After observing its revenue skyrocket throughout the 2020 fiscal year, Zoom has announced its latest acquisition—a $14.7 billion all-stock purchase of Five9 which is a cloud-based contact center software provider. 

The deal, which is one of the largest U.S. enterprise software transactions on record, will grant Zoom the opportunity to expand its product offerings for business and enterprise customers.

Zoom's massive revenue boom during the pandemic

Zoom Video Communications, founded in 2011, has become a household name as video conferencing software became a critical tool for businesses over the past year. In a single year—2020—its market capitalization increased by 413%. 

While the company’s revenue growth is still high, it has slowed down a bit since last October when it reached its peak value at $159 billion. Zoom’s foray into the customer service software market (which is at $24 billion) will provide additional growth opportunities for the video conferencing giant. Zoom’s relationship with Five9 is nothing new—the two have been long-standing partners and will continue to maintain a partnership ecosystem after the acquisition is complete. 

Five9 amplifies Zoom's offerings to enterprise customers

Five9, which was founded in 2001, processes over 7 billion minutes of calls annually.

This acquisition is beneficial for both parties as Zoom will be able to mark its entry into the contact center as a service (CCaaS) space, and, Five9 will be able to get access to a new kind of buyer and thus expand its customer base. This would also bring significant cross-selling opportunities for both companies. With the growing demand for all-in-one solutions, the combination of (unified communication as a service (UCaaS) provided by Zoom phone and CCaaS provided by Five9 could make a good combination and result in exponential growth for both the companies. 

Rowan Trollope, CEO of Five9, had the following to say about the acquisition:

"Zoom’s reach and brand will undoubtedly help propel Five9 forward and help us deliver on our goal of significant international expansion. In the same breath, I truly believe that Five9 is a natural fit that will complement Zoom’s broad cloud communications portfolio.”

The pandemic is shaping mergers and acquisitions in the tech industry

Since the pandemic, many businesses have pivoted to a flexible or remote workforce. Naturally, these changes come with challenges, particularly for industries that rely heavily on call centers for customer support. Call centers, which traditionally operate via landlines, are shifting to cloud-based solutions that provide flexibility and scalability to enterprise customers. 

Zoom’s acquisition of Five9 is a logical way to diversify its product offerings and position itself for the future as more companies pivot to cloud-based work.  According to Zoom CEO, Eric Yuan, “The trend towards a hybrid workforce has accelerated over the last year, advancing contact centers’ shift to the cloud and increasing demand by customers for customized and personalized experiences.”

Zoom isn’t the only company looking to enhance and scale its video conferencing product offerings through acquisition. In a recent announcement, Microsoft disclosed the acquisition of Peer5, a WebRTC-based electronic content delivery network (eCDN) vendor, with the goal of boosting its live-streaming capabilities in Microsoft Teams. 

Nicole Herskowitz, a GM at Microsoft says:

“...large organizations need reliable enterprise video streaming solutions. electronic content delivery networks (eCDN) can alleviate limited corporate network downlink bandwidth to deliver high-quality video streaming and broadcasting for large audiences of employees.”

This is another example of ways in which the pandemic is continuing to shape the product offerings and market representation of companies in the tech industry.