Vonage Buys VoIP Firm Vocalocity In Effort To Crack SMB Market

The deal, which was inked on Thursday, is worth $105 million in cash and $25 million in Vonage stock. Vonage said the deal has been approved by both companies.

Atlanta-based Vocalocity provides VoIP phone systems to small businesses with fewer than 50 employees. In addition to Internet-based phone service, Vocalocity offers data analytics services as well as supplying companies with data mining and call monitoring software.

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"Vonage is mostly a consumer-based voice over IP phone business. They haven't had as much success in the business market. That's why Vonage is acquiring Vocalocity. They want to start seeing the same kind of success in their business side," said telecom industry analyst Jeff Kagan.

Vocalocity's virtual PBX service differs from competing telecom offerings such as Cisco's Unified Communications service that relies on on-premise routers and servers. Vocalocity and Vonage offer so-called fixed VoIP services, a market expected to grow 10 percent in the U.S. between 2012 and 2016, according to a report by Research and Markets. Vonage sizes up the total SMB market for voice service in North America at $15 billion.

AT&T, Verizon, CenturyLink, Windstream and TW Telecom have been heavily investing in building next-generation telecom infrastructure along with smaller players such as RingCentral. Vonage, Kagan said, has struggled for years to break into the business market. With Vocalocity, it gets the head start it needs, he said.

The convergence of the IT and telecom channels was a major theme at industry event Intelisys Channel Connect conference held in San Francisco this week. CRN reported Intelisys, a master agent that has predominantly sold through the telecom agent channel, has seen a jump in the number of IT solution providers in its partner base. Intelisys said that IT solution providers account for 57 percent of the new partners it has brought on this year.

Illinois-based VoIP reseller and ISP Network Business Systems co-owner Shawn Anderson said he's approached Vonage in the past as a potential reseller to the business he serves but without any luck. "I'm impressed with Vonage's quality of service," Anderson said. Anderson and other resellers say they have been stymied by Vonage's lack of business offerings.

Vonage messaging to resellers suggest a more robust business solution is coming soon.

"Vonage has always been able to provide phone service for small office and home office customers who need one or two phone lines for their business. With the addition of Vocalocity, the company will also be able to provide phone service for small and medium size business customers who need more than two lines," wrote Vonage to resellers.

PUBLISHED OCT. 11, 2013