8x8 (EGHT 21.28, +0.18, +0.83%), a provider of VoIP services to business
customers, has been bouncing back in recent weeks after a sell-off in late May
on a disappointing Q4 (Mar) earnings report. 8x8 is a play on a technology
shift that is occurring in business communications where enterprises are
increasingly replacing costly and unwieldy on-premises communications equipment
with agile, cloud-based software services delivered over the public Internet.
In simple terms, what 8x8 has essentially done is combine a
phone, a meeting, a collaboration, and a contact center onto one platform.
That's not easy to do because in essence, these technologies are very
dissimilar. By integrating all of them, the platform achieves a richness of
data and analytics that allows clients to inform their businesses and a
unification of the experiences of both their employees and their customers.
8x8's "pure-cloud" offering combines voice,
conferencing, messaging, and video with integrated workflows and big data
analytics on a single platform. For example, a user who initiates a voice call
on a desk phone and then needs to leave the office can seamlessly transfer the
call to a mobile device without the person they are communicating with being
aware that the user is no longer at his or her desk.
The rapid rise of mobile devices as sites for conducting business
has created demand for "bring your own device," or BYOD, enabling capabilities in the workplace.
Additionally, companies are looking to integrate ERP (Enterprise Resource
Planning), CRM (Customer Relationship Management), and HCM (Human Capital
Management) applications within their communications infrastructures.
That business environment and culture can render on-premises
communications systems, like those offered traditionally by legacy hardware
vendors, poorly suited to meet evolving needs. In addition to being difficult
to deploy and expensive to maintain while spanning multiple locations, these
hardware systems may not provide the mobility, resiliency, and continuity
capabilities that customers require. BYOD demands from employees complicate the delivery of a company-wide communication system, forcing provisional
adaptations that may result in patchwork communications systems laden with security
risks. Security compliance in this environment is extremely difficult.
Because of these inadequacies and security risks, more and
more businesses are moving to enterprise-class cloud platforms like the platform
offered by 8x8. To provide ease of availability and compatibility, 8x8 delivers
its software via all major Internet browsers and on leading mobile devices.
Virtually all of its customers do not need to specifically dedicate any
equipment, employees, or carriers to be able to work 8x8’s offerings -- nothing
more is required than Internet connectivity and a subscription to the 8x8
service.
A key strategy for EGHT has been to go upstream to larger
customers. In the just completed FY18, service revenue from mid-market and
enterprise customers increased 29% year/year and represented 58% of total
service revenue. The success here was helped by EGHT splitting its sales
operation into two separate business units -- Small Business and eCommerce,
aimed at businesses with 1-99 employees, and Mid-market and Enterprise, aimed
at businesses with 100 or more employees. This has helped each segment focus
better on its market niche.
Looking ahead, EGHT said at a recent investment conference
that it's seeing a classic adoption cycle in action. Large on-premise vendors
are now producing cloud offerings, which means they've all decided that it’s
time for on-premise operations to move to the cloud. 8x8 is one of the leaders
in the cloud and is poised to utilize that position amid growing demand.
As a note, the stock’s recovery from the hit taken after the
MarQ report, can be partly attributed to its CEO using the dip to scoop up more
shares (acquired 7,700 shares at $18.15-18.30 for approx. $200K).