8x8 buys Fuze to expand UCaaS customer base

8x8 intends to buy Fuze to gain customers and keep up with Cisco, RingCentral and Microsoft in a tightly competitive cloud communications market.

8x8 announced on Wednesday its plans to acquire unified communications as a service (UCaas) provider Fuze for $250 million. 8x8 CEO Dave Sipes said the deal would expand the company's customer base and improve its XCaaS product. The company touts XCaaS as combining UCaaS, contact center as a service, and communications platform as a service into a single platform.

Dave Sipes

"The migration to cloud-based communications and engagement is accelerating as organizations worldwide shift to hybrid work models, creating a multi-billion-dollar opportunity," Sipes said in a statement.

Fuze CEO Brian Day said the deal would help the combined company take advantage of hybrid work-driven interest in cloud communications.

"Combining resources and expertise with 8x8 is a natural fit, bringing with it needed scale and accelerating the pace of product innovation with differentiated solutions that capitalize on this massive opportunity," he said in a statement.

Raul Castanon, an analyst at 451 Research, said a key driver for the deal is 8x8's desire to grow its international footprint and gain additional customers.

"[The deal] should help 8x8 expand its enterprise customer base and global presence, especially in continental Europe, where Fuze has gained significant traction in recent years," he said.

Industry observers said the acquisition will let 8x8 add features at the same pace as other UCaaS providers like Microsoft, Cisco, Dialpad and RingCentral. Keeping technological parity is vital in what has become an increasingly competitive market.

"[The deal] provides key research and development and engineering capabilities that will help accelerate 8x8's feature coverage in this strategically important market," said Constellation Research analyst Dion Hinchcliffe.

Gartner analyst Christopher Trueman said Fuze is an "excellent fit" for 8x8's expanding R&D efforts because the companies use the same development methodologies and programming languages.

Gartner has featured both companies in its 2021 UCaaS Magic Quadrant. Gartner ranked 8x8 as a market leader but noted that it lagged RingCentral, Microsoft and Zoom in customer growth. Gartner researchers said Fuze is a visionary in the space with a worldwide customer base but added that its brand recognition was low compared with its competition.

8x8 intends to fund the deal with $130 million in cash and $120 million in stock. The company expects to close the deal by the end of its fourth fiscal quarter in early 2022.

Mike Gleason is a reporter covering unified communications and collaboration tools. He previously covered communities in the MetroWest region of Massachusetts for the Milford Daily News, Walpole Times, Sharon Advocate and Medfield Press. He has also worked for newspapers in central Massachusetts and southwestern Vermont and served as a local editor for Patch. He can be found on Twitter at @MGleason_TT.