The evolution of communications presents many opportunities for Gamma and we have the strength to be able to take on each of these opportunities.
and we are well placed to provide our products and services to new and existing customers.
which presents us with an opportunity to grow European revenues as the market evolves.
present us with an opportunity to both upsell and improve ARPU over our cloud telephony customer base.
e.g. evolution of SIP is an opportunity to increase ARPU as customers move to higher value solutions.
as more organisations “voice enable” their solution, we have the opportunity to gain revenue.
Over 60% of businesses in the UK still have a physical, or on-premise, telephony systems, rather than a cloud-based software solution. Over the course of the next four or five years, the number who have migrated to a cloud solution, is expected to more than double from Q2 2022 40% UCaaS penetration to 88% by 2026.
This change is being driven, in part, by the withdrawal of the analogue telephone network (Public switched telephone network or PSTN), which requires all users of a legacy service to upgrade their connectivity and voice services. The UK market for our products will continue to expand and we are well positioned to capture this significant opportunity.
How we capitalise
We have an existing strong and complete product set and a range of wrap-around services to address this market. We continue to develop and acquire new capabilities to complement these services and make our portfolio and offering more attractive and valuable.
The individual markets in Europe are at different stages of maturity and adoption but are less mature than the UK market. Each market is evolving along its own path, depending on its current position, the state of technology in each country and the relative behaviour of businesses and consumers within the market.
The differing paths of evolution for the markets and the diversity this creates allows some protection from any specific fluctuations in any particular market.
The business and communication need which Gamma addresses in each market are broadly similar, which allows an efficiency in how we approach these opportunities.
The projected growth rates are lower than previously forecast but the overall market size remains significant even if it will take longer to achieve sizeable revenues. Germany is the largest single European market and yet by 2026 it will still be less penetrated than UK is today. Growth in Europe will continue for more than 10 years.
How we capitalise
Gamma is building and developing a set of common products to address customer needs on a pan-European basis; leveraging our growing in-house development capability and historical expertise in offering telecoms services. This blends the best of our historical strength supplemented by the new capabilities that we have brought into the business through our acquisitions.
We have already begun to assemble crossborder teams who are working together to successfully launch products developed in the UK overseas (for example Microsoft Operator Connect in the Netherlands and CircleLoop in the Netherlands and Germany).
We continue to evaluate opportunities to grow by acquisition either into new geographies or to augment the sales channels and scale what we have in the countries in which we already operate. Gamma’s acquisition of NeoTel, in Spain, during 2022 will help increase density in country.
Our behaviours as consumers and as employees are changing the demands that we are placing on the companies we do business with and the companies we work for. Communication needs are evolving and driving a need for a broader range of services across all businesses.
Whilst the telephone is still the most important form, we use many more forms of communication than ever to communicate with businesses we interact with. In increasingly competitive times, all businesses are having to embrace more communication forms to ensure they are “open for business” to their customers.
Gamma provides these multi-channel services to SMEs through our own applications and combines more complex contact centre solutions into our customer solutions for larger companies.
The pandemic and the move to working from anywhere has left lasting changes on our expectations as employees. We demand more tools that allow us to work effectively wherever we and our colleagues are. That may be by video conferencing, messaging or file sharing.
How we capitalise
Since 2006, Gamma has sold a core Cloud PBX solution called Horizon – a product which now has 751,000 users in the UK. Over the course of the last three years our in-house team has developed a number of additional modules that are fully integrated with that core Cloud PBX; these are call recording, Horizon Collaborate, Microsoft Teams Integration and Multi-Channel Communications (contact centre functionality).
Each of the above modules were built by our in-house development team; each is sold on a “per month/per seat” basis and provides us with a recurring revenue stream. When we sell these additional modules alongside the core Horizon product, it increases the ARPU of a Horizon seat.
The telecommunications market is evolving the core technologies that support and underpin it. It is mirroring the changes in the wider technology market and moving away from physical infrastructure and analogue services, like an on-premise PBX, to internet based applications.
This is accelerated by specific drivers like the removal of the analogue telephone network in the UK and the continued evolution and roll out of services like 5G in the mobile market.
This is driving the need for evolution in all businesses as they react to both the economic and performance benefits that these services bring. This is also allowing them to assess how to better meet the needs of their business.
A specific example of this is the evolution of the SIP market, where the increasing adoption of cloud-based services is changing the nature of the service a business needs and is driving adoption of new types of services.
How we capitalise
Gamma is a market leader in the provision of SIP services in the UK and Germany. SIP is a product which itself is replacing an alternative underlying technology (ISDN).
As the market evolves we see customers converting from ISDN to SIP or to cloud services. This will drive growth in both those “destinations” and Gamma will continue to win a share of that business. As we have not been a provider of ISDN historically this migration generates new revenue for Gamma. The SIP market has evolved and we now sell different variants of SIP.
If customers move directly to a cloud service they will consider Gamma’s own Horizon Cloud PBX product or a service based around Microsoft Teams (Direct Routing or Operator Connect). All of these have a higher ARPU than the originating product.
Even if a customer chooses to migrate to a competing cloud service, Gamma provides underlying interconnects to a number of our application competitors and so we will still retain some benefit.
Collectively, this range of offers means that Gamma continues to have a revenue opportunity on whatever route businesses take on their forced migration from ISDN.
Microsoft Teams is a software tool which facilitates collaborative working. It allows users to contact others in their own network and to schedule video calls, share messages and presence. Without support from a carrier such as Gamma it does not allow users to make and receive external calls from the PSTN and nor does it have normal PBX functionality (for example, voicemail, hunt groups, call forwarding etc). The growth in the number of users of Microsoft Teams provides Gamma with a number of opportunities to grow revenue.
Microsoft Teams is most prevalent at the higher end of the SME space and in large enterprises and public sector bodies.
Carriers like Gamma are working with Microsoft to provide voice enablement services within Teams to allow customers that want to work within Teams to make and receive telephone calls. There are a number of ways it is possible to provide this, including Direct Routing and Operator Connect.
How we capitalise
Voice enablement of Microsoft Teams is provided by variants of SIP products. Gamma is a market leader in the SIP market and has been able to develop the full range of services to enable Teams users to make and receive telephone calls. Gamma are a Microsoft Solutions Partner for Modern Work and Specialist in calling for Microsoft Teams.
We provide both Direct Routing and Operator Connect services. We are an Operator Connect provider in the UK and the Netherlands. Notably, in the UK we are one of only two providers that can sell Operator Connect for Microsoft Teams through the indirect channel.
Through our acquisition of Exactive we are able to perform complex integrations of Microsoft Teams with other platforms. Where customers want Microsoft Teams with a fully integrated PBX capability we are also able to integrate our Horizon Cloud PBX product with Teams.