecosystem, as more people come into operator connect, as more companies adopt this, as this becomes more ubiquitous, does that create a race to 0 pressure as well, you know, in this ecosystem? Or is there still so much growth and potential that isn't on the radar and the road map yet?
Jaime:I think there's so much potential. Again, you know, just within Microsoft itself, 80% market opportunity within the user community. So, you know, that is a large number of tens of millions of users if you think about it from a global perspective. I don't know. And I'll tell you why.
Jaime:There is a trend in technology to, again, go from industry, to application, to feature set, to you know, this is just a function of the overall platform. And that function then becomes monetized within the platform itself, not by itself. So do I see that happening anytime soon with Teams? I don't think so. And the reason is it's not a Microsoft only solution.
Jaime:So the session border controllers, our class 4 switches, all of the telephony knowledge is still very much outside of the Microsoft world. And until it's incorporated inside, I don't think they'll have a comfort level with saying, we'll just make PSTN a feature that we incorporate into the pricing of the Microsoft seat, or something like that. And the differentiations that that we offer, and some of our competitors offered, is not native to the Microsoft mindset. They're really PSTN carrier type of features and kind of mindset. So I would say, in 5 years, if we had this discussion, it might be a completely different story.
Jaime:But for the next 18, 36 months, I don't see or hear or read anything from Microsoft saying we're deploying our talent, our developers to bring this in house. And I've seen them do it before. You know, when they decided to get into the open source world and were racing against Oracle and everybody in Linux, they put 10,000 developers on developing dot net. Crushed the industry. I mean, literally, a an army of developers that created a whole new development environment for using the Internet as an operating system.
Jaime:But nothing like that on the horizon for telephony or or Microsoft Teams as I see it today.
Max:Jamie, before we wrap, you know, I'll give you an open floor. Any last words, thoughts, comments, things I forgot to ask that we should touch on?
Jaime:I think one of the things I do wanna highlight that I think makes us different, not only from our technology offerings, but our cultural focus and how our company operates and how our customers receive it differently. And that is we work through what's called the inverted pyramid from a manager subordinate perspective. So for lack of a better way of saying it, my manager works for me, his boss, you know, works for him, all the way to our CEO. And it's this type of culture that ultimately says that we work for our client, and that we're not gonna focus on processes, or no widgets, or, hey, let me tell you about this greatest and most amazing technology that has nothing to do with your business or your interest. That is, you know, really learning how to be very client focused.
Jaime:You know, while we're having this discussion around technology, a lot of times what's lost is the human experience and the client experience in solving business problems. And so, you know, while you can tell I get really animated and excited about the technology, it's meaningless unless it lines up with a business need that binds the customer to our service.
Max:Really good. Really well said. Really well said. Jamie, thank you very much. This has been a pleasure.
Max:I really appreciate the time.
Jaime:Well, thank you for the opportunity. I really enjoyed
