Okay. Thanks everybody for joining us today, those here with us in New York and those joining us on the webcast online. We got a lot of content to share with you today, a lot of great new information. Before we begin, a couple of housekeeping items. First, we're going to be making some forward-looking statements. Those statements are subject to risks and uncertainties. For more information, please see our filings on our investor relations website. With that out of the way, let's get right into the agenda for the day. We're going to start off today with our Founder and CEO, Vlad Shmunis. He's going to talk about the opportunity that's in front of us and the progress we're making towards capturing that opportunity.
We're going to go to David Sipes, our COO, and he's going to talk about our industry leadership, covering innovation, competition, and go-to-market strategy. We'll have a demo from our VP of Product, José Pastor. We'll take a quick break, and when we come back, we'll shift our focus externally and hear from our customers and our partners about why they choose to work with RingCentral. We'll wrap up the day with our CFO, Mitesh Dhruv, who's going to talk about the financial model, and we'll leave some time for Q&A at the very end. That's a lot of content to get through, so at the beginning, I thought we'd start off with a quick summary of what we hope will be your key takeaways from the day. The first is the opportunity.
Certainly the size of it, the $50-plus billion opportunity, but also the progress that we're making. It's still early in the evolution of this opportunity. Second is innovation. You've seen the $ that we've invested in R&D. We want to make that investment more tangible for you and show you the products that we're developing and the value that we're delivering to customers. It's fundamental to why we are winning. Lastly, compelling financial model. You're all familiar with the SaaS economic model. You've seen our revenue growth. You've seen our core revenue growth accelerate, and we're going to dive into what was driving that acceleration and how efficiently we're turning sales and marketing $ into profitable revenue growth. With that, let's go ahead and kick off the day and bring up on the stage Founder, CEO, Chairman Vlad Shmunis.
The eight days a week part is a pleasant surprise. It brings it home really. Well, thank you everyone for joining us for our second annual investor conference. Some new faces, some familiar faces here. I'll give you a little bit of an overview of why I think we're here and we'll take it from there. This is one of the people I personally admire. Perhaps he has some other fans in this room. Sir Richard Branson says that employees come first, and if you take care of your employees, they will take care of your clients, your customers. If your customers are happy, that makes for happy businesses. That's what RingCentral does, is we help businesses optimize productivity for their employees. Why are we here?
We're here because there have been some pretty substantial changes in the way that businesses work and in the way that people communicate. If you look at this chart here, world population has been rising gradually, for the last, what, 13 years now. The red line that slopes to the right is use of landlines across the globe. Even though we're dealing with rising population, use of landlines is actually on the decrease. Of course, the line in the middle, bright blue there, is use of mobile devices. These trends apply to consumer behavior as well as to business behavior. This is really one of the things that is perhaps the least understood about RingCentral and what we're here to do. We're not here to just replace legacy landline business devices, business phone lines.
We're here to completely reimagine the way in which businesses and business people communicate, given the realities of mobile global workforces. Legacy, as you can tell, is designed for the old world. These are actually the types of systems that we're replacing day in and day out. Nothing wrong with them. They work, but they're old. They're not mobile. They're not extendable. They don't integrate well with anything in particular. They're just here to light up these fairly dated-looking desktop devices. Again, reality is very different. People are working on a multitude of devices. They're working from multitude of locations, and they are multimodal. We're talking about not just voice, but many other modalities of communications beyond that, and we'll double-click on that in a few minutes.
This is from industry data here, yes, voice is still leading, as you can see 44%
Of business communications is still done via voice. Coming up is team messaging and collaboration. People familiar with our story know that RingCentral differentiates on being the only provider with fully scaled-up business communications telephony, as well as team messaging and collaboration in the cloud. Close behind is business texting, SMS. RingCentral actually led the way there a few years ago. We were the first provider with business SMS available through the cloud on the same phone number that voice communications is associated with, and this is something we all take for granted in the consumer space. In business, believe it or not, it is fairly innovative. Still lagging, but coming up very fast at this point is video and web conferencing, and RingCentral is offering a fully integrated video and web conferencing solution, which has a tremendous uptake in our customer base. UCaaS.
This is our vision. This happens to be Gartner's vision as well. I think most people agree it is really about multitudes of devices, multitude of locations, and any modality. Again, the best way, and frankly, the only way that we know how to address this is with a global multi-tenant cloud solution such as RingCentral is providing. Here are some new data, especially that for people who've seen myself and other RingCentral folks speak before, this is a little bit of peeling the onion here. What you see here are our top 15 accounts by the number of seats deployed. Okay? These are all very large accounts now. All of them invariably use our voice PBX features. That's table stakes for us, taken for granted.
Very interestingly, if you go left to right here, as you can see, majority of this, vast majority, we're talking about 11 out of 15 are heavy mobile users. Okay? In addition to landline telephony, we're talking about mobility. Again, vast majority is using our Glip team messaging and collaboration. People have been asking for some time now is, "Well, how is Glip doing?" We go, "It's doing well, very well." Here is a proof point. 10 out of top 15 customers, two-thirds are using Glip messaging and collaboration. It is my personal belief that we would not have majority of those accounts if we did not have Glip as an integral part of our suite. Okay? Next along is video. Video web conferencing is again, big part of RingCentral. We are doing this in partnership with Zoom.
We believe that they have industry's best cloud-based web conferencing solution totally eating Cisco's and Webex's lunch at this point. We have a differentiated integration with them, actually one that we're hosting, and as you can see, a tremendous uptake with our key customers. Next down the line is contact center. Again, our solutions has been to partner with the absolute industry leader, which is inContact. As you can see, this integrated solution has been extremely well received by the customer base. Last, very much not least, is our open platform. Again, it's a little bit hard to quantify. We try to provide some reference points such as number of developers we have on the platform, which is over 10,000, number of applications, which is over 1,000, growth quarter-over-quarter, year-over-year, which is all in triple digits.
As you can see by the key customer update, it has been very much an integral part of the decision process. Okay. When in turn people go, "Okay, well, why RingCentral? Why do you win?" That's the answer. We are the only provider out there that is able to deliver quality services, and functionalities across all of these modalities. Numbers speak for themselves. Again, let's go left to right here. Leftmost is our voice minutes usage growth, and it is more or less in line with our revenue growth as a company, outpacing a little bit as we're getting into larger accounts, there is heavier usage. If we have our core business grew at 37% last quarter year-over-year, and as you can see, voice is a little bit ahead of that.
Very interestingly, it is the only modality that is growing in double digits for us. Everything else is triple digits. Again, let me just walk through this. Platform a little bit over 100%, video outpacing over 100%, Glip messaging collaboration, again, a little bit above 100%, mobility clearly outpacing, so you can see that mobile use with RingCentral mobile minutes are outpacing landline by better than 3 to 1. Interestingly enough, contact center is just taking off like a rocket. This is the under spinning of the overall landscape. Some of you have seen the slide before. We do update it religiously quarter-over-quarter, and the numbers are holding up. On-premise is declining. Cisco is declining, Avaya is declining, Mitel is declining, so forth. Why is that? For the reason stated.
The world has moved on, world is mobile, these guys are all stuck in the world of connected wired landlines. Cloud's winning. RingCentral is winning in the cloud by a substantial margin. That gap is increasing. Again, we are very much reliant on technology, on product, and on innovation to deliver our differentiation. Some of you have seen this slide before, usually like to include it to show that we are simply clobbering our authentication in our R&D spend. Based on that, our growth is meaningfully above our next competitors on a much larger base now. We expect this trend to continue. We feel that it would be virtually impossible for anyone at this point, for many of our peers or near peers, to catch up with us on innovation and our commitment there. Okay. In summary, why we win.
Our solution is user-centric and mobile-centric, that's from the get-go, or from the initial inception of the company. Our solution is much more than just about voice, messaging, collaboration, video, contact center, et cetera, open platform. These are all unique differentiators. The last two are absolutely objective. There is simply no one out there who can claim an open platform or an integrated messaging and voice and team collaboration suite. Industry analysts tend to agree. Last year, we won every major award in the industry outright, as well as we've been leading the Gartner Magic Quadrant for three years in a row now. We're in the middle of our next submission, keeping fingers crossed that trend will continue as well. We have some very nice logos. This is just a subset.
We have many more companies that are household names that we're, at this point, not able to share by name. We continue winning major deals. We continue winning 7-digit TCV accounts. The last quarter that we reported on, which was Q4 last year, was our record quarter. I can tell you that trend is continuing. We're seeing increased momentum in the large enterprise. Here's the best news. With all of the success, the best is yet to come. If you look at market as a whole, there is about 5 million UCaaS seats currently deployed. Okay? RingCentral is the absolute leader with, call it about 25% market share. Again, growing. The gap is increasing. In the big scheme of things, it's very early.
U.S. market is estimated at 100 million seats, so that'd be about a $25 billion opportunity in the U.S. alone. If you look at global, you can approximately double that again. A very large market, okay? It's very early. We've talked about our billion-dollar revenue goal by 2020. 2020 is just around the corner here. We feel very good about getting there. Our table stakes and what the approach we're taking is it starts with the product. We'll talk a lot more about the product as the day goes today. We've invested heavily into our direct channels. We have a fairly scaled-up sales force in the mid-market now, and we have a very good beginning in the enterprise. Still work in progress. Lots to do as far as building it out further.
We have very good metrics in place now, and good appreciation of what it takes to now double and triple our direct GTM and do that in a profitable and predictable manner. Okay. Channel growth. This has been, I shouldn't say a pleasant surprise. We were hoping for good results, frankly, it has outpaced expectations. It's a fairly new motion for us to deal with VARs and resellers. It's been immensely successful, we'll provide you more information on that as the day goes. Global expansion. We would not be able to achieve this current state of affairs if we didn't have our global office product. We are offering native dial tone in 37 countries, we are winning major global enterprises based on the fact that we are able to cover their entire footprint with a single cloud-based implementation.
With all of this, we feel very positive about our billion-dollar goal in 2020, which is just now two years away. It's just the beginning. What's beyond? We're not going to stop at a billion. We think that this company can become a lot larger. How are we going to get there? Here, we're starting at a billion. Look, we see an opportunity to do substantially more harvesting of the user base than we have already. We are only 40% penetrated into our current accounts. By the way, for example, Avery Dennison, one household name, about 30,000-person organization, we actually have about a quarter of that opportunity deployed. A little bit under 10,000 seats. By the way, they started out not with thousands, but literally with a few dozen seats. We're into thousands now.
Hopefully, we'll get to address their entire base. This is just one example. Some new motions we're considering here is additional vertical targeting. We are seeing a few verticals that are now beginning to take shape for us. They are healthcare, financial, and hospitality. We have major wins in each of those verticals. We think that those successes are repeatable. We have some technological advantages. For example, in being standards compliant, FINRA for finance, HIPAA for healthcare. As we move forward, we expect to verticalize and do so with a bit more conviction. Next initiative for us is laser focusing on large enterprise. I don't think it's any secret to anyone who's followed us since the beginning, because this company started as a SOHO provider. We moved into SMB. We're now pretty successful with lower-end enterprises. When I say lower end, 5,000 to 10,000 seats.
We're seeing a tremendous opportunity with now true enterprises, with global leaders. Addressing Global 2000 is an initiative that we have formulated. It's going to take some time. We're just now beginning to seed those teams. If at all possible next earnings call we do and people come to me and say, "Well, Vlad, you said you'll do Global 2000, so how many of Global 2000 do you have?" Very fair question, but problem was for next quarter or the one after that. These are going to be longer sales cycles, but certainly as we cross the billion-dollar mark, we should have a reasonable following in those communities. Okay. We start with the product, we'll end with the product. Growing our platform, growing the ecosystem, better integrations, serving more systems, more people develop for RingCentral, develop with RingCentral.
We feel very confident that this is a reasonable and achievable roadmap for us, and that it will get us into multiples of billions of dollars of revenue within foreseeable future. Okay. Last slide for me, at least. The team. We haven't talked about our team much in public, but that is a secret weapon, is the people we have. You can look at some nice logos, extremely good-looking faces as well to go with the logos. The one piece of data here I really want to highlight is we have a seasoned team and a team that's been proven to work well together. We have a number of folks outside of myself even who've been together for over a decade, Praful in particular that many of you know. Dave Sipes, our COO, who'll be speaking next. Ryan leads our sales and customer care.
Almost 10 years and so forth. Mitesh is relatively new with the team, our CFO for only six years. I actually don't know that there is another team in our space that can enjoy this type of cohesiveness and loyalty, frankly. We think that teams that play well together win games. I realize I'm in New York here, not San Francisco, but Warriors have been together for a number of years before getting on the track they're currently on. Yeah, we think we are in a good space. Obviously, we had a very successful 2017. Very successful Q1 2018 as well. Again, all I can say, I truly believe this is just the beginning. Hopefully, the rest of the day will convince all of you that our vision will hold up. Again, thank you. With that, I'd like to introduce Dave Sipes.
Thanks a lot. Hi, welcome. I get to speak about industry leadership today, which sounds a little audacious on the surface, but if you are in a category long enough or you are first in category, I guess you are always an industry leader, having been here 10 years. I think what is audacious is really how much the industry, the cloud has grown and as the product set has expanded, and I think that is why we get this kind of crowd today. I am going to talk a little bit about that. First one, quick clarification, when Vlad talks about the install-based opportunity, the 40% he mentioned was the % of new bookings that we get from upsell.
The opportunity to further penetrate existing accounts and our largest existing accounts is even a larger opportunity that Mitesh will cover, but it is about 10%-15% of our largest accounts are currently penetrated with RingCentral services. Let's see how we got here with expansion of the product. We have always been focused on innovation, and if we look back over time, originally we were just cloud PBX and internet fax, and if we had stayed that way, this would not be that interesting today. Obviously, we have evolved over time. In 2014, we started our enterprise journey in building enterprise capabilities, which is largely complete at this time. Obviously, we continue to build out additional capabilities as we bring on additional large enterprises.
We also, that year, brought on our video and web meetings with a partner who at the time no one had heard of, but has been a tremendous success for us. In 2015, we continued that route. It was a big year. We added Contact Center partnership and added that to the portfolio, as well as we made our first and really only acquisition, which was Glip, our team messaging and collaboration. A little ahead of its time and has been a great addition to the platform. We started our open platform initiative, which you will see has made a big difference in the capabilities of the product and ability to integrate it easily into your enterprise workflows.
In 2016, we took that Glip capability and started integrating it with the PBX functionality, as well as we launched our Global Office initiative, which took us to many countries around the world and allowed us to service multinational corporations with one service and one provider. Last year, we started capitalizing on all the data that we are gathering for our customers, launching live reports, launching usage dashboards for our customers, and having really the only quality of service analytics capability that shows back to our customers the capabilities of our global media platform. This year, we are only not even halfway through, but we have already launched several new products. These are all around collaboration, bringing collaborative meetings, which brings team messaging and collaboration with video and web meetings, Collaborative Contact Center, and I will go into that a little bit more, as well as Pulse.
You can see the trajectory has allowed us to have a multifaceted suite of capabilities, and you'll see then the theme is customers are adopting multiple elements, as you saw in Vlad's slides with the triple-digit increase and a lot of adoption of these capabilities. When we think about the core product suite as taking that PBX, team messaging, video web meetings, and Contact Center, and how do we bring that in a differentiated way to the marketplace? A lot of it is how do we integrate these capabilities seamlessly for the customer? Customers feel like they want to have a single platform. They feel it's going to make their employees more productive, it makes their organization more effective when they incorporate it into their workflows, and it allows their employees to connect better. We started out with the world's first mobile PBX.
All the enterprise capabilities of a PBX on your mobile phone. Transfer, park, hold, all those elements, that now allowed the current employees who wanted to be mobile and distributed and global to be able to work the way they want to work. We took it a step beyond. Now we've incorporated that enterprise capability mobile PBX and brought in the team messaging and collaboration. We brought it into one application that's available to customers today. It's what we use internally at RingCentral, but it brings together the calling, voicemail, messaging into your team messaging environment that works across any device. What's the next step to bring that suite together? Is taking video, this is the future that we're working on, to bring this into a unified application. Enterprises only deploy once, customers only access one application.
It makes it easier for the end user. It's what the end users are telling us they want. It also allows for quicker adoption of multiple services to our customers. We talked about these categories coming together. We believe we're executing on it best in the marketplace today with enterprise voice capabilities combined with team messaging and video. Where else can we bring the suite of products together? Collaborative Contact Center is taking team messaging and RingCentral Contact Center and bringing those capabilities together. How does that work? Think about an agent skill set team that lives in the Contact Center and is evolving over time as you bring on different agents over time. We dynamically sync that team with a team messaging collaboration team. Why is that important?
One, it allows those agents to talk to each other, to access experts within their own group, to get quick answers to questions that they may be facing, to raise issues that are coming up real time amongst their core skill set group. Additionally, it allows the organization to talk to their agents, which have historically been a segregated element of the organization. If you are the head of customer support and you want to talk to them, now you can do it through these integration. If you're building training materials for certain agents, you can push that out through the file attachment and sharing document capability that you have in team messaging and collaboration. It really starts integrating these disparate applications and bringing it into a single unified platform. Additionally, we announced Pulse.
Pulse takes the RingCentral Contact Center, it's our technology that monitors the contact center performance and allows to create an alerting mechanism for the rest of the organization. The way this works, through APIs, we have a GUI that allows you to select any of a number of KPI categories in the contact center, say six or seven different categories. You might have 10 to 15 KPIs under each. You can pick a performance level. You can pick a threshold that you want to get alerted if it drops below, for instance. You pick the information that you're going to want to be delivered of what's happening at that time in the contact center. You pick a distribution group, which could be yourself, could be another individual, could be multiple individuals, could be a team, could be multiple teams, and a frequency.
This allows something that historically has been just maybe a shift manager in the contact center that's focused on a proprietary console that sees the performance of the contact center. Now you can broaden that information, send it to the head of customer support, the head of IT, send it to the executive suite, it really starts flattening the organization. That's Pulse, that's how we're differentiating this product suite in the marketplace. Beyond integrating those four key applications, we're building this on a single open platform and a global capability. This is something we've been able to magnify. You saw our R&D spend and how that's accelerating, but being able to spend it on single platform, organically grown business allows us to magnify the capability of that spend.
On the open platform, which I mentioned we started three years ago, it's doubling, as we saw in Vlad, over 100% growth. We have now over 12,000 developers on the platform, over 1,000 certified applications. We have an app store on our website. Why is that important for our customers? Because it allows our customers who have traditionally had to do these integrations themselves through professional services into CRMs or other applications with their phone system. They used to call it CTI, computer telephony integration. Cost a good $5 million to perform one of them. Only the Fortune 500 could afford it. Now, all organizations with any of these other cloud applications, we have these out of the box. We didn't program all these. We programmed only a dozen or so. Our ecosystem is out there coding these and publishing onto our website.
We're also doing this in a global environment, which really hasn't been done previously, as you've had to have a hardware capability but also have a service provider in every country, which is typically one per country. What might have been 30 different vendors historically in different SLAs and managing capacity and having people on site to actually hook things up, we provide it as one application, one service, centrally managed, globally deployed, instantly provisioned in any of these countries. It's a watershed change on how people look at the category, you'll see in some of the replacements that I'll talk about how people have had to have different solutions in different regions, and now they're bringing it under one roof with RingCentral. The other thing that global and platforms allowed us to do is publish things like our global quality of service analytics.
José's going to go into this in a little detail, but this is a very complex high-data environment with a lot of different sources of data, with different endpoints that we publish between mobile apps, soft phone apps, phones and endpoints, our SBCs. We collect all this information. We actually even use machine learning to standardize the data across them, and then we publish it back out to our customers and gives them a holistic look on a global basis of what their account and what their employees are experiencing. Why do we win? We're obviously winning in many areas, but we get asked that question. I'll break it into a couple of parts. One is obviously legacy is still the majority, probably 90% of the category. How do we beat these different legacy providers today?
Cloud obviously gives you the benefit of mobility, distributed workforces that we capitalized on early. It's gone well beyond that through multimodal communications. We see the messaging and video as being critical through the advancements. Those are things that the legacy systems don't provide. Additionally, our speed of innovation with 5 major releases a year has allowed us that curve of innovation. When you think about the legacy solutions, even though some of those vendors would produce updates, they were very difficult to deploy for an enterprise. That's something they would save up for a long weekend, do once a year or once every other year, and stop the whole organization. We do non-customer impacting deployments. It allows us to do much faster speed of innovation, and that flows to the customers.
The single global solution we talked about, significant cost of ownership savings from not just the maintenance streams of the legacy systems, but the service provider charges that they're incurring, as well as the soft costs of managing those systems. All those go away. As you add on multiple services, the cost of ownership savings goes up. Who do we replace today? Avaya, Cisco, Mitel, ShoreTel. Mitel, ShoreTel, we debated because they're one company today, but still two platforms. This is something our head of enterprise sales last night, we had 150 prospects and partners in a room at RingCentral Forum in New York City at the New York Stock Exchange.
He told them, "Imagine a year ago if I were to tell you that Avaya would be in and out of bankruptcy, Cisco would buy BroadSoft, Mitel would buy ShoreTel, then go private." The instability that's occurring in the legacy environment is being noticed by the customers. As they go to make the decision on their next platform, it's impacting their decision, and I think that's why you see some of that legacy decline today. What are examples of that? Vlad mentioned Avery Dennison. At Avery Dennison, we replaced an Avaya system in some parts of the world, Orange and others. We work with them. They're utilizing us on a global basis in the U.K. and Ireland and Netherlands and France, but even in Brazil and in Mexico. They're using our contact center capabilities also. Additionally, Marriott Vacations Worldwide, the largest pure-play timeshare business in the world.
They're using us over almost 2,000 users around the world. They're using us in places like Hong Kong, Australia, London, and even Mexico City. There we replaced Avaya and Nortel system. Public Storage is a Cisco replacement, and this is a new story. You don't know it yet. It's a fabulous story. You may know that last year we published a customer reference of Extra Space Storage. Well, their largest competitor is Public Storage. They're running a Cisco CallManager, and this is a phenomenal purchase cycle story. It's not a typical one. It's a phenomenal one. They had their Cisco CallManager go hard down for 3 days. No communications into any of their properties. They kicked off a purchase cycle for replacement to get off an unreliable platform. They looked at us and said, "You're the Magic Quadrant leader.
Your team's been very responsive and professional. You've already done a point proof of concept with us, and you have industry leadership. As well," this is what was critical, "you have a reference in our space. We know you can deploy in our space because we believe it's a unique and difficult environment to deploy a cloud-based One system." Because of them not being comfortable with the stability of that platform, we closed that deal 7 days. What was critical for them was that we deploy quickly, because they wanted to get off of the old system. They have 2,400 U.S. locations in 38 states, and they wanted those replaced as quickly as possible. Now just think about that. How long would it take you to visit 2,400 locations in 38 states?
We deployed across all those locations in two and a half weeks, and we're fully deployed with Public Storage today. We did that by our team went out and did the top 100 locations. We trained our partner. They did the next 500-1,000 locations. We even got it down to the point where we could package this up, send it out in a self-service mode to those locations for deployment. They believe they've set the world record for quickest distributed deployment of a cloud-based One system. We're checking with Guinness. We'll see. Obviously, people make the decision to move to cloud. Why do we win in those environments when they've already made the decision to leave legacy? One is that innovation leadership. Vlad showed you the amount of investment we make on our platform every year.
It's starting to exceed in a single year what competitors have spent in a lifetime on their platforms. Magnified by having one platform. The open platform, undisputed in the ability to have an app store like we do today and those integrations. The referenceable enterprises wins, like Extra Space helped us with Public Storage. Not only are we winning a lot of these accounts, but the team's been great at being able to get those customers referenceable and published back out in case studies that help build confidence with other enterprise customers in similar space. Gartner Magic Quadrant leadership as well as just market leadership, size, speed of growth, and revenue that we generate help all to build confidence. As a customer, you're looking to make a purchase that's going to last a long time, a decade. You don't want to be switching systems. That's not their goal.
They're buying us not only for current capabilities, but also the promise of continued innovation and future-proof platform. These are some accounts that have moved to us from other cloud providers, but they've done it for a particular reason, mostly because of that combined capabilities of the suite. Citizen moved to us for our PBX, but the integrated capabilities with our contact center. The two products combined, and things like the Collaborative Contact Center and Pulse were key elements in moving them over. SoFi, additionally, was looking at PBX, was looking at mobility capability, usability, but also integration with contact center. Marketo was looking at superior customer support and our global capabilities. You can see a lot of those elements start coming together as people are making decisions across multiple elements of the suite.
U.K. is an area we haven't talked a lot about, but it's been a big success for us in the last few quarters. It's brought some of our biggest deals and something you're going to be hearing more. We've grown organically in the U.K., where others have made acquisitions that may have gotten a faster start, but I think we're toe to toe in our performance there, and it's going to grow significantly from here. These are some examples. Premier Foods, probably one of the best-known packaged goods food company in the U.K. If anyone's from the U.K., they have brands like Bisto Gravy or my favorite, Batchelors Super Noodles. I'm from the U.S., so I didn't eat Batchelors Super Noodles. I ate something equivalent in college here. They are over 1,000 users, using us for UCaaS business and contact center.
Mirion Technologies is an organization that specializes in radiation protection and detection. Obviously working with the nuclear power industry, places like France, the U.K., Finland, Japan. They've been replacing systems that were Cisco in the U.S. and Alcatel on mainland Europe and replacing that and have almost 2,000 users with us. Arca Safety, this is a good example of they had a digital-first initiative, and we're seeing this a lot in enterprises today with the digitization of the enterprise being a common theme. They had $40 million dedicated to this. They've decided to open up state-of-the-art engagement center for the U.K. business with state-of-the-art tools, and chose RingCentral Contact Center to power that engagement center. How do we go to market? This shows our sales teams segmented by approximately the size of installs that they go after. Our mass market is online telesales.
Mid-market is, we call it a hybrid, but it's a hub and spoke model through our major sales centers of Belmont, Denver, Charlotte, London, operating out of those facilities, but also traveling to clients occasionally. Enterprise being field sales in market and our new strategic accounts, which are named accounts, all typically over 10,000 employees. Also field sales model. In those models, we work with channel across all our segments. In the small business, we have a dedicated team focused on that. In the other segments that are geographically focused, they work with the local partners in their geographies. That's been a big success. Channel is the percentage of new bookings coming from channel. It has gone up to almost a third of our new bookings. We don't set a target for this. Mitesh will go over the economics. They're pretty attractive either way.
Because we're getting more traction with our up-market clients on channel, we expect this to continue to increase over the next several years. How do we get the word out? How do we market the business? One, at the top of the funnel, we're building our brand, and we're doing that through thought leadership and advertising and industry events like Enterprise Connect, where we probably had the biggest presence. It's the largest industry event in the U.S. We're also at places like UCX in the U.K. We're hitting those key decision-makers, the CXOs. We're running our RingCentral Forums that we did last night. That was our ninth one in the last year, covering many cities like London and Dallas and L.A., to name a few.
At the end of the funnel, we're talking to our customers and we're getting them to be referenceable, case studies, and advocates of the brand. Obviously, we've had to build up enterprise capabilities with professional services. We talked about what we did at Public Storage, and customer support, I'll go into that a little bit. One, on global delivery, we've now done on-site delivery in 41 countries, so kind of mimicking our global office expansion. We also offer enterprise premium support with dedicated technical account managers and direct routing to tier 2, so segregating the capabilities that we deliver to mid-market businesses from enterprise. RingCentral University, because of the expansion of the product category and looking to get adoption with the end users, we've developed 200 courses just in the last year that allows the head of IT to help get adoption within his own organization.
What's that mean in numbers? We track against the TSIA, Technology Services Industry Association. They say the average for technology companies on a one to 10 scale for customer support satisfaction is 8.5. They track a Pacesetters category, which is their top 15% of companies, and they perform at 9.2 on a 10 scale. We're at 9.4 in the most recent quarter, and we've had 10 consecutive quarters above the Pacesetter mark. That just goes to show you the hand-holding we do with the customers after the fact. Just in wrapping up, we talked about why we're winning. Innovation obviously is key. It's what's expanded the category, expanded the capabilities.
The differentiation we're bringing by bringing the suite close together and adding new capabilities like Collaborative Contact Center and Pulse. Our go-to-market capabilities, how we're getting the word out, how we're selling, how we're deploying, and how we're supporting those customers throughout. Next up, I'm going to bring up José Pastor, who is our head of Product Management, and he's going to give us a demo on some of the product capabilities.
Thanks, Dave. All right. Thanks for being here this afternoon. I'm José, I'm product guy. I love to make stuff. I love to make stuff that solves for important user outcomes that lead to customer value. I've got a bunch of slides here, but being a product guy, I'm going to mostly demo. Let me just get through the slides quickly and let's get to the stuff. The vision's clear. We're going to be the world's best communication and collaboration solution, and I'm going to show you how. The demo's going to be in four parts.
I'm going to talk about end users, IT admins, because end users get value, the admins make a lot of the buying decisions, I'm going to show you how it's powered by the platform, and I'm going to wrap it up with the way that we've innovated on Contact Center just to bring it all together and make it concrete. The first piece is going to tie back to what you saw from Dave, and it's around the RingCentral unified app experience. I'm going to show that to you on our actual mobile. What you're seeing on the screen here is this mobile device, and this is our unified app. This is the endpoint that people get when they use RingCentral. They're not using one of those clunky hard phones on a desk. Since there's no pointer, I'm going to talk through it as we go.
It's a very simple work stream-based approach. Everything that's coming in, my direct messages that have implicit priority for me, all the teams that I work on because that's how productivity happens, a special place for SMS because that's got meaning when somebody texts you, it's sometimes a little different than messaging, and favorites that I want to pay attention to. I think everybody's familiar probably with instant messaging, right? You have conversations with people that you're working with often. Here I was talking with Ted, getting ready for the demo. Sometimes messaging is great, but many times you actually need to talk to someone. If you look up on the top of the screen, you'll see both a phone icon and a video button. We build those in so you can promote those conversations. Let me go ahead and tap that phone and call Ted.
Call RingCentral Data Science team.
Let's hit Connect Prompt.
Good afternoon, José. You're?
Good afternoon, Ted. Why did I play that? Because it's not just peer-to-peer calling like you see in lots of chat apps. That's a full-on better than carrier grade PBX call. What you see up on the screen there are my PBX controls around hold, record, transfer, park, because that's carrier grade, world-class UCaaS right built in from a step up. It doesn't stop there because it's not just about one people, it's about teams. In fact, getting ready for today's Investor Day, we put together a team right here with the things we were working on. As an example, Ted flipped a file from email that's not collaborative at all to Glip for me so that I could see what we were working on.
I've got at my fingertips exactly the kind of data that I need to make the progress to get work done that's driving productivity. I can see all the people that are on that team, and I think you'll see some familiar names here, right? Folks that right here in the room. We talked about messaging one-to-one. We talked about team messaging where you drive collaboration. Glip is really powerful in that it goes even one step further. I think Investor Day has gone pretty well so far. Why don't I assign a task so you can see sort of what that looks like? I tap, I choose New Task, I say, "Buy some RNG," and we'll just go ahead and assign that out right in the team so we get a little social pressure from everybody else to make sure we get that done.
The unified experience is important because in an increasingly complex world, it's got to be really easy to use your products. They have to be better than the native dialer or any other application that you can get out there. Not just our peers, any application out there, and that's what we're investing in. Of course, there's more. There's tasks, there's your corporate directory, so you've got instant access to everybody, your calendar, so you never had to pull over for a conference call again. Because change is a cost, built into the application is that familiar old dialer, so you can call anyone in the world across our world-class network and still support old school use cases like calling back from a missed call or sitting down at the end of the day and going through your voicemails.
In this new world, you don't even have to listen. They're transcribed for you all in the unified app. That's one great example of how we serve end users, driving productivity with delightful applications. How about those people that buy this stuff, the IT admins? What do they care about? That it'd be easy to buy, easy to use, and easy to manage. Let's go through a couple examples. We talked about these 37 countries where we provide global office at RingCentral. Everyone knows that the world is flat, but it's still complex to work outside of your country's borders. You can run software sort of anywhere, but we've done the hard work to deliver full UCaaS in all those 37 countries.
What I'm going to do now is I'm going to show you an example of what maybe is the best demo of all time, me logging in here. Let me show you an example of just how easy it is to go ahead and add someone in another country when you're headquartered here, because that's a typical problem for an IT person. In the olden days, this meant contracts and negotiations, sometimes talking to folks in other languages because it's not your home country. Now look how we do it. This is our award-winning portal. I go to Users because everything is about the people with RingCentral. You'll notice here that users of all different countries are managed together in a single cloud console. I choose Add User.
I'm going to start from the beginning, you'll notice here that it's as easy to add a user in any other country as it is any place in the U.S. We even keep number inventories to make that provisioning instant. Let's do that example. Let's choose somebody in Australia here. Follow a simple wizard so that it's as simple as can be. I'll choose New South Wales. Sydney Zone 3 is fine. As an example of how to make this easy, we're showing the most recent purchases for them, or if they're solving for new use cases, a broad portfolio of endpoints. In this example, since I've got this new employee that I'm putting in Australia, pretty thought-forward, I'll use a soft phone, and no hard phone, which is an increasing trend we see. Now you start to see some of the magic.
This isn't some order that's going to happen three months or six months down the line. We're adding this to the account right now. I got one checkbox that I need for the lawyers, that's authorization. That user's now active on my system and live, ready to go. What used to take weeks and sometimes months, you just saw me do in, I don't know, whatever it was, two or three minutes while I was talking about it. This is the kind of advancement that we can get with the cloud. There's more. Dave mentioned QoS analytics, and I'm going to double-click on it here a little bit because we've got something really special here. Our customers deploy lots of phones, lots of mobile endpoints, soft clients, WebRTC clients. Every one of those things is monitoring the network every time someone makes a call.
That makes us de facto the best network monitoring tool they've got, and it's something we're really proud of. When we think about being the best over-the-top provider in the world, we think about how can we empower CIOs and VPs of IT to help make that transition to the cloud. One of the best ways is to provide concrete evidence of the quality that they're experiencing, because that's top of mind for them. We also enable them to troubleshoot very quickly. Give me one second to swap, and we'll take a look at it. In that same administrative portal, we're still talking about IT folks, we're looking at the call quality for the RingCentral organization. This is the system I make phone calls on, that Dave does, that Vlad does, and it says 97.2% good. Why?
Because it's not just plastic phones on a desk that are connected. It's also mobile phones, people working at home on Wi-Fi, during drive time, everything. It breaks it down by salient dimensions so that IT folks can make good decisions, endpoints, codecs, importantly, their ISPs, because last mile is so important, and by location. If I want to see what's happening in Ealing, it's a simple click, and I drill straight through. Very powerful, unprecedented, in fact, ability for them to see what's going on at the top level, down to an office, down to a person, traffic against call quality to pinpoint network issues. A friend of mine, well, now a friend, a customer of ours at World Vision, Randy, told me he's kind of colloquial.
One of the heartwarming things with me, he said it saved his bacon as they were rolling out their stores because they could put out the phones, they could look at it, they could measure it. In the same day, they didn't have to make two steps, saving time and energy. It's great for troubleshooting. For example, you can drill straight in in a single pane of glass and see any user. This is me. You can see that I came from the West Coast, where I make most of my calls, and I came over here today. You can see if I were to complain to IT and said, "Hey, I had two bad calls. What happened?" Look how quickly I can get to the bottom of this. These are my calls. Here, I called Ted earlier today.
I get the details of this call, all the way down to each of the legs that comprise it. It's a little techie, let me say, why is this important? It's because you can pinpoint exactly what's going on. My leg, my RingCentral leg, on my flip mobile device on Opus had very good quality upstream and down. Ted, on the far end, he had what's effectively terrible jitter, and he was probably in an elevator or something where he had no coverage. As an IT guy, I've got an instant answer to what happened whenever there's a complaint, and that makes the IT guy a hero, not somebody who gets in trouble for moving to the cloud.
That's part of what I think is just critical for helping them be heroes, and that's why we see such strong one of the attributes of why we see such strong reference ability. That's QoS. Following QoS, I want to talk about the open platform. The open platform's important on two dimensions. One, it expands the way that we can build because we want to be where people work. I'm going to show you two demos on this. One is around Office 365 integration. Why? Because even though we've got all the enterprise features, people want to work where they work, and there's still a lot of people, I bet even some people in this room, who spend a lot of time in front of email. Wouldn't it be great if your communication hub was right there inside?
Don't you need to also empower those developers so that they can build applications to deeper integrate with your workflows? Let's have a look at how that works. I'm in Office 365 here. I'm doing whatever it is that I'm doing. I'm checking my email, trying to keep up with what's going on. Just over here on the right-hand side, you see a first-class citizen. That's a RingCentral soft phone. It's integrated into Office 365. Enabling me to use the full dialer. I can call anybody in the world. I can see all of my messages all in one place. Those are SMSs. I can see my contacts both on the corporate side and all of Outlook, making it very easy to call. Of course, my recents, schedule my meetings, and conference calls. A lot about functionality. Why did I go through that?
There's a lot of really interesting stuff around WebRTC and super badass functionality that makes the voice quality great. Really for the end user, it's about convenience to be where they're working. By the way, if there's a phone number in any email, you click it and it calls. Right? Saving those precious seconds for everybody who's working every day, try to drive productivity. That's the Office 365 integration. I'm going to cover off with App Gallery now. Dave showed a slide that already showed you tons of those 140 applications that are in our public app gallery. I want to show you some about why there are so many of those and why we're so proud of them. Apps built by ISVs or our customers, those are built by developers, and developers are people, too.
It needs to be very easy for them to build against your platform so they can be successful. We've built an industry-leading, best-in-class developer platform to make it easy for them to build, and more than 10,000 of them have already done that. They've built the vast majority of the applications that we see on our app gallery. Why do I point that out? As you look at the app gallery, it's not about how far the scroll is, it's about how useful it is. For example, if I were to choose the ServiceNow integration, not only does it tell you what it is and tell you how to get it, but it gives you all the data that you need to make a decision if it's right for you and do the install.
We're making it simple for everyone in the ecosystem to build RingCentral into their workflows, build new workflows, or get data from other systems into their work stream. It's an ecosystem that's defensible. You won't see it anywhere else. Let's finish with Contact Center. I think we all know that every large enterprise has got at least some Contact Center use cases, whether it's a sales use case, a support use case, maybe even a help desk. That's pretty plain vanilla. RingCentral is thinking strongly about leveraging our assets to make these things way better. One plus one should equal three or more. Dave mentioned Collaborative Contact Center to make your agents smart with the teams that are synchronized so that they can get to experts. We can do even more than that.
With RingCentral Pulse, we can expand the reach of the Contact Center to the people that care about it. Contact Center is all about customer experience, you don't want it locked away on the third floor with the Contact Center supervisor. You want it in the hands of the people who care about it and are making decisions. Let me show you how this Pulse works. It's got a console just like our others. It's connected to the Contact Center, and it's got a collection of alerts. I'm not going to go into the details about this, but it's like real-time customer service, agent performance, customer experience, even historical stuff that we can put together. It's all simple enough to use, keeping with our user-centric ease of use philosophy.
We make it a simple wizard, I did it like this so that we can do a nice simple demo. This is calls currently in queue. This is what happens when you call United and you're waiting and you're listening to the music. You're a call in queue, right? We set up a simple example, zero calls in queue. We select what we want to show in the alerts so that we can make good decisions. We select the interval, not everyone wants everything to be too noisy, right? This one's every 30 seconds, I choose the teams that are going to get it. This is key because this is where it reaches out beyond the Contact Center seats and reaches into the business where people are thinking about it, and don't get to see it every day.
Finally, I see a preview so I can find it, and we're done. It's just that simple. Like everything in RingCentral, it's easy to use and very powerful. Here's that agent team where the alert comes in, and in the spirit of a product guy, I'm going to go ahead and call in there so that you can see how this actually works. Bear with me. It's not a live demo unless I sat through a call at least once.
Thank you for calling Smarter Home for sale. Press 1.
I pressed 1. What's happening now is I'm moving to queue. What you're seeing here on the desktop, this is very much like you just saw on the mobile. This is Glip with your people on the left-hand side, your communications stream in the middle filled with alerts. Up here on the top right, you can see the agent team and the experts that are supporting that team. Importantly, this is the newfangled technology, this critter right here, that's a bot that's monitoring the contact center queues and the agent so it can deliver the alerts in real time. Why is that interesting? If you push it to Glip, it's where people work all over and throughout. When that call hits the queue, the alert will hit, and everyone will get notified who cares about it.
That, my friends, changes the game for folks who are interested in better customer support, better service levels, et cetera.
With a minute and a half left, I'll say is how we're executing on becoming the world's best global cloud-based communications and collaboration system out there. Next up is a 10-minute break. Thanks, everybody.
At Structural Group, we're a highly collaborative organization. We do engineering, we do product manufacturing, and we're also a self-performing contractor. For us, it's all about the highly collaborative environment. Our goal has been to put in a unified platform that allows us to have anyone in the company connect with anyone else in the company with whatever medium they're comfortable with. We've put in a system now that over the last year has been able to achieve the vision that we wanted, which was people in the center, and then their ability to communicate with anyone else in the organization, whether that's a phone call, a video conference, an audio conference, a document share, a Glip team, it doesn't matter.
Construction is all about communication. We've got to take a lot of plans and details. We've got to get that information to our crews so that they can go and deliver our project. Before Glip, it was all about that long sequence of communication. We'd get on a job site, inevitable, they're going to find something that's different than what we expected. With Glip, the technician can snap a photo and send it to me instantly. They can open up a video chat, and we can actually talk about what the problem is. So we go from two days and some long hours to fix a problem to maybe a couple of minutes to solve the challenge and get those guys right back to work and moving on.
One of the advantages we have now as administrators is the administrative console that we get with RingCentral, which allows us to handle 90% of the issues that may come across our desk, whereas before, we would have to call in, and it could take a few days to get a customer's issue resolved.
For us, it's really, how do you put people in the center of it and allow those people to communicate any way that it is that they want to communicate and have a system that facilitates the ability to do it?
Please welcome Senior Vice President, Worldwide Sales, Mitch Tarica.
Good afternoon, everybody. Hope you had a chance to get a little food in you, and thanks for spending the day with us today. It is an absolute honor to be here, and particular to be here to share stories of three amazing customers of RingCentral. Three visionaries in their spaces, three members of our customer advisory board, as is Jason Cash from Structural Group as well. We're going to jump in and get started. First up, I would like to introduce Paul Chapman, CIO of Box. Next up, David Baker, CIO of Pacific Dental. Please, yeah. Lastly, Fernando Solares, CIO of ChenMed. Gentlemen, thank you again for being with us this afternoon and sharing your RingCentral journey with everybody. Thanks for taking the time.
Why don't we start by first just introductions. Tell us a little bit about yourself, a little bit about your role in the company, and a little bit about your company, please.
Paul Chapman, CIO over at Box. For those that don't know Box, we're a leading cloud content management platform servicing about 80,000 plus enterprise customers around the world and around 50 million end users and 75% of the Fortune 500, big install base there as well. Prior to being the CIO of Box, I was CIO for HP Software. If you could think about maybe two more contrasting companies, be hard pushed, but gives you perspective.
Yeah
from sort of legacy environments that grew up sort of in the last century versus a born in the cloud growing up digital company.
Great. Thank you, David.
Hey, Mitch. Thank you. David Baker, Pacific Dental Services. We are the second-largest dental services organization in the U.S. We have a unique proposition where we go into partnership with our dental owners and help them build great dental offices. We broke 600 offices, aggressive hyper growth plans, opening around 100 a year currently. Really enjoying quite the trajectory of new office openings, which brings its own challenges. Look after everything that encompasses from the most foundational products, such as phones, all the way through to the complete digital experience for the patient and the provider.
Excellent. Thank you, Fernando.
I'm the CIO for ChenMed. We're based in South Florida, in the healthcare space, but particularly value-based care for the senior population. That is the fastest-growing vertical market in the healthcare space today, and we're trying to become leaders nationally, and we're well on our way to that. Just interesting times and very aggressive growth for us, so unified communications is obviously a big component of that.
Excellent. Fernando, we'll stay with you, and we'll ask a similar question to each of The start of your UCaaS journey, what was the catalyst? What prompted you to look at cloud communications? What business problem were you trying to solve? We'll go each of you answer that question, please.
Thanks, Mitch. Cloud communications, I started off as an engineer, and I came from the time where on-premise systems really, there wasn't another player in town. Unfortunately, it's complex, it's clunky, it takes a lot of resources to manage. Our decision was based on the fact that the business need is to communicate and collaborate across the country or in some cases for other companies, globally. RingCentral, in our eyes, was really the front runner in that space. We took the business need of collaboration and communication and married it to this cloud provider, which was the front runner in that space, and it's been a great partnership thus far.
Yeah. You have about 2,000 users deployed across about 65 locations. Is that about right?
Yeah, correct. Yeah.
Also using RingCentral in the contact center as well, right?
Yes, we are. Back to one of the drivers for us, we had a hodgepodge of vendors, as you can imagine, complexity increases cost in business, as we all know. With the multitude of vendors, trying to manage them all at the same time becomes increasingly difficult. We'd have to clamp on all these different solutions, try to make them all work in unison, and it's difficult. Users don't like it. The experience is poor. One of the things that we had to clamp on previously was contact center. We had to take in patient calls, we had to take in user calls, and it was two different systems. Having a solution that could marry all of these different components as one unified provider was really an integral part to our decision.
Got it. David, a little bit about your UCaaS journey and what problems you were trying to solve.
The I guess the journey is a little more glamorous, Mitch, but it started out for me as a really basic problem, right. I joined as a new CIO into the role with these digital aspirations of patient portals and disrupting dentistry, and it was like Baker, here is number 1 priority. We cannot get phone calls through to the offices, and this is a major problem, right. It is a traditional business, and in fact, still a lot of folks like to pick up the phone, and there were not options at the time to do anything else to book the appointment. They would pick up the phone, get through to the office, and then experience a cellphone-like kind of service from probably about six different systems that we tried over the years with various leadership at some point, and it had not worked.
It was a real mixed mode of product. For me, in total honesty, I wanted to make this as boring as possible. I am not going to win CIO of the Year sticking phone systems in, right. Be on the front of a super glamorous magazine as this innovator. No, it is not happening. I was like, "How do I get out of the phone business as quickly as possible?" That was really my driver. Make sure these poor guys in the offices get a phone. In this day and age, if you pick up the phone, there should be dial tone, right. It should just do what it says on the tin. We aggressively pursued several vendors, who, in all honesty, I would be willing to bet my job on. This was the number 1 priority of the company, to get the phones working.
That is what we did. We locked that in, we have been heavily at the deployment now for, probably less than six months, right. We are about approaching 400 offices deep. We will be completed before mid-year, and then into just the regular cadence of opening the new offices.
Yeah. You have about 5,500 users deployed across your 400 or 500 locations?
Yep.
The total capacity is about 10,000, right? That's your total-
Correct. Yeah. If you look at all of our support centers as well, there's about south of 10,000.
Yep. Excellent. Thank you, Mr. Chapman.
Phones weren't my number one priority when I joined Box, fortunately.
Glamour.
Glamour, yeah. Actually, interestingly though, similar to Fernando's situation, when I first joined Box a little over 3 years ago, we'd had sort of an eclectic buildup of services that were providing sort of UCaaS capabilities. Box is a born-in-the-cloud company anyway, so we didn't carry a lot of technical debt in on-prem services. One of the things that was really important to us was as we go out to the future and think about how we're going to grow and scale our company, making sure that we have best-of-breed platforms for non-strategically differentiating capabilities. Platforms that allow interoperability across other services as well. It's very important that we're able to integrate. We don't want closed-in internet of API world. The other thing that also plays a big part is this sort of demographic change of your employee base as well.
As we think about the much more heavier millennial workforce today than we've seen previously, what's happening now, of course, is that there's a different set of expectations when entering the workforce.
Right.
Modern consumer-like experiences, digital experiences, work is a state of mind, not a place you go to, want to be able to work in any place on any device. All of those factors come into this, into our decision. Of course, back to the earlier point you made as well, it's very costly when you're managing multiple services as well. That took us down the path of, okay, what's our future state architecture look like around UCaaS, which led us to conversations with RingCentral and checking off all the boxes that we needed to check off to get us to where we are today.
Yeah. You were, as you just said, replacing a multi-vendor strategy, right?
You had
I know it was a strategy.
Yeah.
It was a multi-vendor set of decisions
Good point
I wouldn't say it was a strategy to do it.
Talk a little bit about that, please.
Well, again, I think in a lot of growing companies, you don't tend to have strategy for how you make decisions. It's just people are making fast decisions. There's nothing that anybody didn't see they didn't like and the ability to turn on new services and so on. Hence, one of the reasons why they needed a CIO as well to come in and help get ourselves organized around that. Interestingly, when we looked at the cost profile of what it took to manage the different services, and then move to a standardized platform, we actually saw a decrease in our overall spend. Of course, we had efficiencies and everything else, but we decreased our spend by like 70%.
Yeah.
Which is significant.
Yes.
Yeah.
Fernando, maybe talk a little bit about your similar strategy of replacement and what you had to do. You're coming off of another cloud provider and the strategy there.
Yeah. Coming off another cloud provider, I didn't have to sell the organization on the concept of moving to the cloud. Unfortunately for them, and fortunately for you guys, we were having a lot of issues. We were having a lot of quality issues, connectivity issues.
Since there was this disjointed lack of strategy, right, or not having a strategy at all.
Yeah
being able to sell to the organization that we can now collaborate, we can communicate. For us, the primary care physicians in the medical centers, those are our quarterbacks, and everyone else is basically a supporting cast in trying to provide that value-based care. Communication is extremely critical in serving the patient, and it wasn't happening. Patients were calling in and the call quality was poor, so it was a fairly easy decision for the business to accept the fact that we needed to make a change.
Got it. David, Paul mentioned a little bit about his TCO. I know you spent a lot of time with our team talking about the overall value of the solution, but from an economics perspective. Tell us a little bit about your TCO journey.
Yeah. It was a journey because you're going into a well-established business, right? Experiencing this kind of hyper-growth, but they have no consistency in the systems that they've got, and I guess there's some low-hanging fruit there, right? If I start digging through their financials, I see that there's multiple vendors, multiple internet providers, and then multiple telephony and unified comms providers, if you want to call it that, through IM and stuff and Webex and all that good stuff. It's consolidate, see where we're at, and then I figure I'd go in, I'll always pitch top-down, get the exec board behind it, and then I can, once that funding is secure. This wasn't something that was They knew they had problems, but they weren't going at it from, "Let's just fix what we've got.
Right.
I wanted to go at it with like, "Look, let's get into a five-year cadency here in the same way that I would their IT equipment and say, 'Here's what you're spending.'" I think there's some amazing opportunity for renegotiation with some of the main contracts here with AT&T, for example, on the telco space, and just go in single provider, which we did. Huge operational efficiencies from just having that single vendor partner, right, which ended up being you.
Yeah.
Good for you guys. For us, we start to see those fruits. I did a five-year forecast. Obviously, I wanted the fact of the company that there was some outs if we needed them, but I really wanted to just forget about telephones and make those issues a thing of the past. We built that five-year model out. Once we I wanted to go all in on this, like I said. Our conservative savings, because of the way that the minutes are bundled, the eFax is bundled, the text messaging is bundled, at least in my situation, was around $3.5 million over 5 years. I'm monitoring that closely because I went in with that pitch and it was easy for me to essentially not only go in with the net-net, but the total projections on those savings.
Yeah.
There was some upfront capital costs with refreshing that hardware, which I feel was relatively easy to absorb, and we refreshed the entire portfolio.
You modernize your stack while you're providing a three and a half million dollar savings.
To your earlier question, I was joking about making the phone problem a thing of the past. I need the platform I can build on as well. We'll probably touch on some of that. It was like, okay, phones are working, but now what? If I go with certain systems, I'm not going to be able to take advantage of secure text, of instant messaging, of the collaboration suite that is there waiting to be utilized.
Let's stay there on that topic of initial problem statement was phones getting to offices across 5,000 users wasn't happening.
That was premise. That was Cisco and ShoreTel. Once you got through solving that problem, then it was how do I look forward and bring more value to the business?
Yep.
You started rolling out Glip, meetings, rooms. Tell us a little bit about that, and we'll touch on each one of you there.
Sure. We had the foundational product there. It's in, it's working. We're enjoying some stabilization finally. Then it's time to call. It's a huge video company, right? A big Cisco shop. Cisco's something that I've been worked with for many years, and I always say no one gets fired for installing Cisco, but it does take an absolute army to support it. The product's great as long as you have all of this cash to get the stuff in and support it. We were moving so frequently with the openings. I think there was a great opportunity for more of an off-the-shelf product that was intuitive.
There's a bunch of folks that are resistant to change, but they hated their legacy video solution, which meant going in over a VPN, probably taking five to six minutes to jump on their specific piece of hardware, and then again to the meeting room. Once again, it was, I like to go out just fail fast, as they say, let's stick the initial product in and see on some of the larger meetings, "Hey, would you be willing to try this and see how we go with a small pilot?" It's just quick and sticky. That thing fired up quickly when they realized that they could take a meeting from their phone. It was like, wow, it's amazing. Quick, easy wins, really.
We went, we cleared through all of the video, once again, standardized internally on the platform, moved to collapse probably six different instant messaging tools to say, "Hey, this is our corporate standard now." Also for us, the HIPAA component was very important. The security of the messages being passed around was overnight instantly contained, which has been great. Enjoying the benefits from that widespread collaboration through some of the groups. That's coming. Now we've got standard video, standard IM, standard video conferencing, and then next up will be some of the fun stuff around the AI and some of the automated texts from the offices to the patients, which we can touch on if you have time.
Excellent. Paul, similar to you around the rest of the communication stack. You're using RingCentral globally, right?
You're definitely leveraging global office.
Yeah.
Also integrated into Google, integrated into Box. Tell us a little bit about that piece.
Yeah. Well, as I mentioned earlier, one of the things that's really important as far as our quote unquote, our reference architecture for the technology landscape is concerned, is interoperability across different services, and I think that's certainly one of the sort of hidden benefits of the cloud. We know the benefit of freedom from infrastructure and operational overhead and things like that. The scalability and reliability and capacity is managed for you. One of the things that you get when you leverage modern platforms is the ability to connect different services together to curate better experiences so you're not jumping around as much.
Integrations with things like Google and Box, of course, are really important because we want to try to create as much productivity for or enable our employees to be as productive as possible and take the work out of work and create as frictionless set of experiences as possible. We look for where can we take the work out of work across how somebody chooses to get their job done. We did roll out globally, and one thing that I didn't mention earlier was that it was also important for us that we would have, back to David's point, not an army of people managing the sort of the, quote unquote, "backend" of anything we implemented. We actually scaled out with literally one administrator and one backup administrator globally. That's working great.
José mentioned earlier, lightly, quality of service, and that's also really important when you look underneath the covers, that you have really good forensics around quality of service. There are so many things that can go on in the quality of a call, it can be really hard to pinpoint where those issues are. Of course, if you don't have sort of the mean time to innocence of where the issue is, they'll blame the technology in a heartbeat.
Of course, they'll blame the CIO man.
For sure. The C in CIO stands for conference rooms anyway, I think I told you that before. Yeah. We did the web meetings. We consolidated all of our web meetings onto one RingCentral platform, dial tone, and now we're moving with contact centers. We also had several different contact centers.
Yeah.
Fortunately, not quite as many as we did on the voice side, but several to consolidate onto the RingCentral Contact Center.
Excellent. Fernando, as far as also besides contact center integrated to the PBX, you've also standardized in the conference room, right? Rolling out RingCentral Rooms across all the conference rooms as well, and also a little bit on the platform, taking our SMS or our fax API, excuse me, and embedding the fax API. Maybe tell a little bit of that story, please.
Yeah. I'll talk about the less glamorous and less exciting one. Unfortunately, in healthcare, fax is still around, right? It's always been interesting to me how in other industries we can send money to each other pretty much instantly with our mobile phone. Yet, for a patient to get a referral, they have to have a fax. At no additional cost embedded into the platform, we use the fax API. Directly from our medical record system, the person in the office can just fax another medical office without having to go. It's all electronic. For the room, as an example, our doctors get together or would get together, they still get together, but in a different way, once a month.
We operate across seven states. All of the doctors have this national doctors meeting. They get together once a month and collaborate on a bunch of different things. The challenge is that some would be in a conference room, some are on a computer at their desk, let's say, and some folks are just simply calling in. How do you get all of these people on the same conference bridge in a quick, simple, high-quality way? The reality is that there aren't any other providers that are doing that are taking all of these components into one. For all of you guys that have ever joined a video conferencing session, think about how long it takes to join a video conferencing session.
The only way that it happens quickly is when you call the IT guy ahead of time, and they come down and help you. With RingCentral Rooms, what our business loves is the fact that they can do it themselves. IT doesn't have to be involved. We love that as well. They can jump into the room, into the conference room, they click one button, which is join. Everybody's on. It just brings everything together. It's simple to use.
As you can tell, I'm pretty excited about rolling that out to every single conference room.
Excellent. We are going to finish with that and open it up to questions. First off, before we do, thank you very much for taking the time and spending the time sharing the story with us. They're all three impressive stories. We appreciate you guys investing your time to be with all of us. Welcome to open it up to questions for any of the four of us. Please.
I just have a question for Ian then. You mentioned you were consolidating a lot of systems when you went through your adoption with RingCentral. Could you give a sense of how much of the savings was just from kind of consolidating systems versus kind of breaking through lessons learned and your ROI?
I'm going to repeat the question.
Sure.
It was breaking the ROI into how much of the savings was basically just replacing systems compared to what the overall was.
First of all, overlapping.
Overlapping.
Maybe like getting rid of overlap.
Yeah
Selection.
Overlap versus selection.
Most of this stayed away from the operational efficiencies, I would say, in terms of the staffing, I focused purely on the cost savings in terms of licensing, ongoing support and maintenance as a component of that licensing. Honestly, the huge piece was the bundled minutes, for example. There was some low-hanging fruit for me around some of the legacy contracts that were in place where we were just paying an extortionate amount for long-distance calls, for example. All of that's bundled. It's a conservative number because I don't like to go out and just stand around, I'm going to save all these millions, right? The $3.5 over five years was extremely specific, just around call and licensing savings. The hardware was apples to apples. There's a little less required in there because it's virtual-based infrastructure.
As long as you've got your Power over Ethernet, I was fortunate to at least have that ready to roll. I would say that the bulk of that cash is purely, like I say, the licensing and the minutes.
Thank you.
Yeah.
Maybe you could talk about just the richness of the API platform that you started to work with next. How rich did it seem versus the other vendors you were looking at or maybe some preexisting technology vendors? How many kind of points of integration do you have leveraging the API, like in terms of integrated workflows?
The question was, and repeating for the web audience, was the richness of the APIs.
Yeah
Speak to your experience, how many API integration points do you guys have? All three of you are using the open platform, go for it.
All right. I'll go first. Interestingly, from a Box perspective, we get 25-plus billion API calls a month, half of those don't actually come from Box first-party apps, interestingly. They come from integrations with things like RingCentral. We actually turned on things like the ability to SMS text directly out of Box, to eFax directly out. We're integrated with Google Email or Gmail, you can easily punch out a phone call from there. I'm trying to think, what else do we have?
Salesforce
Salesforce integration in with Salesforce as well. We're doing the same with the contact center as well. That will be integrated into other SaaS apps that we have. The ability to pop up, dial directly out of the application you're in or the service you're in without having to switch out and go to a separate integration. Integration with single sign-on is another one. We're Okta single sign-on, we use the interoperability there. Also, I think the other thing that was also important to us in the decision was we recognized that service providers need to monolithically focus on what they do best. Where it's not their core competency per se, they actually leverage other best-of-breed capabilities in the ecosystem as well.
For the pull-through for video, that was important for us as well, where we recognized that that integration that they have there was important. Same with contact center as well. We're leveraging the platform for sort of core capabilities and then the broader ecosystem of best-of-breed for other services that come in on top of that.
Cool.
From our point of view, there are several out-of-the-box integrations. I think the platform and their API library is one of the stronger long-term plays, which has really helped us, right? I just think we're a big Box customer as well. I think you should have picked up the tab for dinner last time.
No.
We've got Box play, Salesforce play, and from the custom side of the house, we're doing some really fun stuff with some of the automated responses. We're about to roll out secure text messaging from the office to the patient so that they can start booking appointments and just having some back and forth. We're working towards some of the Glip bot, as they call it, some of the algorithms around how many of these canned questions can we start with in an automated fashion before we hand off to a human per se. There's some really great functionality around that. I think kudos to Ring. There's still a very Silicon Valley-esque feel to the company. We come up and we have some fun working with you, really.
Your propeller head is up there and working through some excellent workflows that maybe haven't been possible with some of the other folks that I've worked with over the years.
Impact Dental is also an Okta shop, leveraging the Okta integration, Salesforce shop, leveraging Salesforce as well. Those are all out of the box APIs. Fernando, why don't you close us up? I think that one's going to be our last question.
Yeah.
We take advantage of several of the out-of-the-box integrations. To the question about the difference, typically with partners, they all have APIs, or a lot of them have APIs, and they provide you documentation, and it's pretty much go figure it out, right? With RingCentral, it's been a great partnership, and they've done some even custom things for us when it wasn't readily available out of the box. That, to me, has been the primary difference.
All right. Well, thank you all again. Appreciate very much you being here, and thank you all for listening. Appreciate it as well. Thanks very much.
Please welcome Zane Long, Senior Vice President, Global Channel Sales.
Good afternoon, everyone. Welcome. We have today three key partners. These three key partners were also participants in a partner executive roundtable that we hold once a year in Quebec City. We had 20 of our key partners in attendance, and they're here with us again today. Let's have Mike, Scott, and Ryan up on stage, please. Okay, guys. Let's take some time to do some introductions, a little bit about yourself, a little about your company, and we're going to start right here.
Sounds good. My name's Mike Dolloff. I'm the Chief Revenue Officer for Inflow Communications. We're a UC and contact center-focused business. That's all we do. We bring on about 15 to 20 customers a month, new customer acquisition. We work in the mid-market and enterprise space. Our heritage is, when you talk about the technology and some of the company names, competitive names that have come up, our heritage is really working from a ShoreTel-Mitel partnership perspective. We're one of their platinum partners, which is their highest tier, and have deployed tens of thousands, hundreds of thousands of endpoints on those systems and have a large base of those customers that we work with today.
Great. Scott Davis with AGC Networks. AGC Networks is a global solution integrator, historically in the UC and contact center space specifically. We focus on the Global 2000 space, headquartered here in the United States in Dallas, Texas, and our world headquarters are in Mumbai. Historically, with our legacy technologies, we have predominantly been an Avaya integrator, large contact center and UC. We focus on 10,000 and above, it correlates what Vlad said earlier in their market segment. We're particularly excited about the opportunity to provide these services with RingCentral globally.
Thanks, Scott. Ryan?
Ryan Heath, CTO of PCM. We're a $2.25 billion revenue company. We basically sell 200 product lines across the globe. Really specific in collaboration is my focus at this point.
Thank you. We've got some questions here to really kind of get inside, I think, the decisions, obviously, to become a RingCentral partner, why you're seeing the transformation in the marketplace, and we've got some questions, I think, that will open up further discussion. The first question, I'm going to start with you, Ryan. How has demand for cloud solutions changed over the last two to three years, in your opinion?
It's in every conversation that we have. Basically, every proposal we put on place is either a cloud and on-premise offering. We take what the customer is really looking for and then kind of go that direction. Upfront, the conversation is cloud starting.
Yeah. On that, it's interesting, something that we've witnessed and talked a lot about with our partner community. It's the speed that the customers are moving. You heard David Sipes, our CEO, talk about this, and in the partner community, we're talking about it and seeing it as well, representation of multiple different carriers, obviously, do you have and the majority of our partners have, and I think it's interesting to watch and see customers making decisions so quickly. Same question to you, Mike. How has demand for cloud solutions changed for you in the last couple of years?
Yeah, I think it used to be, in the mid-market and enterprise space, it used to be something that came up peripherally in some of the opportunities two, three years ago, a smaller percentage of them. Now, I think, like Ryan said, every conversation is cloud. A lot of times, that's the only topic that's at hand. The speed of that is just like almost a light switch flipped, really. It just changed in the last 18 months or so, where it is probably 80% of the conversations are cloud only for us, and another 20% is usually mixed. There's very few that are people speaking, some of it's our customer profile, but a lot of it reflects the market of prem only. It's very small percentage now, and that's almost a flip from three years ago that we saw.
Yeah. For you, Scott, you and I have had conversations.
Obviously, you've seen some of those customers-
Yep
walk away from prem.
Yep.
We had that conversation when we were in Quebec City recently. Same question for you. What have you seen happen in the last two years in regards to how cloud solutions are changing?
Yeah. For us, cloud solutions specifically, in the large enterprise space, cloud's not new to some of our customers, but specifically to UCaaS in particular, we're starting to see now that that's a default request, specifically globally for UC and CC. I would say that that percentage of those conversations increased dramatically in the last 12 months. Again, it's specific to UC. These are cloud savvy customers that are just now accepting that this application is extensible. Some of that has to do with where they do business and some of the privacy requirements that they have in other parts of the world that are a little more stringent than they are here. We can speak to those things intelligently when we talk about RingCentral, and I think that that's a dramatic shift for us.
It has a lot to do with how the customer wants to consume this application. For our large customers who've been using products like Box and Salesforce and Microsoft in large enterprise license agreements, they're used to consuming this product as a service. That consumption model has become the default. We now, and some of the legacy vendors are struggling, frankly, because they have a conflict of interest. They're struggling, frankly, to migrate to that. It's important for us to be able to provide a consumption model that our customers are comfortable with already for UC and CC, and Ring is our solution for that.
Good. I appreciate that. Let's go to another question about life cycle. We just talked a little bit about that, I want to go a little deeper into it. Mike, for you, what stage of the product life cycle and adoption do you think UCaaS is in today? Where would you see that?
I think most of us on the stage here deal more in the mid-market enterprise space. UCaaS is more mature, but it's still in growth in the SMB and smaller markets. If you look at mid-market enterprise, it's early growth for us, I think. I think our customer base reflects a lot of the overall life cycle, where it's at, and we've small percentage of customers in there that have made that transition. A huge percentage that are looking to make that in the next couple of years. Early growth, we feel like the rocket's really taken off and it's about to get pretty wild here.
It's interesting, last year, I think it was at this event, I kind of coined a phrase, called it the bubble-up effect, and it's where customers of yours and your customer base making demands. Coming to you and making demands to bring them a UCaaS solution. You are the trusted advisors to your very large customer bases out there. We just looked at the size of the customer bases we're in. You're in the tens of thousands of customers in your bases, and we're seeing them make demands like never before, like no product before. We've been all doing this for quite some time, and it's fascinating, isn't it, to see those customers come to you and say, "You will bring us a UCaaS solution." Unfortunately, if you don't, that's sometimes when you lose that customer to someone else. Ryan?
Absolutely. I just want to kind of go on that. I was on the losing side of the Public Storage deal. I designed the system. Sorry, trust me, you have no idea.
It was down for three days.
I know. It wasn't our fault.
Oh, of course not, right.
I mean, that life cycle from the first meeting the customer to actually deployment was an 18-month sales cycle. All right. It took 12 months to actually deploy all those phones. Okay. We were in a five-year maintenance period. They were down for three days, which was an internet problem with an SD-WAN thing, that's besides the point. I was so surprised that all of a sudden, you guys, in a couple of weeks, ripped us and replaced us. I was like, "All right, well, what pivot point can I have in my life?" Cut wide open, I was up for 10 days straight, working 18 hours a day trying to support them, getting them back on. It wasn't three days, it was a little longer than now it's just three days.
Yeah.
We just did some work magic.
Triage
make it happen.
Yeah.
Yeah, triage. We were in a triage for a good week.
Oh, we got all kinds of words.
Oh, yeah. It was incredible. what you guys did-
Been doing this a while
in those couple of days, took us forever to even get to that point. Just being impressed by what you guys are able to do is amazing.
It's a perfect example of the pain or gain, obviously.
Oh, absolutely.
Some partners come to us because of, obviously, the gain. You chose the pain way, but that's okay. You came and.
Hey, you know you are a friend.
here you are a part of our.
You got a choice.
One way or the other.
A part of our organization. Well, I think that is true. Customers making those demands, they're going to find a way to get there.
Yeah.
They're going to find a way to get to the UCaaS solution. They're more familiar with it now, there's no question they're going to find a way.
It's a fast deployment and it works.
Yeah. Well, that's great. Thank you for sharing that.
Yeah.
Another question, we're going to go a little deeper here. I'm going to go back to you, Scott, for a moment, if you don't mind.
Okay.
What will compel you to continue to invest resources into growing your UCaaS book of business this year and beyond?
Well, two things. One, I'm a salesman, there's a huge market opportunity. When I see an addressable market and the place that we're at in the market, I've been doing this enough to know you've got to move quickly and invest heavily. We're already compelled. What's most compelling to me, I shared this story with you last night. Fortunately, we meet with large customers at global disparate workforces and smart CIOs, and we're talking about 20,000, 30,000, 40,000 endpoints that they're managing and trying to use collaboration on. In the past, our conversations with them have been, "It's not for us. It's not for our market. That's not for us." Because these are heavy decisions and complex multi-year integrations that they're used to.
I told you this last night, the only time I've seen this once before in my career when we were doing infrastructure and compute, I would go talk to CIOs about data center and storage and servers, it was a very easy sale. It was scalable, economic. Then VMware came out, we went and talked about VMware, and almost every CIO said, "That's not for us. I like my physical servers. I understand how they come in." Okay, we dutifully went away because I had a big server business. Then one budget cycle later, that same guy sat across the table from me and said, "Oh, no, we're VM first." I don't want to talk about buying servers. It was that quick. That's what's happening to us in the large enterprise space for UCaaS now.
I have CIOs I talked to last year, "It's not for us. Protection. I know where my data is. Cloud, I don't know." All of a sudden, it's this is our default, and if you're going to try and sell me something in the premise, you better have a very compelling story, which it would be hard for me to compel. To me, that's where I see it.
Even last night, you told me that you're already ready to register a very large opportunity.
It's over 1,000
that you've been working with. Yeah, over 20,000 users.
Yep.
I think that's the kind of tipping point that we're starting to see. I know that sounds somewhat cliché, but it really is something you can witness when you see larger customers looking to move as fast as they are, so fast to come to us, to you, and ask for that solution. Same question for you, Ryan, and also you have a very, very large direct sales organization-
Yeah
at PCM across the country and the world, and obviously we're working with PCM in the U.K. as well. You have lots of direct salespeople. Talk about your investment of resources into growing UCaaS for business for you.
Yeah. We've got to scale to support 1,000 salespeople. It keeps growing by the day, so it could be 1,200 at this point. It's really being able to have a series of sales force to go out there with them, to go over and pitch the deal, take the deal on, because there's so many things that individual salesperson has to sell, that it's nice to be able to kind of hand things off, go do the deal, and they get the revenue for you. At the end of the day, that's what they're trying to do.
Right.
If they don't have to really get the engineering aspect, which takes us 2 to 3 weeks sometimes to get an engineer out to you. They can call you and just, boom, it's there.
Yeah. What you're talking about is something we trademarked recently, Channel Harmony.
It's the collaboration, Mitch, my partner in crime, that was just up here. That collaboration, the Channel Harmony that you see, our ability to go to market very quickly by utilization of what we call subject matter experts, who are also known as our direct sales reps. That mapping, even though there's 1,000 and growing to 1,200, and I'm happy to hear that by the way, that's more people talking about RingCentral and out there selling. That's good for us. Okay. We'll go here and then we'll take some questions from the audience.
Sure.
Same question on investment of resources in growing UCaaS.
I think similar, I think, to Scott, is that there's a huge opportunity. There's certainly just a massive opportunity that we're seeing just right before our eyes, just this flip. That's part of it. I think the other part for us as a business, we want to be really sticky. Just, I think a lot of the conversations today were about adoption and utilization and continued upsell within the existing base. We want to be really sticky with our customers, right? We've all moved to as-a-service world, and that lifetime value of a customer doesn't get realized in the first 6 months or 12 months. It gets realized if you have a good sort of post-sale process, and you have the ability to just continue to grow that lifetime value of a customer and keep them happy.
With there's so much stickiness so that this isn't just a phone system, right? This is tied into workflows like was discussed. This is tied into core business applications, and you're extending this throughout the entire organization where they could never think of not working with this tool anymore. That connection for us, and that really speaks to us as a partner of that's where RingCentral sees that bigger picture, right? The ability, we like that. We want to have customer engagements and life cycles that match that. The other piece is the Contact Center. It's been talked a lot about today. We see more and more Contact Center adoption across the board.
In fact, as a company, oftentimes I almost think we've flipped from being a UC company that talks about Contact Center to Contact Center that pulls through UC in some regards because some of that's a market shift. Contact Center is being adopted by everybody. We talk about stickiness. We've gotten into several thousand seat opportunities with a 20-agent Contact Center. That was the tip of the spear.
Yeah.
There's nobody out there that has that full integration and vision that RingCentral has around taking the Contact Center, taking best of breed Contact Center and capabilities, and tying it with a UCaaS platform. No one's even close to that. You have a lot of legacy partners that a lot of us work with that have a ton of baggage technology-wise to carry. That's a huge anchor for them in trying to get there technology-wise. We're seeing that there's this great market opportunity. There's this great technology and great, you mentioned Channel Harmony, Zane. I think just people, the processes, it's there. It's the full package. As a partner, we're excited to continue to just pour as much energy as we can in because this is something that, I don't know, I wonder, will this be repeated in my lifetime kind of thing.
Yeah. Well, very good. Thank you for that. I want to thank you all for your, I know you're all very, very busy.
You bet.
Taking time out to come and talk with us, I want you to know we're obviously very proud to have you as partners of RingCentral. It's very meaningful to us. We're still very much in the beginning here at RingCentral in our partner program. Just imagine the future.
Right.
With that being said, if there are questions from the audience for these gentlemen, we can certainly take a few now. Back here.
Sure. I'm just curious if you represent any other cloud-only UCaaS companies, and if so, do you have a sense of relative win rate for RFPs that are cloud-only?
Yeah. The question was, are you representing other cloud providers? I think the other part of it was if there's outstanding RFPs. Is that what you-
Win rate.
Win rate.
Win rates. Forgive me.
I'll take that one first. We, as a company, stayed pretty focused on technology stacks because we don't want to be the, "Hey, here's 10 quotes." We really deal with kind of two in any category. We do UCaaS and CCaaS. We've got one other UCaaS provider we work with, and we've got one other CCaaS provider we work with. From a win rate perspective, we actually position RingCentral as sort of our leading. We've got the other as almost like an alternate in a lot of cases for opportunities where the company is nowhere close to seeing the technology potential, and they want something that's, for lack of a better term, just sort of the simple option. Maybe ours is a bad example because we don't compare a lot of them in one scenario.
We're pitching really one option, and then we feel like this is the best. We don't respond to a lot of RFPs, actually, frankly. We've got a kind of a different acquisition and sales process. From our perspective, when we lead with RingCentral, 80% plus win of that. Another question? Kind of blinded here. Okay. Right here.
No, I was just curious if you ever compete with inside sales reps at all.
Never.
compete against other outlets.
The question was do our partners compete with RingCentral direct salespeople?
Yeah, I'll take that one. Zane's program is very good. I'm not saying that because he invited me to dinner, although that does help. The Channel Harmony, I was asked to prepare why I would pick RingCentral over another one of the providers, he's got a big ecosystem of folks that can contrast over the other providers. We picked one, because generally I'm supporting a large incumbency. From my standpoint, the majority of our legacy partners, there's a tremendous amount of channel conflict between direct sales. You'll see that at all of the logos that were mentioned, including Avaya and others. I would not pick a UCaaS vendor that had channel conflict inherent in their go-to-market strategy. With Harmony, figured out a way to resolve all that. We've had nothing but really good engagements with the direct folks, whether they were there first or we come after.
From my perspective, that was one of the major tenets on why RingCentral just doesn't exist.
Thank you, Scott, thank you again, gentlemen, for joining us here today. It's been a pleasure, and thank you for sharing your thoughts with us. Thank you so much. Now break for 20 minutes.
10-minute break, please. 10-minute break.
Brinker International is based in Dallas, Texas. We own two brands, Moe's Original and Chili's. We have roughly 1,000 restaurants across the continent of the U.S. There are about 600 team members here at the restaurant support center, probably another almost 60,000 out in the corporate-owned restaurants across the country as well. More than 60% of our to-go orders are still coming in through the telephones, we kind of realized the failure rates on our old phone systems, they just started falling over left and right.
You had to guess whether it was internal wiring, the phone system itself, or was it the phone company. In the meantime, your phones are down for four or five days usually.
That's when we began to move towards a cloud-based phone solution in the restaurants. What really drew us to RingCentral was inexpensive voice, central platform. We can do everything we want and then some. We started looking at the industry as IT guys looked to Gartner for, RingCentral is in the upper right-hand quadrant. Right now, we're about 700 restaurants completed out of the 960, and we're already realizing a tremendous amount of savings with the cloud-based solution. Even if there weren't savings to be considered, we would still be really excited about just the increased stability that we have with the phones on the cloud.
It's been just amazing. We can go in and see exactly what's going on and troubleshoot the whole thing remotely. No more dispatches are really even necessary. With the implementation of the RingCentral phones, we started getting CDR data, which we've never had before. We shared that with our business intelligence team. They were able to mine the information and start producing reports for our operators at the restaurant level and have them adjust staffing levels so that we didn't miss to-go calls, which impacts our sales. We take over half of our to-go orders over the phone, so keeping our phones up is a mission-critical operation for us.
Please welcome Chief Financial Officer, Mitesh Dhruv.
Welcome back after the break. Hope you had some coffee, refreshments, checked the Adobe press release. The software land continues to grow really well. Hopefully we'll demonstrate that with RingCentral as well. I was talking to Sterling earlier in the hallway that my daughter, who is 11 years old, the other day came and told me, "Hey, Dad, I'm taking a class, and have you heard about the concept of yin and yang?" I was like, "Yin and yang? Wow." I was like, "No, tell me." Of course, I knew what it is, but I said, "Tell me what it is." She said, "Yin and yang is the eternal balance between two seemingly opposing forces." When she said that, I took a pause. Such an elegant answer from my daughter. Wow. My wife must have done something right.
I thought about it, that of course, I know what yin and yang is, it got me thinking more that not only do I know what yin and yang balance is, I live it and breathe it every day at work, which is the trade-off between growth and profit.
As investors, you guys are also tasked with the same problem when you are investing in SaaS companies, is this perennial trade-off between growth and profit, which is why somebody invented this Rule of 40. For those of you who are not familiar with the Rule of 40, it's the optimal balance between revenue growth plus operating margin, and the optimal balance is to be at 40 or above. All through this presentation, we'll dive deeper on how RingCentral is doing on the Rule of 40 and how we've been marching toward that. We'll share some insights and dive into some dynamics. Before that, let's just quickly recap the day, what you've heard so far, starting with the opportunity. We are disrupting a ginormous market. It's one of the biggest TAMs available to any horizontal application. That's one.
The way we've been doing this is through innovation, which is really the secret weapon or not-so-secret weapon, where all our past investments in innovation have led to our leadership position. As you go further, we are doubling down on our innovation. This will just continue the leadership going forward. With capturing the market comes go-to-market. The way we've been capturing go-to-market is the playbook is going to be very simple again. We are trying to crack open even larger enterprises. Vlad did mention about Fortune 2000. Somebody came and told me, "Hey, Vlad said after two quarters, you can start asking." Vlad, they're going to start asking in two quarters. That's one. Again, that's larger enterprises, and then how do we crack open this efficient distribution model? Quick and efficient, which is what Zane is doing through the channels.
Let's quickly take a look at how these three vectors have played since our IPO. It just feels like yesterday, in 2013, we IPO'd a little over $150 million in revenues, since then, our revenue has tripled. Last year, we were a little over $500 million, and the most recent quarter, we were a little under $600 million in run rate. About 4x growth. Two things to underscore on our revenue. One is we have enormous visibility. 90% of our revenue is recurring. In any given quarter, we have over 90% visibility going into the quarter. That's number one. The customer dynamics are getting really powerful. We are experiencing stronger bookings.
The customers who are on the platform are staying for a longer time, and they're buying more, which is what has led to our growth rate of over 33% consistently over the last couple of years. Not only have we been growing at a clip over 30%, we've also expanded margins. That comes with a high level of fiscal discipline in the company. If you ask my finance team, a couple of members who are here, they will say, and they will tell you, and even Dave Sipes, we maniacally watch every dollar we spend. It's really maniacal. We find more efficient ways of doing the same thing. Every dollar we spend gets pushed through an ROI lens. We do two things. We invest heavily in innovation, and we invest heavily in sales and marketing, but efficiently.
Everything else becomes an avenue for margin expansion. Which leads me to this yin and yang concept, the balance between growth and profit. There's no right answer. One could solve for profit at the expense of growth. You can take all the money and give it to investors in forms of cash flow, dividend. That could be one avenue. You could have growth at all costs. You could double down on sales and marketing, double down on innovation, and be unprofitable. The trick really is to have this balance. The way when we look at this balance is that if we were to invest a dollar in growth today at the expense of profit, that growth dollar better be profitable. That profit dollars that recur over a long period of time better far exceed the upfront investment we make.
Because it's just not about top-line growth. It's about the overall value you capture in a business. That's how we come up with a simple mantra, profitable growth. As RingCentral optimizes for profitable growth, we look at a couple of simple things, but powerful things, key things in a SaaS model. Number one, what's our cost of acquisition? What's the cost of getting a customer in? Second, how long will a customer stay with us? Third, when a customer stays with us, what's the cost to serve the customer? Fourth is, how are these dynamics changing over time? What I want to do today is explore with you guys and double-click on some of these vectors together to see how we've been trying to strike that right balance. Let's start with growth. Now, growth is simple.
In a hardware-based land, or if you are in licensed software, it's pretty simple. You sell, you grow. You don't sell, you don't grow. In a SaaS business model, it's a bit more nuanced, as you guys know. Even if you don't have new sales, new bookings, you can still show growth. There's an optical illusion for a period of time, and then people realize, "Oh, shit, the company's not growing," because you missed the forward-looking indicator. To explore that, let's look at some building blocks of a SaaS model. There are three key building blocks is the way we view the SaaS model. The first one, first building block is net bookings. In every SaaS model, you start with your beginning ARR, your beginning book of business. To that, you add new bookings.
New bookings should come in two forms, new logos we land and customers that have repeat sales. From that, you deduct the churn because customers may leave for various reasons. That leads you to your ending ARR or revenue, which is your closing minus opening. The key concept to note here is that as long as your new bookings, which is the green line, exceeds your churn, which is the red line, a company is going to grow. It then becomes very pertinent to look at that net concept, which is the new bookings less gross churn, and we define it as net bookings. That's building block number 1. What becomes interesting is how does this building block number 1, which is net bookings, translate to your revenue growth of a company? Let's look at an illustrative example.
Let's take a company of $100 in ARR, growing bookings at 30%, which is the blue circle. Your ending ARR of the company is the orange bar here of $130, and the revenue growth rate is 30%. Far, so good. What if we start doing some analysis or sensitivity on growing the bookings? Let's start to grow the bookings, the forward net bookings, the forward-looking indicator by 40%. You see the blue circle from years two through five, each year you start growing the bookings to 40%. Let's explore what happens to the revenue of that company. It's the orange circle now. The revenue starts growing from 30 to 32 to 34 to 36 and 37. The core concept here is that revenue acceleration takes a long time, it's a lagging indicator because you have a higher install base.
To grow that install base and to accelerate that growth is really hard because you're layering new bookings on top of that. It takes years for a company that is growing and accelerating bookings to accelerate revenue. It's a hard concept. It's a hard journey. You could take any different scenarios, and ultimately, your revenue growth will converge to your bookings growth. Let's explore some scenarios. This first line is what we just saw. A company bookings growth of 30%, accelerating to 40%. You see on the right side how the revenue starts asymptoting towards 40%. What if their bookings growth is flat at 30%? Your revenue growth is then flat at 30%. One more scenario where if there is deceleration in net bookings, the revenue will start to decelerate and asymptote towards 20%.
In the end, why is all this relevant? It is because it leads to the third building block, because ultimately, net bookings growth leads to revenue growth, which will ultimately dictate the size of the company. In our first example, where a company was growing 30% bookings and decelerated, which is a red bar, in five years, this company is going to be 3x its size. A company that is growing 30% bookings as a starting point and accelerates booking to 40%, that company will be 4x in five years. That's only five years. What if you extend this concept to 10 years? This compounding effect really, really starts to take hold. In 10 years, this company on the orange will be 20 times larger. A small company's name comes to mind, Salesforce, which was exactly like this. ServiceNow is on the same trajectory. Adobe.
You pick any software company, it's the net bookings that's been a precursor. That's all academic, you guys are not here to see academics here. Let's see how it applies to RingCentral. This orange line is our core subscription revenue growth. The way we define core subscription is we take our overall subscription and deduct the impact of AT&T to get a clean compare on the underlying business. This represents about over 90% of our subscription revenue. It's a proper install base. You see this orange line has been accelerating from the end of 2016 until now by about eight, nine points. Again, the precursor of revenue is always net bookings growth. Let's see what our net bookings growth were at that same time. Our net bookings growth for the same period went from 20% growth to over 50% growth.
Which led to the acceleration. When I was discussing this chart internally, a colleague of mine said, "Yeah, you can do this. We can just pour more money." Sure, you can. There are two ways of driving this growth up. You either pour more money, tank your efficiency, and if you do, you either are unprofitable or have less to spend on innovation or both. That growth is a mirage, total mirage. The moment you pull back your sales and marketing spend, the growth will drop to the floor. There's also the better way of doing it. The better way of doing it, which is option two, is you increase your sales and marketing efficiency, and then you expand your net bookings. For every dollar you spend, you increase your net bookings. Let's see how RingCentral has done this.
Over the same period we've accelerated our bookings, our sales and marketing growth has been flat. For every dollar we've spent, we've actually brought in a higher book of business. That too, by expanding upmarket or while expanding upmarket, which is more expensive. The question is, let's explore a little bit more as to how we've been able to achieve these economics. We have this fast Formula One car, which is really fast, which is the color of last car. It's very efficient. It's got an engine of a Toyota Prius. What we'll do today is we'll pop open the hood for you on the vectors to see what's really driving these efficiencies. There are two simple vectors for us. One is our mid-market enterprise, and the second one is channel. Let's take both of those in sequence.
Let's first explore the mid-market enterprise, our move upmarket. Our mid-market enterprise business now is growing over 75%, and that too, on a base of $200 million. Just three years ago or four years ago, this business was little over $10 million. It's been seeing a fairly good trajectory, and right now this business represents over 60% of our net new bookings. That's how the forward-looking indicator is tracking. How do we do that? What we did is we took the profits from our small business, which is enormously profitable, and we started deploying this profit into our mid-market enterprise segment. We just didn't do it just on a whim. There was a reason we did that, because we ran long-term economics or the growth economics for this business.
We saw that the long-term growth economics for this model or this channel or this segment is much more profitable than the small segment. What do I mean by growth economics? When we talk about growth economics, we mean three things. Cost to book, which is how many dollars it takes us to acquire a customer, measure of efficiency. That's one. Second is churn. Once a customer is on a platform, how long does he stay with us? Stickiness. The third is upsells. Once a customer is on the platform, how much do they buy more? Expansion. Let's now dive into each one of these economics in the next couple of slides. Let's start with cost to book. This chart represents our sales and marketing dollars divided by $1 of new bookings we bring in.
Lower line means better, higher line means worse. We've seen that our cost to book has come down dramatically in the enterprise, and mid-market is actually holding really flat and very nicely, very steady. The reason we've seen this economic shift or the lower cost to acquire a customer is because of increased productivity of our reps. Really, if you, again, unpack this one more layer to give you an operational sense of what's really happening, driving productivity, is I would say three things. Number one thing is the product. We are an innovation company, and we make the product easy to use and easy to buy. That's what's really driving the efficiency. That's data point number one. Number two is the people. As Vlad said, it's about the team.
We've got Ryan Azus here, who's been with the company 9 years, and he is the head of sales who's been driving this since last 9 years. He has really augmented his bench. You've got Mitch Tarica here from Webex and Oracle, who is on the bench now or on our team now. You've got a gentleman called Carson Hostetter, who is the head of enterprise, who used to be running a half a billion book of business at Avaya. You've got Derrell James here from Avaya, who used to run, what, $2 billion of business at Avaya, Derrell? You've got heavy hitters like these guys who make my job pretty easy to report these numbers, thank you. Then the third one is, we've covered product, we covered people, and third one is process.
Behind Ryan's team is an amazing sales ops engine, which is really, really fine-tuned with enablement, efficiency, process improvement, automation, That's what's driving this whole engine forward. The best news of all is that it's still early days. Only half of our reps in the enterprise segment are ramps, or less than half, and you've seen the productivity increasing. That was cost to book. Now let's look churn. Our overall churn rate, annualized gross churn, is about 10%. That in and of itself is a great number, actually. If you look at Salesforce.com's annual churn, it's about 8%-9%, I think, annually. Which is, they are what? 20 times larger than us. There's nothing structural about this. Once you remove the business mortality, it's a pretty sticky product.
If you look at the sliver of larger enterprises where business mortality is not as prevalent, our churn rate drops into half. This is less than 10%, or less than 5% annually. Why is that? Three simple reasons. One is it's a mission-critical app. You heard the customer panel, with Box, Pacific Dental, ChenMed, you heard the partner channels. When customers deploy this, it's really mission-critical. Number two is, in larger enterprises, there are high switching costs. CIOs are replacing five, six, seven applications and subsuming it with RingCentral. With multiple people in multiple locations on multiple devices, with data stored on a Glip and the platform, it's all tethered in the guts of the system. To replace this is just not you turn off your dial tone. It's not as simple as that. We are in the guts now of every customer application.
The third is Darrell's team provides enhanced support. We've got customer success managers for supporting these customers. These three combinations really work well together to reduce the churn. We've seen the cost of acquiring a customer is low in the mid-market. Churn is low. Now let's look at retention, which is essentially same-store sales. Our overall net retention or net expansion for this segment is over 130%. Which means that even if you don't add a single new platform on a customer, our growth rate will be about 30%, plus or minus in this segment. What's really more interesting is if you look at the cohort journey. Cohort is just a fancy word in my mind of snapshotting a customer where they came from. 2013, customers who came there, their net retention rate on an annualized basis was 115%.
Each cohort since then has been progressing higher. Early days for 2017, I was debating whether to show it or not, but we said, "You know what? Let's show it." Again, it's 160%, but the year is not complete. Really positive trends on the cohort. Again, why is that? The first vector is customer mix. Shifting to larger enterprises automatically provides a natural tailwind. Then we can land and expand more. There's a lot more we can go to the well multiple times. When we deploy customers, most of the time, it's not a wall-to-wall deployment. The third is our product portfolio has expanded meaningfully. Back in the day in 2013, we only had one product to sell, which is RingCentral Office. Right now, you saw with Sipes's presentation and José, we've got a slew of products to sell.
It's not a one-trick pony anymore. You've got these multiple on-ramps into communications. With all these economics going on, the goal is to double down on these investments and keep driving it, pour more money. Why? Because it's still very early innings. Really early innings here. If you look at our install base right now, it's a $200 million install base. There are really two vectors that really will have expansion in the install base. One is seats. The potential number of seats in the mid-market enterprise right now is six to eight times. Within that install base, we have over 40% upsell ratio. That's what Vlad referred to in the morning. He, I think, misspoke a little bit. That's one. That's the Y-axis, the potential within the install base itself, just users.
We also have this P times Q, we also have the P, our ARPU. Of all these new products we have, global office, contact center, collaborative meetings, we can expand our ARPU by $10, $12. If you marry P times Q, the white space in a customer actually is pretty meaningful. Without growing a single new customer, we can have our install base, we can grow eight to 10 times within install base, which is a $1.6 billion-$2 billion opportunity. The exciting part is that that's just install base. If you look at the journey of larger customers, it's just very early. It's a $30 billion TAM. It's a deep blue sea here, right? We're just starting to swim, like maybe Michael Phelps. I don't know.
That was the growth economics of mid-market and enterprise, where we have momentum, the economics are really strong, so we'll be doubling down. The question becomes, how do we reach this deep blue sea? There's so many customers, how do you reach them? How do you expand the reach? That's where the instinct comes in, the channel. Our channel business is a little over $100 million business, growing triple digits. Again, just like the mid-market segment, it used to be a little over $10 million business a couple of years ago. Really what happened, what changed this dynamics was in the last two years, we actually saw acceleration on a larger base, which tells the maturity of the market there. In Q1 of 2017, the channel business grew 85%, in Q1 of 2018, it was over 100%.
You're seeing a higher growth rate on a larger install base. That's the growth part, again, RingCentral's mantra, profitable growth. Let's look at the growth economics of the channel. Is it good or bad? Similar to economics as mid-market and upmarket, which is a cost to book and churn, they both remain there. There's a third variable in the channel, which is the residual cost. Unlike a direct business where you pay the sales rep upfront for a book of business, channels flipped. You don't quite pay upfront, later on, you have to have a revenue share with the channel partners. Let's look at the combination of these three economics and what really it means for our P&L. This is, by the way, the number one question I get from investors every single time.
I thought let me just address it in this broad forum. The first one is cost to book. Cost to book is lower in the channel because we don't spend the marketing dollars. That's the value add the channel partners bring us, so thank you very much for all the business there. We only pay for the deals we win. That's sort of a pay-to-play model. The cost to book for us is lower, and the gross churn is also lower because of similar dynamics. The customers that come through the channels are usually larger customers, so they exhibit some of similar behavior in business mortality, where there's less business mortality. Second is the program of the channel is incentivized in such a way that the channel partners get paid only if they hang on to the customer.
That creates a virtuous circle where the channel partners want to hold on to the customers to get paid, and it in turn helps RingCentral. This flywheel effect has been going on for quite a while. Every customer that does not churn for us gives us more money to acquire a new customer. You can now see how the flywheel has been turning and how this momentum builds up on itself. Let us summarize net what it means. You've got positive forces, some pluses and minuses, lower cost to book, lower churn, but the minus is the residual cost at the back end. When you combine these three forces, what you see is The question becomes, what's better? If you have a $1 to spend, do you spend it on the channel or do you spend it on direct side?
That's the model we ran. What you see when you run the model is that because of the lower cost to book and lower churn, the revenue is much higher for the channel partners. Again, it's just not about growth, it's about profitable growth. We do tax the impact of residuals. Even when you tax the impact of residuals, you see that the net efficiency for the channel is higher because your upfront cost, which is lower in churn offsets or more than offsets the residuals. It's higher dollar value. It's out and out accretive. That's why we've been doubling down on the channels. That wraps up the growth side of the equation.
What we've seen so far is how we've been growing on the mid-market and enterprise side, how the growth economics are improving, we've also seen how the channel is growing and how channel is accretive to the P&L. Let's start with the other side now, profit. Here it is basically once you've acquired a customer, how much profit can you expect from that customer in the ensuing periods? Let's start with a simple equation. You've got a recurring revenue business. You keep on getting revenue every month, every quarter, and from that, you deduct your cost to serve. We keep the equation pretty simple.
We take all of subscription COGS, all of R&D, and all of G&A, even though there is some argument to be made that not all of R&D goes towards the install base and not all of COGS is towards install base, we fully tax it to be just conservative. That brings us to our recurring profit, which is the green bar, or recurring margin. To be intellectually honest, we actually take out churn from that. Why? Because as studies state, if a customer is churning, we or a company needs to replenish that bucket to grow at the same rate. You have to tax it for churn. That's what we call our economic margin. What it really translates to, the economic margin is the true steady state margin of a company. Let's see how RingCentral's financials map to this model.
Let's start with the recurring margin. Our recurring margin has gone from about 28% when we IPO'd to over 55%. 26 points growth since the IPO. There are a couple of key drivers for that. One is gross margin, which is now over 80%, our subscription gross margin, 82% in the last quarter. In that, we've seen scale both in fixed and variable costs, cost to scale a data center, network costs because we have a common layer across all users. Then variable costs, like our transport costs, when in 2013, these transport costs were about mid-teens of revenue, percent of revenue. Now they're in the mid-single digits. You've seen that. Second is also we've seen scale in R&D.
It's a very, very efficient innovation cycle, where because it's a single code base, it's a multi-tenant architecture, cycles become very fast and innovative and very productive. That's two. Third is operational efficiencies. As we mentioned earlier, everything else besides innovation and efficiencies in marketing is an avenue for margin expansion. There's a sense of frugality here where we watch every dollar. That's what's happened, why our recurring margins have been 55%. One thing for people who know me is I'm a shameless benchmarker. I benchmark everything. From the bread I eat, to the milk I drink, to everything. Here's how we stack up on the recurring revenue benchmarks versus some of the well-known SaaS companies. We are number five of 15 or 16 companies. There's some cool companies ahead of us. There's Salesforce.com, much larger than us.
There's ServiceNow, much larger than us, who we use as role models. There are some amazing companies like Paycom and HubSpot who are a little bit ahead of us. Over time, our goal is to be in this top quadrant and maintain that. We have levers like innovation, productivity, fixed cost productivity, variable costs, efficiencies to get there. That was recurring margin of 55%. Now let's look at economic margin. We have 55% or 50, 55%, recurring margin. We take out a 10% churn from that, which leads us to our 40%-45% economic margin, or steady state operating margin, call it. This base of customers we have, 45% margin, is a very, very highly profitable install base, very profitable. You can almost break RingCentral's P&L into two P&Ls.
One is this highly accretive profitable customer base, which is spitting out 45% margin. Then the second P&L is our growth P&L, where we are investing for growth. We're taking all that money and deploying it there. The combination of these two things is what you see is our net operating or our operating margin of 7%-8%. When you peel back the onion, what's really happening under the hood is we are taking this gray bar of 45% and redeploying every dollar we can into the blue bar. Why is that? Because of the growth economics we just saw. We'd be remiss to not do that if these economics are so powerful and the market's so large.
What happens is the minute the company or RingCentral hits maturity, hopefully not in a long time, the profit dollars start to flow to the bottom line. That's the inherent leverage in the business model. Right now, it doesn't make sense for us to do that. Which brings me back to the balance between growth and profit and the yin and yang. The best strategy is to have profitable growth, if you can, which is what RingCentral has been having. Again, the first question I always get when I meet with investors is the channel question, economics.
The number two question I get from Terry Tillman in particular is, "What will be your margin profile at $1 billion?" Every time I pick up the phone, he doesn't say good morning, he just says, "What's going to be your margin profile?" Terry, this is for you, man. Thank you. The answer is the politician answer, it depends. Why it depends? Because right now our economics are really powerful. Our cost of acquiring a customer is coming down. The customer is staying there for a long period of time, and they're buying more. As long as these economics are there, we will keep dialing for growth. Terry, please do not ask me this question ever again until we reach $1 billion. Take it offline. Yeah. Yeah. Again, this is only if the economics are there.
Again, you should know that the management team of RingCentral is maniacal about ROI. If we don't see the ROI, we will give it back to profit and to shareholders. That's been the mantra every single day. Which again, then leads me to the Rule of 40, which I started with. The x-axis is our revenue growth, y-axis is operating margin. The diagonal line is the golden Rule of 40, people strive to be. If you're in the blue zone, you're cold. Orange zone, you're hot. Last year, RingCentral was just under the orange zone, so kind of cold still. Over time, we will achieve the Rule of 40 and actually exceed it by 2020. This is new.
We feel confident that we will exceed the Rule of 40, that's one, and we also feel very confident that we'll just not meet $1 billion, we'll exceed our $1 billion target by 2020, given the growth profile of the company right now and the momentum we are seeing. Exceeding $1 billion, exceeding a Rule of 40. The bias is going to be for growth. It's a fiscally disciplined company. We will not dip in the red like some other companies in the industry. We will show at least 75 to 100 basis points of operating margin each year. The drivers are simple. All the drivers we've been talking about. A shift up market, which has churn tailwinds. The enterprise reps are going to be ramped more. It's less than 50% ramped. There's upside bias towards in our recurring margin.
How do we all put it together? Is where how Vlad started. I do not know where he is, that is how we started. It is an innovation company. There he is. My eyes are blinding. What we have been doing is driving for innovation, that is what has led to our disruption in the industry with the product. We are investing in R&D more than ever before. As the product set is getting better, the value proposition for the customers, like what you saw in the panel, the channel partners, is getting even more compelling. That leads to feeds efficiency. Why? Because we now have more brand value. We are getting recognized by industry leaders or analysts like Gartner, Forrester, Infonetics, there is repeat customer reference. We saw the example of Public Storage, which saw Extra Space Storage, the competitors deploying RingCentral, they came to us.
That momentum is starting to take off, it becomes easier for our sales folks to sell. That is number 1. Number 2, our churn is coming down because the product is getting better. If you take these two combined forces and look at the sales and marketing you have to spend for every dollar of booking you get, it is getting better, feeds growth. Because now you can acquire a lot more profitable customers for the same money, opens up more money for innovation, starts this virtual circle. If you impose this virtual circle on a $50 billion TAM, that is where the excitement comes in. With that, let me just wrap up with our mission statement.
I mean, this is, even for me, I was a software analyst before I joined RingCentral, it has been truly an amazing journey for me RingCentral is trying to change the way businesses communicate. That is pretty powerful. I have been very honored to work with an amazing group of people like Vlad, Dave, the entire management team. One thing is, Sterling was asking again earlier, "Hey, what is changed in the last year?" I said, "Look, it is a shitload of work, it is a lot of fun." I am having a lot of fun. The opportunity is there. Look, I just summarize with a couple of key takeaways. One is the opportunity is enormous. We are leading the charge through innovation, that innovation is distancing ourselves from the competition making sales and marketing more efficient.
We are seeing the sales and marketing efficiency play out in the mid-market enterprises we saw. The growth economics are better. In the channel, it is accretive to the P&L. That is leading to our growth acceleration of 37%. Again, it is just not about growth for us, it is profitable growth. Our recurring margin is over 55%, there is a positive bias from that. Ultimately, we will exceed the billion-dollar target and the Rule of 40 by 2020. With that, thank you very much, I want to invite Vlad and Sipes on the stage for Q&A from you guys. I forgot the last slide, thank you. Question from Sterling. Sterling, you have the mic coming there for you.
Thank you.
Thank you.
The targets for 2020 that you outlined, I imagine that assumes that the economy continues to roll along as we see. One of the benefits of the recurring model is the defensive nature of it. I'd be curious if we start to see the economy roll over, how would you manage the targets and how would you manage the business through it?
You want to start off, Shmunis?
Well, that's a really interesting question. Hopefully, that's hypothetical, right? It's, from what I understand, not something that most economists are projecting at this point. Look, this question has been asked before, and just maybe to reiterate the answer is, we have been through down cycles, okay? At least two, as a company. We've accelerated both times. At a, I don't know, common sense level, if you will, if the economy slows down, dollars become more dear, and the economics that we provide become yet more pronounced. As the economy stabilizes and re-accelerates, nobody necessarily wants to all of a sudden start burning cash, because now they've experienced the savings and the efficiency gains. I would say would be cautiously optimistic to that. Having said all of that, really, I'm hoping that 2020 is not the time we need to worry about that.
Hi, Mitesh. Maybe we can talk about the long-term model. No, I'm kidding. In terms of the sales productivity, in terms of the ramp, less than 50%, give us appreciation for where it was maybe six months earlier or a year ago. As we progress through the year, are there major step-ups in that productivity, or is it still a couple of years out? Just help us see how that's going to evolve. Thank you.
Yeah, sure. I'll take it, and maybe Dave can add on. Over a year ago, it was even more nascent than it is right now, Terry. What we've been doing is we've been the first phase of the journey was to fill out the necessities and then now densify it. We are in the second phase now, densifying it. As it relates to the long-term, we are adding capacity every day, and I think we don't expect this capacity to slow down. We hope that the overall ramp of the segment is lower as it stands right now.
Thanks so much. I was wondering at what point does it make sense to build your own video or contact center solution, just in terms of maximizing your gross margins. Basically, at what point is it big enough where you want to stop paying your inContact or Zoom?
I'll take that one. Look, it's really less about paying because it's a little bit like with the channel. Yes, we're paying some residuals. On the other hand, we're saving on R&D, we're saving on products, and so forth. It really is about how do we best position ourselves to deliver world's best, not only world-class, but world's best experience in one or both of those areas. We are partnering with two industry leaders here. It is hard to compete with them. It's hard for our joint competition to compete against us and them. It would be hard for us individually to compete against them as well. Now, we are now a meaningfully larger company than both of them. Well, if you take within context, outside is nice. Time's on our side.
Eventually, we'll find a way, whether it be in partnership, whether it's with them or somebody else, or if we take it in-house. Eventually, it's about control of the roadmap, control of the user experience, and ability to quickly and definitively react to customer or process demands. You've heard from our partners, you've heard from our key customers. The beauty of RingCentral, and this really differentiates us from much of the perceived competition, is the fact that we control our own stack. We can react to customers' requests and demands in real time. We can influence our partners' roadmaps, but we don't fully control it. That's the rub. One way or another, it will be solved.
I have a question, especially in the long-term horizon. How comfortable do you feel that from Microsoft Teams and from Google Hangouts, especially the lower end of market, it wouldn't present, especially as we go to 2020, any serious competition from there? On the higher end, the efforts of Avaya and Genesys and Cisco, especially for the not so much distributed enterprise, but for a larger location where they could have customized cloud kind of hybrids. How do you look on this competition in longer-term? Thank you.
I guess I'll take that, too. I'll do it in reverse order, with, how you say, higher enterprises. Let's do an easy one. I know that Cisco is out there saying, "Well, gee whiz, sure, situations like we heard from today, where you have hundreds of processes, and you need to roll out." They sort of already admitted defeat. They're saying, "Yeah, but if you have a very large center, then doesn't hardware make sense?" The answer is no, it does not, because I struggle to name a single. We talked about Global 2000. I struggle to name a single Global 2000 business that is single location. I actually struggle to name any enterprise with over 1,000 employees that is single location. That's simply not how the world is. Okay? That's where they fall down.
The minute you get from one to two, cloud just takes over completely. Okay? That may be an answer to that question. Outside of large concentrated locations, look, Cisco is not a cloud company. They've shown that over and over and over again. Avaya is not a cloud company. All right? Genesys is not a cloud company. Okay? Yes, they acquired Interactive Intelligence, but Interactive Intelligence is not a proven player in the cloud, and it's not Genesys. The two stacks are disjoint. We feel very comfortable in our ability to stand up to them. We are born as a cloud company, and I at least personally, again, struggle to name a single scaled-up cloud provider that has ever been disrupted by a legacy player. We have lots of people smarter than me and better students of the industry, so you guys speak up.
We can get Terry in particular here. We're just going to be picking up on you. Yeah, I don't know. It just hasn't been done before. Okay? People never came back and never reclaimed leadership from Salesforce. PeopleSoft never came after Workday and Zendesk. I don't think it's going to happen. Your first question is, okay, what about the big guys, specifically Google and Microsoft? Look, Microsoft has been talking about this for a long time. Okay? Microsoft simply does not have the product today. They keep talking about it. They keep on not delivering. It's Microsoft. They do have the resources. They do have Teams. From what we understand, Teams is beginning to gain traction against Slack, but Teams does not have the PBX.
If you remember, one of my key slides was about the distribution and multimodality of communication that we're seeing and that the industry is seeing. Voice and enterprise-grade voice, I kind of played it down, as I said. Look, it's only growing 40% year-over-year for us, but every customer uses voice. That's a piece that Microsoft does not have. Will they ever have it? We'll see. They've been trying and failing for a number of years. Even if they do, again, it's a very, very large market. Yes, we'll punch through the billion-dollar mark, but we're not saying that we'll punch through the $50 billion mark. Okay? It's going to be a different thing. We'll keep our share. Google is very different, frankly, and with Google, they tend to go after a much lower end.
Many people know here we partner with Google, the minute it gets serious there and they have an actual need at the enterprise grade, people go with RingCentral. For example, in particular, Avery Dennison, I used them already. We got introduced to them by Google or by Google Reseller. They are 100% Google Shop, once it hits enterprise-grade communications, Google doesn't play. Very long-winded answer.
Could you reflect on the revenue retention of the latest cohort? I think you showed something like 175%, and the simple stupid there would be even with a 10% churn. If that continues, you should be able to grow billings in the order of 65%. Are there any other nuances or offsets that we should be thinking about?
First of all, it was over 160%, not 75. That's just a small wicked correction. Structurally, you're right. Again, the 2017 cohort is an early cohort. We have not finished the year. It's only half the year is over. The overall takeaway is that let's look at our total net retention in that segment. It's over 130%. Yeah, there, your overall upsell is surpassing your churn or gross churn. If those dynamics continue, there's structural tailwinds to the business.
Hi. Catharine Trebnick. Two questions. One, you recently took out the convertible, and I'm wondering where you think your product gaps might be for the use of the funds.
Well, you got to remember, we are profitable.
Yeah.
As Mitesh said, we're not going to dip into the red. The idea was to not use the convert to plug up. Whatever roadmap we have, the company pays for it, and the company is profitable. Look, it was a good deal, zero coupon. We are in a good company there. Just a matter of taking the money when you don't need it. Cheap money. We talked a little bit about macro concerns. Simple fact of the matter is that deal probably would not have been possible today, not because of anything we did. Or did not do, just different interest rate environment. We just wanted to take advantage of free money as we have.
The second part was any product gaps that you're seeing in the roadmap on the way. You have a very broad platform. Is there anything else that you're seeing from your customers that will drive new innovation?
Nothing that wasn't mentioned already. Question of ownership of the entire portfolio comes up. You may or may not view this as a gap. I tell you what, if you, again, you refer to one of my slides where I was showing top 15 customers using. Yeah. In the ideal world, we would like to have every one of those customer. We would like it to see all orange. Yeah. Every little block being filled for every customer. We're not there yet. You can well imagine that some of them, because there is already a trusting relationship, why doesn't everyone use Glip? I don't know. We're working on that. Usually we got I don't take it literally. We do know. Those are the obstacles, but it's incremental improvements. We don't feel that there is anything structural.
There is not like an inflection point that we're projecting. We just need to make it better, more robust. I was talking to one of the gentlemen who was in one of the panels, which conversation started, "Thank you for being here and supporting us." Yeah. He said, "Thank you. That's great." Said, "Well, what can we do for you?" He says, "You know what? Just keep it up. Keep it working. When it's working, it's working really good." That's our challenge.
We'll take a couple more questions, two or three, and then we'll wrap it up.
I have two questions. The first one is, do you think your product is ready for the Global 2000? If not, what feature and functionality do you think you still need? Then two, could you remind me, do you still run your infrastructure on a internal private cloud? Do you think that's still the right strategy as you become bigger, or are you thinking of migrating that spend to public cloud? Thanks.
Yeah, we think we started the enterprise journey three, four years ago. We filled out most every capability of legacy PBX at this point. There's incremental opportunities we find in our pipeline as we talk to customers. We add that to our commitment from pipeline. We know that when we build those, it goes out to all our customers. We feel like the product is ready for Global 2000. The second part of the question was?
Infrastructure.
Infrastructure, private cloud. I think it's logical to do components in public cloud. We do some functionality today in both, some in AWS, some in GCP. Incremental functionality may be there, as well as some geographical expansion could be there over time.
Take the last two questions.
Parts of the products are in public cloud already.
Hey, this one's for Mitesh. Just on the channel investments. If we think about the sales and marketing investments that are made, how much of those are fixed versus variable? I don't know if you're doubling down on the channel is a literal question, but how should we think about that in terms of the, I guess, upfront investments versus residuals?
On the fixed versus variable, it's a mix. There are some costs like overhead, which are fixed, a lot of the channel costs are variable, like salaries, labor, whatnot. That's one. Second is, how should we think about doubling down? Say that question again.
Yeah. Are we literally going to see a doubling in channel?
Doubling down was a way of saying it. Yes, we are, let me say, increasingly going to invest in the channel. Let me just rephrase it that way. This is a vector of growth, and we will be seeing increasing investments. Last question I'll take from the gentleman right here.
Hi, I actually have two. First, about your current account penetration. How do you define your penetration? You might think they need X amount of new seats, but the company might actually think differently. Second, what do you think hold those customers? Why they cannot convert at a faster pace or right now if your offering's so good?
Sure. On the penetration, it's a simple calculation. We have the total number of employees from the customer, and we have the seats deployed today. Avery Dennison, the employee seat count is over 20,000. Right now you've got 2,000 seats deployed, that makes it 10% penetrated. That's the calculation number one. Number two is why not now? Yes, because it takes time. There's no real magic behind it. It's a methodical structure rollout. If you imagine a company like Avery or Marriott, they have thousands of locations, they just don't flip the switch one day. It's a very methodical global rollout. Over time, you should see us to increasingly increase our penetration within that base. Well, thank you all for coming. Really, really appreciate it. We'll be here offline available for questions. Please grab a drink and some refreshments afterwards.
Thanks again.