Region to contribute 40% of its business this year
Aims to capture enterprise customers with on-demand communications model
FRESH off a 2014 that saw its business volume double and revenue move up 85% year on year, London-based cloud communications provider Nexmo is planning to significantly increase the size of its team in Asia, in a bid to secure a larger piece of the growing regional pie.
Speaking to Digital News Asia (DNA) in Singapore recently, Nexmo founder and chief executive officer Tony Jamous said. “We are going to double or triple our team on the ground, primarily on sales and marketing.
“Today we have an office in Hong Kong, Singapore, and [South] Korea, and we’re going to expand into Japan and go into China – so that’s our plan for Asia,” he added.
In fact, Asia was always part of the plan. In 2013, the technology startup saw half of its business come from large Asian customers, such as e-commerce behemoth Alibaba, Chinese Internet giants Tencent and Sina Weibo, handset manufacturer Xiaomi, Japanese online retailer Rakuten and mobile messaging service Line.
The following year however, that mix decreased to 35% due to a ramp-up in volumes from the United States and Europe. “We had more people on the ground,” Jamous said.
With the renewed focus on Asia, Nexmo’s newly appointed executive chairman Trevor Healy told DNA that the company expects the region to contribute 40% of its business this year, with total revenue hitting “over a hundred million” US dollars.
Nexmo is but one of the vendors in the cloud communications market that IDC expects will be worth US$7.5 billion by 2018, growing at a compound annual rate of 127.5% within the next three years.\
Other players in this relatively new field include Plivo, Twilio and Tropo, and they have similarly experienced skyrocketing growth.
San Francisco-based Plivo, for example, posted in its company blog that it saw a 250% annual increase in revenue in 2014, based on a doubling of its voice traffic, and a 500% growth in SMS volumes.
In its Worldwide Cloud Communications Platforms Forecast report, IDC described how these new entrants “are benefiting from the shift to new voice and SMS, which combine the pay-per-use scalability of cloud services with simple telephony API (application programming interface) tools.”
Essentially, these companies provide a way for developers, particularly Internet startups as well as enterprise customers, to plug in global text messaging and voice capabilities into their applications, in a fast and cost-effective way.
This is done through software tools or APIs that enable the apps to communicate to end-consumers in a number of ways, depending on how the app is designed.
Healy put it simply, “Have you ever used Viber, WeChat, Line, KakaoTalk, Airbnb, Lyft, or taxi applications? Have you ever understood that during that whole process, there’s some element of communications there, be it an SMS message received by the drivers outside (referring to the taxi apps), or a short code that you receive when you sign up for the app – well we do all that. It’s communications for every app.”
Apps like WhatsApp and Tencent’s WeChat, what the industry terms as ‘over-the-top’ (OTT) applications, have clearly disrupted the traditional SMS market. Telecom carriers have seen their SMS revenue decline due to these messaging apps that are mainstays on today’s smartphones.
Yet each time a new user activates these chat services on a device, SMS messages are generated, and that traffic is routed through companies like Nexmo, back to the carrier networks. And so the race is on to tie up with as many carriers as possible.
“It’s almost always better to be carrier-friendly than carrier-disruptive when you’re building an infrastructure company,” Healy explained. “If you’re not marketing to the consumer, you should try and partner with the carrier if possible.”
That strategy has resulted in Nexmo securing 1,700 network end-points over the past few years, with 270 unique contracts with telecom operators around the world.
And while this won’t completely replace the carrier’s lost SMS revenue, Healy believes that now they have the chance to participate in the new economy directly, through Application-to-Person (A2P) communications.
“At least we can help the carrier keep the interaction on their network”, he added.
The larger potential however, lies with enterprise applications. Similar to how corporates are shifting part of their IT infrastructure to the cloud, many of these companies are also considering ways to enhance their telecommunications infrastructure with cloud-based communications applications.
According to Jamous, consumers themselves are driving the change within the enterprise.
“For example, you’re an airline company – you have a multi-channel strategy, you’re using in-bound calling to call your call centre, you’re using social to connect through Twitter with your customers and users, while your users today are asking you – I want to reach you over WeChat.
“But how they’re going to implement that into their business processes and the application is going to be very specific to their business. We call it the emergence of in-context communications,” he added.
With the pay-as-you-go model, companies could also see significant savings compared with investing in or upgrading their traditional phone systems, turning what is traditionally a capital-intensive fixed business cost into an on-demand operating expense.
However, that switch is not happening as fast as expected. Jamous believes that while a small number of companies are adopting cloud communications in their business processes, the majority of the uptake will happen over the next three to four years.
Part of that is due to an education process that’s needed, to help companies understand the whole API model.
The other is ensuring that the service meets government data privacy policies. Some countries, such as Singapore, require the physical servers of cloud-based services to be located within the country itself.
“We can make sure the communications and data doesn’t leave the country,” Jamous said.
And that partly explains why Nexmo is beefing up its staff strength here. It currently employs 100 people worldwide, but 70 of them were hired in 2014 alone. Looks like 2015 will see a similar uptick in new talent for the rising startup.
APAC Unified Communications as a Service market prospers: IDC
Embrace API development to boost UC: Tata Communications
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