Okay. Thanks everybody for joining us today, those here with us in New York and those joining us on the webcast online. We've got a lot of content to share with you today, a lot of great new information. But 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. So 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 Schmunis.
He's going to talk about the opportunity that's in front of us and the progress we're making towards capturing that opportunity. Then we're going to go to Dave Sipes, our COO, and he's going to talk about our industry leadership covering innovation, competition, and go to market strategy. Then we'll have a demo from our VP of Product, Jose Pasteur. 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. Then 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 and A at the very end.
Now 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 1,000,000,000 opportunity, but also the progress that we're making. And it's still early in the evolution of this opportunity.
2nd is innovation. You've seen the dollars that we've invested in R and 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. And lastly, compelling financial model.
Now 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 dollars into profitable revenue growth. Now with that, let's go ahead and kick off the day and bring up on the stage Founder, CEO, Chairman, Vlad Schmunis.
This 8 days a week part is a pleasant surprise. It brings it home really. Okay. Well, thank you everyone for joining us. Our 2nd annual investor conference.
Some new faces, some familiar faces here. So I'll give you a little bit of an overview of why I think we're here and we'll take it from there. Okay. So this is one of the people I personally admire. Perhaps he has some other sense 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. And if your customers are happy, that makes for happy businesses. So that's what RingCentral does is we help businesses optimize productivity for their employees. Now, so why are we here? So we're here because there have been some pretty substantial changes in the way that businesses work and in the way that people communicate.
And if you look at this chart here, so world population has been rising gradually, so for the last, what, 13 years now. The red line that goes down to the 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. And of course, the line in the middle, bright blue there is use of mobile devices. So these trends apply to business they apply to consumer behavior as well as to business behavior.
And this is really one of the things that is perhaps the least understood about RingCentral and what we are 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.
So legacy as you can tell
is designed for the old world. So these are actually the types of systems that we're replacing day in and day out. And 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 mobile devices desktop devices. So again, reality is very different. People are working on the multitude of devices, they're working from multitude of locations and they are multimodal.
So 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. So this is from industry data here. But yes voice is still leading. As you can see 44% of business communications is still done via voice. But 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 1st 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.
But in business, believe it or not, it is fairly innovative. And 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 tremendous uptake in our customer base. So UCaaS, this is our vision. This happens to be Gartner's vision as well.
I think most people agree it is really about multitude of devices, multitude of applications and any modality. And 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. So here's 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. So what you see here are our top 15 accounts by the number of seats deployed. Okay.
So these are all very large accounts now. So all of them invariably use our voice PBX features. That table stakes for us taken for granted. But very interestingly, if you go left to right here, as you can see, majority of this vast majority, so we're talking about 11 out of 15 are heavy mobile users, okay? So in addition to landline telephony, we're talking about mobility.
Again, vast majority is using our Glip team messaging and collaboration. And people have been asking for some time now is, well, how is Wip doing? And we go, it's doing well, very well. Here is a proof point. 11 out of or 10 out of top 15 customers, 2 thirds are using Glitz 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. So 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, tremendous uptake with our key customers. Next down the line is contact center. And again, our solutions has been to partner with the absolute industry leader, which is Inconta.
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 and we try to provide some reference points such as well 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. But as you can see by the key customer update, it has been very much an integral part of their decision process. Okay?
So one is there people go, okay, well, why RingCentral? Why do you win? That's the answer because 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. So again, let's go left to right here.
So left mouse 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. But 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. So platform, a little bit over 100%, video outpacing over 100%, glitz 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 3:1. And interestingly enough, contact center is just taking off like a rocket.
So this is the underpinning of the overall landscape. And 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 reasons stated. The world has moved on.
World is mobile. And these guys are all stuck in the world of connected wired landlines. Cloud is winning. RingCentral is winning in the cloud by substantial margin. That gap is increasing.
Again, we are very much relying on technology, on product and innovation to deliver our differentiation. Some of you have seen this slide before, but usually like to include it to show that we are simply collaborating our competition in our R and D spend. And 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 from any of our peers or near peers to catch up with us on innovation and our commitment there.
Okay. So in summary, why we win? Our solution is user centric and mobile centric and 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, etcetera, and open platform. These are all unique differentiators and the last 2 are absolutely objective.
There's simply no one out there cooking claim and 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 3 years in a row now. And we're in the middle of our next submission. So 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. But 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 a record quarter. And I can tell you that the trend is continuing. We're seeing increased momentum in the large enterprise. But here is the best news. With all of the success, the best is yet to come.
So if you look at market as a whole, there is about 5,000,000 UCaaS hits currently deployed, okay? RingCentral is the absolute leader with call it about 25% market share, Again growing, GAAP is increasing, but in the big scheme of things it's very, very early. So U. S. Market is estimated at 50 I'm sorry, 100,000,000 seats.
So that would be about $25,000,000,000 opportunity in the U. S. Alone. And then if you look at global, you can approximately double that again. So very, very large market, okay?
And it's very, very early. So we've talked about our $1,000,000,000 revenue goal by 2020. 2020 is just about just around the corner here. So we feel very, very good about getting there. And 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 very good beginning in the enterprise, still work in progress, lots to do as far as building it up further, but we have very good metrics and appreciation 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, that has been really, I shouldn't say, a pleasant surprise.
I mean, we were hoping for good results, but frankly, it has outpaced expectations. It's a fairly new motion for us is to deal with VARs and resellers. It's been immensely successful and 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 and we are winning major global enterprises based on the fact that we are able to cover the entire footprint with a single cloud based implementation.
So with all of this, we feel very positive about our $1,000,000,000 goal in 2020, which is just now 2 years away. But it's just the beginning. So what's beyond? So we're not going to stop at €1,000,000,000 We think that this company can become a lot larger. And how are we going to get there.
So here we're starting at $1,000,000,000 And look, we have we see an opportunity to do substantially more harvesting of the user base that 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. And we actually have what about a quarter of those of that opportunity deployed, a little bit under 10,000 seats. By the way, they started out not with 1,000, but with a little bit of few dozen seats.
We're in 2000 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, Syndra 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 for since the beginning. 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, 5000, 10000 seats. But we are seeing a a tremendous opportunity with now true enterprises with global leaders. So addressing Global 2000 is an initiative that we have formulated. It's going to take some time. We're just now beginning to see those teams.
So if at all possible next earnings call we do and people come to me and say, well, you said you'll do Global 2000. So how many of Global 2000 do you have? Very fair question, the problem was for next quarter or the month after that. These are going to be longer sales cycles. But certainly as we cross the $1,000,000,000 mark, we should have a reasonable following in those communities.
Okay. And we start with the product, we'll end with the product. So growing our platform, growing the ecosystem, better integrations, saving 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 1,000,000,000 of dollars within of revenue within foreseeable future. Okay.
Last slide for me at least. So the team, we haven't talked about our team much in public, but that is really that is the secret weapon is the people we have. And you can look at some nice logos, extremely good looking faces as well to go over the logos. But the one piece of data here I really want to highlight is we have a seasoned team and the team that's been proven to work well together. So we have a number of folks outside of myself even who have been together for over a decade, Profol in particular, as many of you know.
Dave Sacks, our COO, who will be speaking next. Ryan leads our sales and customer care. So almost 10 years and so forth. Mitesh is relatively new with the team, our CFO for only 6 years. I actually don't know that there is another team in our space that can enjoy this type of cohesiveness and loyalty frankly.
And we think it's we think the teams that play well together win games. They realize I mean New York here, not San Francisco, but Warriors have been together for a number of years before getting on the track there and so on. So yes, we think we are in a good space. Obviously, we had a very, very successful 2017, very, 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. So again, thank you. And with that, I'd like to introduce Dave Seitz.
Thanks a lot.
Hi, welcome. I got to speak about industry leadership today, which sounds a little audacious on the surface. But if you're in a category long enough for you to first in category, I guess you're always an industry leader having been here 10 years. And but I think what's audacious is really how much the industry, the cloud has grown and as the product set has expanded. And I think that's why we get this kind of crowd today.
So, I'm going to talk a little bit about that. First one quick clarification, when Vlad talks about the installed base opportunity, the 40% he mentioned was the upsell the percent 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's about 10% to 15% of our largest accounts are currently penetrated with RingCentral Services. So, let's see how we got here with expansion of the product. We've 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 wouldn't be that interesting today. But obviously, we've evolved over time. In 2014, we started our enterprise journey and 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 did a 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. So, a little ahead of its time and has been a great addition to the platform. And we started our open platform initiative, which you'll 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 1 service and one provider. Last year, we added we started capitalizing on all the data that we're 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. And this year, we're only not even halfway through, but we've already launched several new products. So and these are all around collaboration, bringing collaborative meetings, which brings team messaging collaboration with video and web meetings, collaborative contact center, I'll go into that a little bit more as well as Pulse. So you can see the trajectory has allowed us to have a multifaceted suite of capabilities.
And you'll see in the theme is customers are adopting multiple things, multiple elements, as you saw in Vlad slides, with the triple digit increase and a lot of adoption of these capabilities. When we think about the core product suite of 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 single platform. They feel it's going to make their employees more productive.
It makes their organization more effective when they incorporate into their workflows, and it allows their employees to connect better. We started out with the world's first mobile PBX. So all the enterprise capabilities of the 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. But we took it a step beyond. So 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. And then what's the next step to bring that suite together is taking video, which is so this is the future that we're working on to bring this into a unified application. So enterprises only deploy once, customers only access one customers quicker adoption of multiple services to our customers. So we talk 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? So Collaborative Contact Center is taking team messaging and RingCentral contact center and bringing those capabilities together. And how does that work? Well, 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. And 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. But 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. So, it really starts integrating these disparate applications and bringing it into a single unified platform. Additionally, we announced Pulse. And 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. So the way this works and through APIs, we have a GUI that allows you to select any of a number of KPI categories in the contact center, say 6 or 7 different categories.
And 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.
So 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.
And it really starts flattening the organization. So that's Pulse, and that's how we're differentiating this product suite in the marketplace. Beyond integrating those 4 key applications, we're building this on a single open platform and a global capability. And this is something we've been able to magnify. You saw our R and 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 3 years ago, it's doubling as we saw in Blads over 100% growth. And we have now over 12,000 developers on the platform, over 1,000 certified applications. We have an app store on our website. And 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 $5,000,000 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. But 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 1 per country. So, 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. So the watershed change on how people look at the category. And 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 platform has allowed us to do is publish things like our global quality of service analytics. Jose is going to go into this in a little detail, but it's a very complex high data environment with a lot of different sources of data with different endpoints that we publish between mobile apps, softphone 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. So why do we win?
I mean, we're obviously winning in many areas, but we get asked that question. So 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.
But it's gone well beyond that through multimodal communications. We see the messaging and video as being critical through the advancement. 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 once a year or once every other year and stop the whole organization. We do non customer impacting deployments, allows us to do much faster speed of innovation and that flows to the customers. The single global solution we talked about and 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 maintenance the soft costs of managing those systems, all those go away. And as you add on multiple services, the cost of ownership savings goes up. So who do we replace today?
Via Cisco, Mitel Shortell. Mitel Shortell, we debated because they're one company today, but still 2 platforms. But this is something our Head of Enterprise Sales last night, we had 150 prospects and partners in a room at RingCentral Forum in New City, the New York Stock Exchange. He told them, imagine a year ago, I already tell you that Via 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.
So as they go to make the decision on their next platform, impacting their decision. And I think that's why you see some of that legacy decline today. So 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 UK, in Ireland, in Netherlands, in France, but even in Brazil and in Mexico. And they're using our contact center capabilities also. Additionally, Marriott Vacation Worldwide, the largest pure play timeshare business in the world. They're using us over almost 2,000 users around the world. And they're using us in places like Hong Kong, Australia, London, and even Mexico City.
And there we apply 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. So 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 call manager. And this is a phenomenal purchase cycle story. It's not a typical one, but phenomenal. And they had their Cisco call manager go hard down for 3 days.
No communications into any of their properties. They kicked off a purchase cycle for replacement to get off it unreliable platform. And they looked at us and said, you're the magic quadrant leader. Your team has 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. We closed because of that platform them not being comfortable with the stability of that platform, we closed that deal
7 days.
But what was critical for them was that we deployed 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.
I 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 2.5 weeks, And we're fully deployed at Public Storage Day. We did that by our team went out and
did the top
100 locations. We trained our partner. They did the next 500 to 1000 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. So they believe they've set the world record for quickest distributed deployment of cloud based phone system.
We're checking with Guinness, we'll see. We also 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.
And again, 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 has 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. So 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. So Citizen moved to us for our PBS, but the integrated capabilities with our contact center. So the 2 products combined and things like the collaborative contact center and Pulse were key elements and moving them over. SoFi, additionally, looking at PBX, was looking at mobility, capability, usability, but also integration with contact center. And Marketo was looking at superior customer support and our global capabilities.
So you can see a lot of those elements start coming together as people are making decisions across multiple elements of the suite. And UK 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 UK 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 UK. If anyone's from the UK, they have brands like Pesto Gravy or my favorite, Bachelor Super Noodles. I'm from the U. S.
I didn't eat Bachelor Super Noodles. I ate something equivalent in college here. But they are over 1,000 users using us on contact for UCaaS business and contact center. Myriam Technologies
is
an organization that specializes in radiation protection and detection. So obviously working with the nuclear power industry, places like France, the UK, Finland, Japan, and 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. And Arco 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 $40,000,000 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.
So how do we go to market? This shows our sales teams segmented by approximately the size of installs that they go after. So our mass market is online telesales. Mid market is, we call it a hybrid, but it's hub and spoke model through our major cell 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. And that's been a big success. Channel is the percentage of new bookings coming from channel, has gone up to almost a third of our new bookings.
And we don't set a target for this, but Jess will go over the economics. They're pretty attractive either way. But because we're getting more traction with our upmarket 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?
1, 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 were the I had the biggest presence. It's the largest industry event in the U. S. We're also at places like UC Expo in the UK, as well as we're hitting those key decision makers, the CXOs, we're running our RingCentral forums that we did last night, that was our 9th one in the last year, covering many cities like London and Dallas and LA to name a few, as well as 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 of professional services. We talked about what we did at Public Storage and customer support. I'll go into that a little bit. 1 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 last year that allows the Head of IT to help get adoption within his own organization. And we're providing multi language support within the product, probably 8 different languages within the product today and 4 languages on the customer support side. But what's that mean in numbers?
We track against the TFIA, Technology Service Industry Association. They say the average for technology companies on a 1 to 10 scale for customer support satisfaction is 8.5. They track a pacesetter's category, which is their top 15% of companies, and they perform at 9.2 on a 10th scale. We're at 9.4 in the most recent quarter, and we've had 10 consecutive quarters above the pacesetter mark. So I just got to show you that the handholding we do with the customers after the fact.
So 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 that suite close together and adding new capabilities like collaborative contact center and Pulse. And 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. So next up, I'm going to bring up Jose Pastore, 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 Jose, product guy. I love to make stuff. I love to make stuff that solves for important user outcomes that lead to customer value. And I've got a bunch of slides here, but being a product, I'm going to mostly demo.
So let me just get through the slides quickly and let's get to the stuff. The vision is clear. We're going to be the world's best communication and collaboration solution, and I'm going to show you how. The demo is going to be in 4 parts. I'm going to talk about end users, IT admins, because end users get value, the admins make a lot of these buying decisions.
I'm going to show you how it's powered by the platform and then wrap it up with the way 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. So 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, if they're not using one of those clunky hard phones on a desk.
And since you can't see me, since there's no pointer, I'm going to talk through it as we go. 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. So I think everybody's familiar probably with instant messaging, right? We have conversations with people that you're working with often. Here I was talking with Ted getting ready for the demo.
And sometimes messaging is great. But many times you actually need to talk to someone. So if you look up on the top of the screen, you'll see both a phone icon and a video button. We build business so you can promote those conversations. So let me go ahead and tap that phone and call Ted.
I'll ring central 5Q.
That's a connect prompt.
Good afternoon, Jose of New York.
Good afternoon, Ted. Now why does that 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 are on hold, record, transfer, park because that's carrier grade, world class UCaaS, right built in from a step up.
And it doesn't stop there because it's not just about one people, it's about teams. And in fact, getting ready for today's Investor Day, we put together a team right here with the things we were working on. So as an example, Ted flipped a file from e mail that's not collaborative at all to GLP for me so that I could see what we're working on. So I've got at my fingertips exactly the kind of data that I need make the progress to get work done that's driving productivity.
And
I can see all the people that are on that team and I think you'll see some familiar names here, right, folks right here in the room. Now, we talked about messaging, 1 to 1. We talked about team messaging, where you drive collaboration. Glip is really powerful in that it goes even one step further. So, I think Investor Day is going pretty well so far.
So, why don't I assign a task so you can see some 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. So, 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. And because change of the 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.
But in this new world, you don't need to listen. They're transcribed for you, all in the unified app. So that's one great example of how we serve end users, driving productivity with delightful applications. How about these 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. So let's go through a couple of examples. We talked about this 37 countries where we provide global office at RingCentral. So 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 ever in all those 37 countries.
So 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. And 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. And 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. So 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. And 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. And in this example, since I've got this new employee that I put in Australia is pretty thought forward. I'll use a softphone and no hard phone, which is an increasing trend we see. And now you start to see some of the magic.
This isn't some order that's going to happen 3 months or 6 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. And that user is now active on my system and live ready to go. So what used to take weeks and sometimes months, you just saw me do in, I don't know, whatever it was, 2 or 3 minutes while I was talking about it.
This is the kind of advancement that we can get with the cloud. But 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. And 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. Well, 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. And we also enable them to troubleshoot very quickly.
Now, 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. So this is the system I make phone calls on that Dave does, that Vlad does, and it says 97.2 percent 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 dimension so that IT folks can make good decisions, endpoints, codecs, importantly their ISPs because last mile is so important and by locations. 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, the 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 saved its bacon as they were rolling out their stores because they could put out the phones, they could look at it, they could measure it.
And the same day, they didn't have to make 2 steps, saving time and energy. And it's great for troubleshooting. So for example, you can drill straight in, in a single pane of glass and see any user. So 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.
And you can see if I
were to complain to IT and said, hey, I had 2 bad calls. What happened? Look how quickly I can get to the bottom of this. So 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. Now it's a little techie, but 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 CLIP mobile device on OPUS had very good quality upstream and down. But Ted, on the far end, he had what's effectively terrible jitter.
He was probably in an elevator or something where he had no coverage. So 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. And 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 referenceability. And that's QOS.
Following QOS, I want to talk about the open platform. The open platform is important on 2 dimensions. 1, it expands the way that we can build because we want to be where people work. I'm going to show you 2 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 e Well, wouldn't it be great if your communication hub was right there inside? And 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. So I'm in Office 365 here. I'm doing whatever it is that I'm doing.
I'm checking my e mail, trying to keep up with what's going on. And just over here on the right hand side, you see a 1st class citizen, that's a RingCentral softphone. 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 SMSes. I can see my contacts both on the corporate side and all about what's making it very easy to call. Of course, my recents, scheduled by meetings and conference calls. So, a lot about functionality. Why did I go through that?
I mean, there's a lot of really interesting stuff around WebRTC and super bad ass functionality that makes the voice quality great. But really for the end user, it's about convenience to be where they're working. And by the way, if there's a phone number in any email, you click it and it calls, right, saving those precious seconds everybody who's working every day, trying to drive productivity. And that's the Office 365 integration. I'm going to cover off with App Gallery now.
Now, Dave showed a slide that already went through. She 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. Because apps built by ISVs or our customers, those are built by developers. And developers are people too.
They need to it needs to be very easy for them to build against your platform so they can be successful. So they've built an industry leading best in class developer platform to make it easy for them to build And 10,000 of them 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. Now, why do I point that out? Because as you look at the app gallery, it's not about how far the scroll is, it's about how useful it is.
So 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 those 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. And it's an ecosystem that's defensible. You won't see it anywhere else. Now, let's finish with contact center.
I think we all know that every large enterprise has got at least some context that are use cases, whether it's a sales use case, a support use case, maybe even a help desk. So that's pretty plain vanilla. RingCentral is thinking strongly about leveraging our assets to make these things way better. 1 plus 1 should equal 3 or more. Dave mentioned collaborative contact center to make your agents smart with teams that are synchronized so that they can get to experts.
But 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. And so you don't want it locked away on the 3rd floor with a contact center supervisor. You want it in the hands of the people who care about it and are making decisions.
So 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.
And it's all simple enough to use, keeping with our user centric ease of use philosophy, we make it a simple wizard. And 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, 0 calls in queue.
We select what we want to show in the alerts so that we can make good decisions. We select the interval, like not everyone wants everything to be too noisy, right? So this one's every 30 seconds. And I choose the teams that are going to get it. And 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.
And then 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. So 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 the call at least once.
Thank you for calling Smarter Home.
For sale,
press 1.
Okay. So, press 1. And what's happening now is I'm moving to queue. What you're seeing here on the desktop, this is very much what you saw on the mobile. This is Glip with your people on the left hand side, your communication 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. And importantly, this is a 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. Now, why is that interesting? Because if you push it to Glip, it's where people work all over and throughout.
And so when that call hits the queue, the alert will hit and everyone will get notified who cares about it. And that, my friends, changes the game for folks who are interested in better customer support, better service levels, etcetera. And with that, 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. And 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. And so 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 clip 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 GLP, it was all about that long sequence of communication. We get on a job site, inevitable they're going to find something that's different than what we expected.
And 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. And so we go from 2 days and some long hours to fix the 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.
All right. Well, 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 3 amazing customers of RingCentral, 3 visionaries in their spaces, 3 members of our customer advisory board as was Jason as is Jason Cash from Structural Group as well. So 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. Yes. And lastly, Hernando Saladia, CIO of ChenMed.
All right. Well, gentlemen, thank you again for being with us this afternoon and sharing your RingCentral journey with everybody. So 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?
So Paul Chapman, CIO over at Box. For those who don't know Box, we're a leading cloud content management platform servicing about 80,000 plus enterprise customers around the world and around 50,000,000 end users and a 75 percent of the Fortune 500, so big install base there as well. Prior to being the CIO of Box, I was CIO for HP Software. So if you could think about maybe 2 more contrasting companies, it'd be hard pushed, but it gives you perspective from sort of legacy environments that grew up 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 2nd 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 are approaching we broke 600 offices, aggressive hyper growth plans opening around 100 a year currently. So 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?
So 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. And that is the fastest growing vertical market in the health care space today. And we're trying to become leaders nationally and we're well on our way to that. So just interesting times and very aggressive growth for us.
So Unified Communications is obviously a big component of that. Excellent.
So, Randall, we'll stay with you and we'll ask a similar question to each. 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? And we'll go each of you answer that question, please.
Thanks, Mick. So cloud communication, I started off as an engineer and I came from the time where on premise systems really there wasn't another player in town. But unfortunately, it's complex, it's clunky, it takes a lot of resources to manage. And so 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. And RingCentral in our eyes was really the front runner in that space.
And so 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. Yes. And you have about 2,000 users deployed about across about 65 locations.
Is that about right?
Yes, correct. Yes.
And also using RingCentral in the contact center as well, right?
Yes, we are. So back to one of the drivers for us, we had a hodgepodge of vendors. And as you can imagine, complexity increases cost in business as we all know. And with the multitude of vendors trying to manage them all at the same time becomes increasingly difficult. So we'd have to clamp on all these different solutions, try to make them all work in unison.
And it's just it's difficult. Users don't like it. The experience is poor. So one of the things that we had to clamp on previously was contact center. We have to take in patient calls, we have to take in user calls and it was 2 different systems.
So having a solution that could marry all of these different components as one unified provider
was really an integral part to our decision. David, a little bit about your UCaaS journey and what problems you were trying to solve?
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 offices. This is a major problem, right? And it's a traditional business. And in fact, still a lot of folks like to pick up the phone and there weren't options at the time to do anything else to book the appointment.
So they pick up the phone, get through to the office and then experience a cell phone like kind of service from probably about 6 different systems that we've tried over the years with various leadership of Sam Ford hadn't worked. And it was a real mixed mode of product. So for me, in total honesty, I wanted to make this as boring as possible. I'm 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. It's not happening.
So I was like,
how do I get out of the
phone business as quickly as possible? And that was really my driver. Make sure these poor guys in the offices get a phone. I mean, in this day
and age, you should pick up the phone that
should be dial tone, right? Should just do what it says on the tin. So, we aggressively pursued several vendors, who, all honesty, I do want to spend my job on.
This is the number one priority
of the company to get
the phones working. So that's what we did. We locked that in and we've been heavily at the deployment now for probably less than 6 months, right? We're about approaching 400 offices deep. We'll be completed before mid year and then into just the regular cadence of opening the new offices.
Yes. And you have about 5,500 users deployed across 400 or 500 locations?
Yes.
And the total capacity is about 10,000, right? That's your total capacity. Correct. Yes.
And if you look
at all of our support centers as well, there's about a staff of 10,000. Yes. Excellent.
Thank you.
Mr. Chapman?
So phones weren't my number one priority when I joined Buck fortunately. Glamour, yes. Actually, interestingly though, similar to Hernando's situation, when I first joined Box a little over 3 years ago, we'd had sort of an eclectic buildup of services that we're 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. But 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 nonstrategically differentiating capabilities, We don't want closed in Internet of API world. We don't want closed in Internet of API world. And so
and the
other thing that also plays a big part is sort of demographic change of your employee base as well. So as we think about a 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. So all of those factors come into this, into our decision. And of course, back to the earlier point you made as well, it's very costly when you're managing multiple services as well.
So 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.
Yes. And you were, as you just said, replacing a multi vendor strategy, right? You had
I know it was a strategy. It was a multi vendor decision, but
I think that was a strategy. Talk a little bit about that, please.
Well, again,
I think in any in a
lot of sort of growing companies, you don't tend to have strategy for how you make decisions. It's just it's 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. So hence, one of the reasons why they needed a CIO as well to come in and help get ourselves organized around that. And 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%, which is significant. Yes.
So, Hernando, 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. Yes.
So 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. And since there was this disjointed lack of strategy, right, or not having a strategy at all. 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 task in trying to provide that value based care.
So communication is extremely critical in serving the patient and it wasn't happening. Patients were calling in and the cough, the cough 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 PCO. I know you spent a lot of time with our team talking about the overall value of the solution, but from an economic perspective. So tell us a little bit about your TCO journey.
Yes. It was a journey because you're going into a well established business, right, experiencing this kind of hyper growth that they have no consistency in the systems that they've got. And I guess there's some low hanging fruit there, right? So if I start digging through their financials, I see that there's who
do you want to call it that through
I'm and stuff and WebEx and all that good stuff. So who you want to call it that through I'm and stuff and WebEx and all that good stuff. So it's consolidate, see where we're at. And then I figured I'd go in, I'll always pitch top down, get the execs ball behind it. And then I can once that funding is secure.
And this wasn't something that was they knew they had problems. They were going at it from let's just fix what we've got, right? And I wanted to go at it was like, let's get into a 5 year cadence here in the same way that I would there. I'd see equipment and say, here's what you're spending. I think it's an amazing opportunity for renegotiation with some of the main contracts here with AT and T, for example on the telco space and just going single provider which we did.
And then huge operational efficiencies from just having that single vendor partner, right, which ended up being good for you guys. And for us, we start to see those fruits. So I did a 5 year forecast. Obviously, I wanted to back to the company that there was some out if we needed them, but I really wanted to just forget about phones and make those issues a thing of the past. So we built that 5 year model out.
So once we I wanted to go all in on this, like I said. So our conservative savings because of the way that the minutes are bundled, the eFax is bundled, the text message is bundled, at least in my situation, was around $3,500,000 over 5 years. And 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. So there was some upfront capital costs with refreshing that hardware, which I feel was relatively easy to absorb, and we refresh the entire portfolio.
Yes, you modernize stack while you're providing a $2,500,000 return. Yes.
And I mean to your earlier question, I was joking about making the phone phones a thing in the past. I was, but I need the platform I can build on as well. And we'll probably touch on some of that, but 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 or instant messaging or the collaboration suite that is there waiting to be utilized. Yes.
So let's stay there on that topic of initial problem statement was phones getting to offices across 5,000 users wasn't happening.
And
that was premise, that was Cisco and ShoreTel. Once that once you got through solving that problem, then it was how do I look forward and bring more value to the business. So then you started rolling out Glip, meetings, rooms, tell us a little bit about that. We'll touch
on each one of you there.
Sure. So we have the foundational product there. Ian is working. We're enjoying some stabilization finally. Then it's time to collapse, a huge video company, right?
A big Cisco shop. Cisco is 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. Product's great as long as you have all of this cash to get the stuff in and support it. So 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. So there's a bunch of folks that are resistant to change, but they hated their legacy video solution, which meant going in over VPN, probably taking 5 to 6 minutes to jump on their specific piece of hardware and then again to the meeting room. So once again, it was I like to go out just fail fast, as I 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? And I mean, it's just quick and sticky. That thing fired up quickly.
When they realized that they could take a million from their phone, I was like, wow, it's amazing. So quick easy wins really. So we went we cleared through all of the video, once again standardizing internally on the platform and then moved to collapse probably 6 different instant messaging tools to say, hey, this is our corporate stand now. And also for us, the HIPAA component was very important. So the security and of the messages being passed around was overnight instantly contained, which has been great.
And then enjoying the benefits from that widespread collaboration through some of the GLP groups. And that's coming. So now we've got standard video, standard I'm standard video conferencing. And then next up will be some of the fun stuff around the AI and some of the automated text from the offices of 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? So you're definitely leveraging Global Office, but then also integrated into Google, integrated into Box. So tell us a little bit about that piece.
Yes. Well, as I mentioned earlier, one of the things that's really important as far as our, call it, 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.
But 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. So 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, take the work out of work and create as frictionless set of experiences as possible. So 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 back end of anything we implemented. So we actually scaled out with literally one administrator and one backup administrator globally.
So that's working great. And then Jose 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, because there are so many things that can go on in the quality of a call. It can be really hard to pinpoint what where those issues are. And of course, if you don't have sort of the mean time to innocence of where the issue is, they'll blame the technology and the So yes, we did the web meetings.
We consolidated all of our web meetings onto 1 RingCentral platform, dial tone, and now we're moving with contact centers. So we also had several different contact centers,
also besides contact center integrated to the PBX, you've also standardized in the conference room, right? So rolling out RingCentral across all the conference rooms as well. And also a little bit in the platform taking our SMS or our fax API, excuse me, and embedding the fax API. So maybe tell a little bit of that story, please?
Yes. So I'll talk about
the less glamorous and less exciting one. Unfortunately, in healthcare, fax is still around, right? And always been interesting to me how in other industries we can send money to each other pretty much instantly with our mobile phone yet to for a patient to get a referral, they have to have a fax. So at no additional cost embedded into the platform, we use the fax API. So 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, so as an example, our doctors get together or would get together, they still get together, but in a different way, once a month. So we operate across 7 states and all of the doctors have this national doctors meeting and 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. And so how do you get all of these people on the same conference bridge in a quick, simple, high quality way. And the reality is that there aren't any other providers that are doing that, that are taking all of these components into 1.
And 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, right? So with RingCentral Rooms, what our business loves is the fact that they can do it themselves. IT doesn't have to be involved and we love that as well. They can jump into the room, into the conference room, they click one button which is join and everybody's on.
So, it just brings everything together. It's simple to use. And as you can tell, I'm pretty excited about rolling that out to every single conference room. Excellent.
Well, we are going to finish with that and open it up to questions. So first off, before we do, thank you very much for taking the time and spending the time sharing the story with us. It's 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 4 of us.
Please.
So 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. Overlapping. Overlapping.
Yes.
Overlap versus
Most of this stayed away from the operational efficiencies, I would say, in terms of the staffing. And I focused purely on the cost savings licensing. And then honestly, the huge piece was the bundled minutes, for example. So there were some low hanging fruit for me around some of the legacy contracts that were in place where we were just paying extortionate amounts like long distance calls for example. So all of that's bundled.
So it's a conservative number because I don't like to get out and stand around I'm going to say, well, these 1,000,000, right? So the 3.5 over 5 years was extremely specific just around call and licensing savings. The hardware was apples to apples. There was a little there's a little less required in there because it's virtual based infrastructure. So as long as you've got your power over Ethernet, I was fortunate to at least have that ready to roll.
So I would say that the bulk of that cash is purely like I say the licensing and the minutes.
Thank you.
The question was and repeating for the web audience was the richness of the APIs and speak to your experience and then how many API integration points you guys have. And all 3 of you are using the open platform and so go for it.
All right. I'll go first. Interestingly, from a box perspective, we get 25 +1000000000 API calls a month and half of those don't actually come from Box first party apps interestingly. They come from integrations with things like RingCentral. So we actually turned on things like the ability to SMS text directly out of box to eFax directly out.
We're integrated with Google, e mail or Gmail, so you can easily punch out a phone call from there. I'm trying to think what else do we have. We have a Salesforce integration in with Salesforce as well. And we're doing the same with the contact center as well. So that will be integrated into other SaaS apps that we have.
So 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. So we're Okta single sign on, so we use the interoperability there. And then also, I think the other thing that was also important to us in the decision was we recognized that service providers need to maniacally focus on what they do best. And where they don't where it's not their core competency per se, they actually leverage other best of breed capabilities in the ecosystem as well.
And so for the pull through for video, that was important for us as well, where we recognize that that integration that they have there was important. Same with contact center as well. So 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.
From our point of view, there are several out of the box integrations. There's some great I think the platform and their API library is one
of the
stronger long term plays, which has really helped us, right? So we're I think we're a big box customer as well. I think you should have picked up the tab for dinner last night. No. So we've got box play, sales force play and the 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 patients, so that they can start booking appointments and just having some back and forth. But we're working towards some of the GLP 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. So there's some really great function around that. And I think in kudos to Ring, it's still a very Silicon Valley esque feel for the company. We come up and we have some fun working with you really.
You're prepared to heads up there and working through some excellent workflows that maybe what haven't been possible with some of the other folks I've worked with over
the years. Impact Dental is also an Okta shop levering the Okta integration, Salesforce shop levering Salesforce as well. So those are all out of the box API. Fernando, why don't you close this up? I think that was going to be our last question.
Yes. So I take it 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? And so 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.
And that to me has been the primary difference.
All right. Well, thank you all again. Appreciate very much for 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 3 key partners. These 3 key partners were also participants in a partner executive roundtable that we hold once a year in Quebec City. So, we had 20 of our key partners in attendance and they're here with us again today.
So, let's have Mike, Scott and Ryan up on stage please. Okay, guys. Let's take some time to do some introduction. So a little bit about yourself, little about your company and we're going to start right here.
Sounds good. My name is Michael Dolloff. I'm the Chief Revenue Officer for inflow communications. We are 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 2,000 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 in UC.
We're focused on 10,000 and above to correlate to 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 Heath, CTO of PCM. We're a 2.25 $1,000,000,000 revenue company. We do basically sell 200 product lines across the globe, Really, specific in collaboration is my focus at this point.
Thank you. So 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. So, the first question, I'm going to start with you, Ryan. How has demand for cloud solutions changed over last 2 to 3 years in your opinion?
Oh, I mean, it's in every conversation that we have. Basically, the proposal we put on place is either a cloud and on premise offering. So we really take what the customer is really looking for and then kind of go that direction. But upfront, the conversation is cloud starting.
Yes, 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.
So same question to you, Mike. So how has demand for cloud solutions changed for you in the last couple of years?
Yes, 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 2, 3 years ago, 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. And the speed of that, it's just like almost a light switch flipped really. I mean, 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 a mix.
There's very few that are people speaking. Some of it's our customer profile, but a lot of it reflects the market of crema only. It's very, very small percentage now. And that's almost a flip from 3 years ago that we saw.
Yes. And for you, Scott, I mean, you and I've had conversations. Obviously, you've seen some of those customers walk away from prem. We had that conversation when we were in Quebec City recently. So same question for you.
What have you seen happen in the last two years in regards to how cloud solutions are changing?
Yes, for us cloud solutions specifically, in the large enterprise space, it's not the cloud is not new to some of these to some of our customers. But specifically to UCaaS, in particular, we're starting to see now that that's a default request and specifically globally for UC and CC. And I would say that, that percentage of those conversations increased dramatically in the last 12 months. But again, it's specific to UC. These are cloud savvy customers that are just now accepting that this application is extensible.
And 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. But 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. So for our large customers who've been using products like Box and Salesforce and Microsoft and large enterprise license agreements.
They're used to consuming this product as a service. And it has to do that consumption model has become the default. So 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.
And 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 RAIN is our solution for that.
Good. I appreciate that. Let's go to another question about lifecycle. So we just talked about a little bit about that, but I want to go a little deeper into it. So Mike, for you, so what stage of the product lifecycle and adoption do you think UCaaS is in today?
So how would you see that?
Yes, I think for I think most of us on the stage, you deal more in the mid market enterprise space. I think it's more UCaaS is more mature, but it's not even it's still in growth in the SMB and smaller markets. But if you look at mid market enterprise, it's early growth for us. 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. So early growth, like we feel like we're just kind of the rockets really taken off and it's about to get pretty wild here.
Yes. It's interesting. Last year, I think it was at
this event, I kind of coined the phrase, called it the bubble up effect. And it's where customers, customers are yours and your customer base, making demands, coming to you and making demands to bring them UCaaS solution. And you are the trusted advisors to your very large customer bases out there. And we just looked at the size of the customer bases we're in, you were 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. And unfortunately, if you don't, that's sometimes when you lose that customer to someone else. Brian? Absolutely.
Yes. I just want to kind of go on that. So I was on the losing side of the Public Storage deal. I designed this to go. Sorry, Justin, you have no idea.
It was down for 3 days. I know. It wasn't our fault. Of course not. But I mean that life cycle from the first meeting, meeting the customer to actually deployment was 18 month sales cycle, all right.
And then it took 12 months to actually deploy all those phones, okay. Then we were in a 5 year maintenance period. Then they were down for 3 days, which was an Internet problem with an SD WAN thing, but that's beside the point. But I mean, 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?
I mean, 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 3 days. It was a little longer than now, just 3 days. We just did some work magic
to make it happen.
We had triage. We were in a triage
for a good week. We got all kinds of words. Yes. I mean,
it was incredible. But what you guys did in those couple of days took us forever. I mean, to even get to that point. So just being impressed by what we're able to do. It.
It's a perfect example of the pain or gain, obviously. Some partners come to us because of obviously the gain you chose to pay me, but that's okay. You came and here you are. Thank you. You got
to push. One way or another.
Part of our
organization. Well, that's I think that is true. Customers making those demands, they're going to find a way to get there. They're going to find a way to get to the UCaaS solution. They're more familiar with it now and there's no question they're going to find a way.
It's a fast deployment and it should work.
Well, that's great. Thank you for sharing that. Another question. So we're going to go a little deeper here. So, what I'm going to go back to you, Scott, for a moment,
if you don't mind.
So what will compel you to continue to invest resources into growing your UCaaS book of business this year and beyond?
Well, I 2 things. 1, I'm a salesman, so there's a huge market opportunity. And so when I see an addressable market in 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. So 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 work forces and smart CIOs, and we're talking about 20000, 3000, 40000 endpoints that they're managing and trying to use collaboration on. And in the past, our story our conversations with them have been, it's not for us. That's not it's not for our market. That's not for us because these are heavy decisions and complex multiyear integrations that they're used to. And I told you this last night, the only time I've seen I've seen this once before in my career when we were doing infrastructure and compute.
And I would go talk to CIOs about data center and storage and servers, and it was a very easy sale. It was scalable, economic, and then VMware came out. And 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. And okay, and we dutifully went away because I had a big server business. And then one budget cycle later, that same guy sat across the table from me and said, oh, no, no, we're VM first. I don't want to talk about buying servers. And 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 don't 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 on the premise, you better have a very compelling story, which it would be hard for me to compel. So that's to me, that's where I see it.
And even last night, you told me that you're already ready to register a very large opportunity that you've been working with, yes, over 20,000 users. And I think that's the kind of tipping point that we're starting to see. I know that sounds somewhat cliche, 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. So, same question for you, Ryan. And also, you have a very, very large direct sales organization at PCM across the country in the world.
And obviously, we're working with PCM in the UK as well. So, you have lots of direct salespeople. So, talk about your investments of resources into growing UCaaS for business for you? Yes.
So I mean we got to scale to support 1,000 salespeople. I mean it keeps growing by the day, so to be 1200 at this point. But it's really being able to have a series like Salesforce to go out there with them, to go over to pitch the deal, take the deal on because there's so many things that those that individual salesperson has to sell that it's nice to be able to kind of hand things off, go to get the deal and they get the revenue for you. I mean, at the end of the day, that's what they're trying to do, right? So if they don't have to really get the engineering aspect, which takes us 2, 3 weeks sometimes to get an engineer on-site, they can call you and just boom, it's there.
Yes. And 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 clearly by utilization of what we call subject matter experts who are also known as our direct sales reps. And so that mapping even though there's 1,000 and growing to 1200 and I'm happy to hear that by the way, that's more people talking about RingCentral and now they're selling, that's good
for us.
Okay. So we'll go here and then we'll take some questions from the audience. But same question on investment of resources and growing
Yes, 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 to slip.
And so 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 1st 6 months or 12 months, it gets realized.
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. So with the use 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 can never think of not working with this tool anymore. So that connection for us and that really speaks to us as a partner of that's where Ring sees that bigger right, the ability and 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 contact center or 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 1,000 seat opportunities with a 20 agent contact center. That was the tip of the spear. And 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'll that's a huge anchor for them and trying to get there technology wise. So 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, like it's there, it's the full package. So as a partner, we're excited to continue to just pour as much energy we can in because this is something that, I don't know, I wonder, will this be repeated in my lifetime kind of thing?
Yes. Well, very good. Thank you for that. And I want to thank you all for your I know you're all very, very busy 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. It is we're still very much in the beginning here at RingCentral and our partner program, but just imagine the future. So with that being said, if there are questions from the audience for these gentlemen, we can certainly take a few now. Back here. Yes.
So the question was, are you representing other cloud providers? And I think the other part of it was if there's outstanding RFPs, is that what you Win rate.
Win rate. Win rate, forgive me. I'll take that one first. So we as a company, stays pretty focused in technology stacks. We don't want to be the, hey, here's 10 quote.
We really deal with kind of 2 in any category and we do UCaaS and CCaaS. So, we deal we've got one other UCaaS provider we work with, and we've got one other CCaaS provider we work with. And so from a win rate perspective, we actually kind of position RingCentral RingCentral is sort of our leading. We've got the other as almost like an alternate in a lot of cases. For opportunities where that 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.
So we don't 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. And when we do, when we don't and we don't respond to a lot of RFPs actually frankly. We've got a kind of a different acquisition and sales process. But from our perspective, when we lead with Green Central, 80% plus win of that.
So
another question? Kind of blinded here. Okay. Right here. Question was, do our partners compete with RingCentral direct salespeople?
Yes, I would well, I'll take that one. So from 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. And he's got a big ecosystem of folks that can contrast over the other providers.
We picked 1, because generally I'm supporting a large incumbency. So from my standpoint, if I had 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's 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.
And so from my perspective, that was one of the major tenants on why RingCentral just doesn't exist.
Well, thank you, Scott, and thank you again gentlemen for joining us here today. Again, it's been a pleasure and thank you for sharing your thoughts with us. So thank you so much.
We own 2 brands, Maggion's and Chili's. We have roughly a 1,000 restaurants across the continent of the United States.
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 2 bill orders are still coming in through the telephones and 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 4 or 5 days usually. That's when we begin to move towards a cloud based phone solution in the restaurants.
What really drew us to RingCentral was inexpensive voice, central platform, everything we want and then so. We started
looking at the industry as IT guys looked at the Garden Report and RingCentral is in the upper right hand quadrant.
Right now, we're about 700 restaurants completed out of the 9 60 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 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. So no more dispatches are really even necessary.
So 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, check the Adobe press release, the software land continues to grow really well. So hopefully we'll demonstrate that with RingCentral as well. Now starting with 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 the class.
And have you heard about the concept of yin and yang? I was like, yin and yang, wow. And I said, no, tell me, of course, I knew what it is, right? I said, tell me what it is. And she said, yin and yang is the eternal balance between 2 seemingly opposing forces.
And when she said that, I took a pause. Such an elegant answer from my daughter? Wow, my wife must have done something right. So, but and then I thought about it that, of course, I know what Yin and Yang is, but it got me thinking more that not only do I know what Yin and Yang balance is, but I live it and breathe it every day at work, which is the trade off between growth and profit. And as investors, you guys are also tasked with the same problem when you are investing in SaaS companies is this perennial trade off within growth and profit, which is why somebody invented this rule of 40.
And 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. And 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. So we'll share some insights and dive into some dynamics. But 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. And 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 has led to our leadership position. And 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 2 quarters, after 2 quarters, you can start asking. So Vlad, they're going to start asking in 2 quarters.
So that's one. And again, how do we that's larger enterprises. And then how do we crack open this efficient distribution model, quick and efficient, which is what Zane is doing to the channel. So, 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 ed a little over 150,000,000 in revenues.
And since then our revenue has tripled. Last year, we were a little over 500,000,000 and the most recent quarter, we were a little under $600,000,000 in run rate, so about 4x growth. And 2 things to underscore on our revenue. One is we have enormous visibility. 90% of our revenue is recurring.
So in any given quarter, we have over 90% visibility going into the quarter. That's number 1. And 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%, But we've also expanded margins. And 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'll tell you and even Dave types, we maniacally watch every dollar we spend. It's really maniacal. And we find more efficient ways of doing the same thing.
And every dollar we spend gets pushed through an ROI lens. So, we do 2 things. We invest heavily in innovation and we invest heavily in sales and marketing, but efficiently, and everything else becomes an avenue for margin expansion, which leads me to this Yin and Yang concept, the balance between growth and profit. And there's no right answer. 1 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, or 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. And 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. And that profit dollars that recur over a long period of time better far exceed the upward investment we make. Because it's just not about top line growth, It's about the overall value you capture in a business.
So that's how we come up with a simple mantra, profitable growth. And as RingCentral optimizes for profitable growth, we look at a couple of simple things, but powerful things, key things in a SaaS model. Number 1, what's the cost of acquisition? What's the cost of getting a customer in? 2nd, how long will the customer stay with us?
3rd, when a customer stays with us, what's the cost to serve the customer? And 4th is, how are these dynamics changing over time? So 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. So 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.
But in the 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. So there's an optical illusion for a period of time and then people realize, oh shit, the company is not growing because you missed the forward looking indicator. So to explore that, let's look at some building blocks of a SaaS model. There are 3 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 2 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, our company is going to grow. And so it then becomes very pertinent to look at that net concept, which is a new bookings, less gross churn. And we define it as net bookings. So that's building block number 1.
Now what becomes interesting is how does this building block number 1, which is net bookings, translate to your revenue growth of a company. So, 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. So, your ending ARR of the company is the orange bar here of $130 and the revenue growth rate is 30%. So far so good.
But what if we start doing some analysis or sensitivity on growing the bookings? So let's start to grow the bookings, the forward net bookings, the forward looking indicator by 40%. So you see the blue circle from years 2 through 5, 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 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 installed base. So to grow that installed base and to accelerate that growth is really hard because you're layering new bookings on top of that. And it takes years for a company that is growing and accelerating bookings to accelerate revenue.
So it's a hard concept. It's a hard journey. Now you could take any different scenarios. And ultimately, your revenue growth will converge to your bookings growth. So, let's explore some scenarios.
So, this is the first line is what we just saw. A company bookings growth of 30%, accelerating to 40%. And you see on the right side, how the revenue starts asymptoting towards 40%. But what if their bookings growth is flat at 30%, your revenue growth is then flat at 30%. And then one more scenario where if there is deceleration in net bookings, the revenue will start to decelerate and asymptote towards 20%.
In the end, so why is all this relevant? It is because it leads to the 3rd billing block, because ultimately net bookings growth leads to revenue growth, which will ultimately dictate the size of the company. So in the first example where a company is growing 30% bookings and decelerated, which is a red bar, in 5 years, this company is going to be 3xercise. But a company that is growing 30% bookings as a starting point and accelerates booking to 40%, that company will be 4x in 5 years. That's only 5 years.
So what if you extend this concept for 10 years? This compounding effect really, really start to stay cold. In 10 years, this company on the orange will be 20 times larger. A small company's name comes to mind, salesforce.com, 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. So that's all academic, but you guys are not here to see academics here. Let's see how it applies to RingCentral. So 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 and T to get a clean compare on the underlying business.
And this represents about over 90% of our subscription revenue. So it's a proper install base. Now you see this orange line has been accelerating from the end of 'sixteen until now by about 8, 9 points. Again, and the precursor of revenue is always net bookings growth. So 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. Now when I was discussing this chart internally, a colleague of mine said, yes, you can do this. We can just pour more money. Sure, you can. So there are 2 ways of driving this growth up.
You will explore more money, tank your efficiency, and if you do, you either are unprofitable or have less to spend on innovation or both. And that growth is a mirage, total mirage. The moment you pull back your sales and marketing spend, the growth will drop to the floor. So there's also a better way of doing it. The better way of doing it, which is more option 2, 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.
So let's see how RingCentral has done this. So at the same period, we've accelerated our bookings. Our sales and marketing growth has been flat. So for every dollar we spent, we've actually brought in a higher book of business that too by expanding up market or while expanding up market, which is more expensive. So 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 1 car, which is really fast, which is the color of Vlad's car. And but it's very efficient. It's got an engine of a Toyota Prius. So if you 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. And there are 2 simple vectors for us.
1 is our mid market enterprise and the second one is channel. So let's take both of those in sequence. So let's first explore the mid market and enterprise, our move up market. Our mid market and enterprise business now is growing over 75% And that's you want to base off 200,000,000. The last just 3 years ago or 4 years ago, this business was a little over 10,000,000.
So it's been seen a fairly good trajectory. And right now this business represents over 60% of our net new bookings. So that's how the forward looking indicator is tracking. So 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. And 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. So what do I mean by growth economics? When we talk about growth economics, we mean 3 things.
Cost of book, which is how much how many dollars it takes us to acquire a customer, measure of efficiency, that's 1. 2nd is churn. Once a customer is on our platform, how long does he stay with us, stickiness. And the third is upsell. Once the customer is on the platform, how much do they buy more?
So expansion. So let's now dive into each one of these economics in the next couple of slides. So let's start with cost to book. This chart represents our sales and marketing dollars divided by a dollar of new bookings we bring in. So lower line means better, higher line means worse.
So 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. And really 3, 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 3 things. One is 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 1. Number 2 is the people. As Vlad said, it's about the team. I mean, we've got Ryan Azuz 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. And he has really augmented his bench. You've got Mitch Tarika here from WebEx and Oracle, who is on the bench now or on our team now. You've got a gentleman called Carson Hotzetter, who is the head of enterprise, who used to be running a half a 1,000,000,000 book of business at Avaya. And you've got Darryl James here from Avaya, who used to run what $2,000,000,000 of business at Avaya, Darryl.
So you've got heavy hitters like these guys who make my job pretty easy to report these numbers. So thank you. And then the third one is, so 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, and that's what's driving this whole engine forward. But the best news of all is that it's still early days.
Only half of our reps in the enterprise segment are ramped or less than half. And you've seen the productivity increasing. So that was cost to book. Now let's take churn. Our overall churn rate annualized gross churn is about 10%.
And 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 about 20 times larger than us. So, there's nothing structural about this. I mean, once you remove the business mortality, it's a pretty sticky product. So, 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. And 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 channel.
This is when customers deploy this, it's really mission critical. Number 2 is, in larger enterprises, there are high switching costs. CIOs are replacing 5, 6, 7 applications and subsuming it with RingCentral with multiple people in multiple locations on multiple devices and with data stored on a Glip and the platform, it's all tethered in the guts of the system. So 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, Darryl's team provides enhanced support. We've got customer success managers for supporting these customers. So, these three combinations really work well together to reduce a churn. So we've seen the cost of acquiring a customer is low in the mid market, churn is low.
And now let's look at retention, which is essentially same store sales. And 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 the customer, our growth rate will be about 30%, plus or minus in this segment. But what gets 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 when they came from. So 2013 customers who came there, their net retention rate on an annualized basis was 115%. And 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. But again, it's 160%, but the year is not complete. But 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. And then we can land and expand more. There's a lot more we can go to the multiple well, multiple times. When we deploy customers most of the time, it's not a wall to wall deployment. And 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 Saip's presentation and Jose, we've got a slew of products to sell. So, it's not a one trick pony anymore. You've got this multiple on ramps into communications. And so with all these economics going on, the goal is to double down on these investments and keep driving it, pour more money.
And why? Because it's still very early innings, really early innings here. So if you look at our installed base right now, it's a $200,000,000 installed base. And there are really 2 vectors that really will have expansion in the installed base. 1 is seats.
The potential number of seats in the mid market enterprise right now is 6 to 8 times. And within that installed base, we have over 40% upsell ratio. That's what Vlad referred to in the morning. He, I think, misspoke a little bit. So that's 1.
That's the y axis, the potential within the install base itself, just users. But we also have this P times Q, we also have the P or ARPU. Because of all these new products we have, global office, contact center, collaborative meetings, we can expand our ARPU by $10,000,000 $12 So 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 installed base, we think we can grow 8 to 10 times within the installed base, which is $1,600,000,000 to $2,000,000,000 our opportunity. But the exciting part is that, let's just install base.
If you look at the journey of larger customers, it's just very, very early. So it's a $30,000,000,000 TAM. It's a deep blue sea here, right? And we are just trying to swim, like maybe Michael's house. So 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.
And 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? And that's where Zane's team comes in, the channel.
So our channel business is a little over $100,000,000 business growing triple digits. And again, just like the mid market segment, it used to be a little over $10,000,000 business a couple of years ago. And really what happened, what changed the dynamics was in the last 2 years, we actually saw acceleration on a larger base, which is it tells the maturity of the market there. In Q1 of 'seventeen, the channel business grew 85%. In Q1 of 'eighteen, it was over 100%.
So you're seeing a higher growth rate on a larger installed base. Now, let's that's the growth part. But again, RingCentral's mantra, profitable growth. Let's look at the growth economics of the channel. Is it good or bad?
So similar to economics as mid market and up market, which is a cost to book and churn, they both remain there. But 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, but then later on, you have to have a revenue share with the channel partners. So let's look at the combination of these three economics and what really it means for our P and L. And this is by the way the number one question I get from investors every single time.
So I thought, let me just address it to in this broad forum. The first one is cost to book. Cost of 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.
And we only pay for the deals we win. So that's sort of a play to play model. So the cost to book for us is lower. And the gross churn is also lower because of similar dynamics. The customers that come to the channel are usually larger customers.
So, they exhibit some of similar behavior and business mortality where there's less business mortality. And 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. So that creates a circle, a virtuous circle where the channel partners want to hold on to the customers to get paid and it in turn helps RingCentral. So this sizable effect has been going on for quite a while. And every customer that does not churn for us gives us more money to acquire a new customer.
So you can now see how the flywheel has been turning and you know how this momentum builds up on itself. Let's just summarize net net what it means. So you've got positive forces, some pluses and minuses, lower cost of book, lower churn, but the minus is the residual cost at the back end. When you combine these three forces, what you see is for every so then the question becomes, right, what's better? If you have a dollar to spend, do you spend it on the channel or do you spend it on direct side?
So that's the model we ran. And what do 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. But again, it's just not about growth, it's about profitable growth. So we do tax the impact of residuals. And 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 offset the residuals.
So it's higher dollar value. So it's out and out accretive. And that's why we've been doubling down on the channels. So 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 of economics are improving, and we've also seen how the channel is growing and how channel is accretive to the P and L.
Let's start with the other side now, profit. So here it is basically once you've acquired a customer, how much profit can you expect from the customer in the ensuing periods? So, let's start with a simple equation. You've got recurring revenue business, you keep on getting revenue every month, every quarter, And from them, for that, from that, you deduct your cost to serve. And we keep the equation pretty simple.
We take all of subscription cost of goods sold, all of R and D and all of G and A, even though there is some argument to be made that not all of R and D goes towards the installed base and not all of COGS is to the installed base, but we fully tax it, to be just conservative. That brings us to our recurring profit, which is a green bar or recurring margin. And then to be intellectually honest, we actually take out churn from that. Why? Because as Teddy said, if a customer is churning, we or a company needs to replenish that bucket to grow at the same rate.
So you have to tax it for churn. That's what we call our economic margin. And what it really translates to the economic margin is the true steady state margin of a company. So let's see how RingCentral's financials map to this model. So let's start with the recurring margin.
Our recurring margin has gone from about 28% when we IPO to over 55%. So 26 points growth since the IPO. And there are a couple of key drivers for that. 1 is gross margin, which is now over 80%, our subscription gross margin, 82% in the last quarter. And 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, and then variable costs like our transport costs, when in 2013, these transport costs were about mid teens of revenue percent of revenue.
Now they are in the mid single digits. So you've seen that. That's second is also we've seen scale in R and D. It's a very, very efficient innovation cycle where because it's a single code base, it's a multi tenant architecture, so cycles become very fast and innovative and very, very productive. That's 2.
And 3rd is operational efficiencies. As we mentioned earlier, everything else besides innovation and efficiencies in marketing is an avenue for margin expansion. And 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, right, from the bread I eat to the milk I drink to everything. And so here's how we stack up on the recurring revenue benchmarks versus some of the well known SaaS companies. So we are number 5 of 15 or 16 companies. And there are some cool companies ahead of us. There is salesforce.com, much larger than us.
There's ServiceNow, much larger than us, who we use as role models. And there are some amazing companies like Paycom and HubSpot, who are a little bit ahead of us. So over time, our goal is going to is to be in this top quadrant and maintain that. And we have levers like innovation, productivity, fixed cost productivity, variable cost efficiencies to get there. So that was recurring margin at 55%.
Now let's look at economic margin. So we have 55% or 50% 55% recurring margin. We take out a 10% churn from that, which leads us to our 40% to 45% economic margin, our steady state operating margin call it. So this base of customers we have, 45% margin, is a very, very highly profitable install base, very profitable. And you can almost break RingCentral's P and L into 2 P and Ls.
One is this highly accretive profitable customer base, which is spitting out 45% margin. And then the second one is, the second P and L is our growth P and 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 margin of 7% to 8%. So 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.
And why is that? Because of the growth economics we just saw. We'd be remiss to not do that if this economics are so powerful and the market is so large. And so 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.
But 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. And the best strategy is to have profitable growth, if you can, which is what RingCentral has been having. And again, the first question I always get when I meet with investors is the channel question, economics. The number 2 question I get from Terry Tillman in particular is what will be your margin profile at $1,000,000,000 Every time I pick up the phone, he doesn't say good morning, he just says what's going to be your margin profile. So, Terry, this is for you, man.
So, the answer is the politician answer, it depends. And 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.
So as long as these economics are there, we will keep dialing for growth. So, Terry, please don't ask me this question ever again until we reach $1,000,000,000
Take it offline.
Yeah. So, again, this is only if the economics 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. But over time, we will achieve the rule of 40 and actually exceed it by 2020. This is new. So, we feel confident that we will exceed the rule of 40, that's one.
And we also feel very confident that we will just not meet $1,000,000,000 we'll exceed our $1,000,000,000 target by 2020, given the growth profile of the company right now and the momentum we are seeing. So exceeding $1,000,000,000 exceeding the rule of $40,000,000 And the bias is going to be for growth. But 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.
And the drivers are simple. All the drivers we've been talking about, a shift of market, which has churn tailwinds. The enterprise reps are going to be ramped more. It's less than 60% ramped and there's upside bias towards in our recurring margin. So how do we all put it together is where how Vlad started and where he is, but that's how he started.
It's an innovation company. There he is. My eyes are blinding. Yes. Where what we've been doing is driving for innovation and that's what led to our disruption in the industry with the product.
And we are investing in R and D more than ever before. And as the product sets getting better, the value proposition for the customers like what you saw in the panel and the channel partners is getting even more compelling. That then leads to feed efficiency. Why? Because we now have more brand value.
We are getting recognized by industry leaders or analysts like Gartner, Forrester, and phonetics. And there's repeat customer reference. So, you saw the example of public storage, which got which saw extra space, the competitors deploying RingCentral and they came to us. So, that momentum is starting to take off and then it becomes easier for our sales folks to sell. So that's number 1.
But number 2, our churn is coming down because the product is getting better. So then if you take these 2 combined forces and look at the sales and marketing you have to spend for every dollar of booking you get, it's getting better, which again then feeds growth, because now you can acquire a lot more profitable customers with the same money, which then opens up more money for innovation, which starts its virtuous circle. And then if you impose this virtuous circle on a $50,000,000,000 TAM, that's where the excitement comes in. So, with that, let me just wrap up with our mission statement. I mean, this is even for me, it's I was a self-service analyst before I joined RingCentral and it's been truly an amazing journey for me where RingCentral is trying to change the way businesses communicate.
And that's pretty powerful. And I've been very honored to work with an amazing group of people like Vlad, Dave and the entire management team. And I've never one thing is, Sterling was asking again earlier, hey, what's changed in the last year? And I said, look, it's a shitload of work. But it's a lot of fun.
I'm having a lot of fun. The opportunity is there. And so look, I just summarized with a couple of key takeaways. One is the opportunity is enormous. We are leading the charge through innovation and that innovation is distancing ourselves from the competition and making sales and marketing more efficient.
And we're seeing the sales and marketing efficiency play out in the mid market and enterprises we saw, the growth economics are better. And in the channel, it's accretive to the P and L. That is then leading to our growth acceleration of 37%. But again, it's just not about growth for us, it's profitable growth. So our recurring margin is over 55%, and there's a positive bias from that.
And ultimately, we will exceed the $1,000,000,000 target and the rule of 40 by 2020. So with that, you very much. And I want to invite Vlad and Saip on the stage for Q and A from you guys. Oh, I forgot the last slide, but just thank you. Question from Sterling.
Sterling, is the mic coming there for 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?
Well, that's 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 reiterate the answer is we have been through down cycles, okay, at least 2 as a company. We've accelerated both times.
At a, I don't know, common sense level, if you will, If economy slows down, dollars become more dear and the economies that we provide become yet more pronounced. As the economy stabilizes and reaccelerates, nobody necessarily wants to all of a sudden start burning cash because now they've experienced the savings and the efficiency gains. So I would say we'd be cautiously optimistic to that. And having said all of that, really am 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 6 months earlier or a year ago? And then 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.
Yes,
sure. I'll take it and maybe Dave can add on. So over a year ago, it was even more nascent than it is right now, Terry. And what we've been doing is we've been the first phase of the journey was to fill out the NFS cities and then now densify it. So we are in the 2nd phase now, densifying it.
And as it relates to the long term, there's we are adding capacity every day. And I think we don't expect this capacity to slow down. So ramp will take a long we hope that the ramp, the overall ramp of the segment is lower as it stands right now.
Thanks so much. I was wondering if 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 inContact or Zoom?
Yes, 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 and D, we're saving on products and so forth. It really is about how do we best position ourselves to deliver world's best world class not only world class but world's best experience in one of both of those areas.
And we are partnering with 2 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 again them as well. Now, we are now a meaningfully larger company than both of them.
And well, if you take within contact outside of NICE and within times on our side, eventually we'll find a way 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 because 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. And we can influence our partners' roadmaps, but we don't fully control it. So that's the rub. And once we but one way or another, it will be solved.
I have a question, especially in the long term horizon. How comfortable you feel that from Microsoft Teams and from Google Hangouts, especially the lower end of market, it wouldn't present in especially as we go to 2020, any serious competition from there. On the higher end, the efforts of Avaya and Genesis and Cisco and especially for the not so much distributed enterprise, but for a larger location where they could have customized cloud kind of hybrid, how do you look on this competition in longer term?
Thank you.
[SPEAKER JEAN
PIERRE CLAMADIEU:] I guess I'll take that too. So do it in reverse order with what you say higher enterprises. So let's do an easy one for so I know that Cisco is out there saying well gee whiz sure, if you have situations like we started from today where you have hundreds of offices and you need to roll out, they sort of already admitted defeat. They're saying, yes, but you do have a very large center then doesn't hardware make sense. So 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? And that's where they fall down. So the minute you get from 1 to 2, cloud just takes over completely,
okay?
So that's maybe an answer to that question. Outside of large concentrate applications, 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? And Genasys 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 Genesis. It was factored this joint. So 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.
And we have lots of people smarter than me and better students of the industry. So you guys pick up, but I we can get Terry in particular here. We're just going to be picking up on you. But yes, I don't know. It just hasn't been done before, okay?
Siebel never came back and never reclaimed leadership from Salesforce. People never came after workday in the end. So I don't think it's going to happen. So your first question is, okay, so what about the big guys, specifically Google and Microsoft? So 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, but 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. And if you remember, one of my key slides was about the distribution and modality multi modality of communication that we are seeing and that industry is seeing.
And voice and enterprise grade voice, kind of played it down and said, well, look, it's only growing 40% year over year for us, but every customer uses voice. So 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.
But even as they do, again, this is a very, very large market. So we're not yes, we'll punch through the $1,000,000,000 mark, but we're not saying that we'll punch through the $50,000,000,000 mark, okay? So it's going to be a different thing, but we'll keep our share. Google is very different, frankly. And with Google, they tend to go after a much lower end.
And as many people know here, we partner with Google. So the minute it gets serious there and they have an actual need as the enterprise grades people go with RingCentral. For example, in particular, Avery Dennison, I use them already. We got introduced to them by Google or by Google reseller. And they're 100% Google shop, but once it hits enterprise grade communications, Google doesn't have a play.
It's 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%. So that's just a small second correction. But 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. But the over takeaway is that, let's look at our total net retention in that segment, it's over 130%. And yes, there your overall upsell is surpassing your churn or gross churn. And so if those dynamics continue, the structural tailwinds to the business.
Hi, Catherine Trebnick, Dougherty. Two questions. 1, 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, so you got to remember, we are profitable. And as Mitesh said, we're not going to dip into the red. So the idea was to not use the convert to plug up. I mean, whatever roadmap we have, the company pays for it and the company is profitable.
So look, it was a good deal, 0 coupon. We are in a good company there. And just a matter of taking the money when you don't need it, Cheap money with we talked a little bit about macro concerns. Simple fact of the matter is that deal probably would not have been possible today just not because of anything we did or did not just different in the straight environment. So we just wanted to take advantage of free money as we have.
Nothing that wasn't mentioned already. And question of ownership of the entire portfolio comes up, you may or may not view this as a gap. But I'll tell you what, if you again refer to one of my slides where I was showing top 15 customers using so in the ideal world, we would like to have every one of those customers we would like you to see all orange, every little blog being filled for every customer. So we're not there yet. So you can well imagine that some of them because there is already a trusting relationship why doesn't everyone use GLP?
I don't know. We're working on that. But usually we got I mean I don't think it's necessarily. We do know. So 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. And he said, thank you, that's great.
And so 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. So that's our challenge.
We'll take a couple of more questions, like 2 or 3, 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? And then 2, could you remind me do you still run your infrastructure on an internal private cloud? Do you think that's still the right strategy as you become bigger?
Or are you thinking of migrating some of that spend to public cloud? Thanks.
Yes. We think we started the capability of legacy PBX at this point. There's incremental opportunities we find as we in our pipeline as we talk to customers and we add that to our commitment from pipeline. And we know that when we
build those, it goes out to
all our customers. So we feel like the product is ready for Global 2,000. And 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 and in GCP. Incremental functionality may be there as well as some geographical expansion could be there over time.
Take the last two questions.
And parts of the products are in public cloud
already. This one is 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? And 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?
So on the fixed versus variable, it's a mix. There are some costs like overhead, which are fixed, but then a lot of the channel costs are variable, like salaries, labor, whatnot. That's 1. And second is, how should we think about doubling down? Say that question again.
Yes. Just to use, are we literally going see doubling in channel
Doubling down was a way of saying it. So, but yes, we are, let me say, increasingly going to invest in the channel. Let me just rephrase it that way. So, this is a vector of growth and we will be seeing increasing investments. Last question I'll take from the gentleman here.
Hi. I actually have 2. First, about your current account penetration. So how do you define your penetration? Because you might think they need x amount of new seats, but the company may actually think differently?
And second, what do you think hold those customers? Why they cannot convert at a faster pace or right now if your offering is so good?
Sure. So
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. So every Denison, the employee seat count is over 20,000. Right now, we've got 2,000 seats deployed. So that makes it 10% penetrated.
That's the calculation number 1. And number 2 is why not now because, 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.
So they just don't flip the switch one day. It's a very methodical global rollout. So over time, you should see us to increasingly increase our penetration within that base. Well, thank you all for coming. Really, really appreciate it.
And we'll be here offline available for questions. Please grab a drink and some refreshments afterwards. And so thanks again.