Consolidation in VoIP SaaS MarketConsolidation in VoIP SaaS Market

Voice over IP (VoIP) technology has reached broad acceptance with many small and medium businesses now relying on these systems to support their businesses. Consolidation is one sign of a maturing market, and two long standing competitors have decided that pairing up was their best long term option.BroadSoft, which supplies application software so service providers can deliver hosted telephony and multimedia services to businesses and consumers acquired Sylantro, which offers software for hosted IP communication services across fixed, mobile, and cable networks. The two companies had focused on building SaaS solutions rather than premise based systems and had been competing against one another since their inceptions in 1998.

Both had experienced some success. Sylantro collected about $116 million in venture capital while BroadSoft raised more than $76 million. Sylantro customers include AT&T, China Netcom, QWEST and Swisscom. BroadSoft provides VoIP applications to eight of the top 10 and 14 of the top 25 largest carriers in the world, including Korea Telecom, KPN, SingTel, Sprint, Telefonica de Espana, Telstra, and Verizon. In addition BroadSoft has some experience in purchasing other vendors. In 2004, it acquired software development firm CarbonTwelve, which was based in Sydney, Australia.

The Broadsoft/Sylantro merger is significant for a couple of reasons. VoIP solutions have become more widely accepted as businesses have tried to consolidate their autonomous IP networks. Consequently, competition in this space had been intensifying. Therefore, vendors need to establish themselves as top suppliers now or be faced with possible extinction when market growth slows. Also start ups, like

BroadSoft and Sylantro, found themselves banging heads with established suppliers, such as Avaya, Cisco, and Microsoft. From the merger, Broadsoft gains more mass, which will be needed to compete against the industry heavyweights.

The move can benefit small and medium businesses in a number of ways. First, the new company will have a better chance of long term success. Also, the merger means more emphasis on hosted systems, which are often a good fit for such businesses. Last, there will continue to be an emphasis on delivery of cost effective VoIP applications, which can help improve productivity.