Good morning, everyone. I'm Tom McCallum. I'm the Head of Investor Relations for Zoom. And welcome today to our analyst meeting at Zoomtopia. Welcome to everybody in the room here and everybody who is on the Zoom webinar.
We appreciate all the time you guys are putting in today. And I'll just do a few quick housekeeping items and then I'll turn it over to Kelly. First, our agenda. Kelly is going to come up in a few minutes and talk about our growth strategy. We're going to follow it up with an update from Graham on Zoom phone.
We're going to take a short break and have lunch available right out here and drinks as well. If you guys can all come back in about 5 past, that would be great. We'll have a little quick video, customer video and then the afternoon session will start. We're going to have Oded come in. He's going to do a strategy update on our technology as well as some of the announcements.
And then Eric's going to come over and join Kelly for a Q and A. We will have some Q and A in between for the Zoom phone and for Oded, if you want to ask them questions, but hold off on the Kelly questions until that session, if you wouldn't mind. And then we're lucky to have Ryan, our new Head of Sales, our Chief Revenue Officer coming in and he's going to have 2 CIOs with him, one from Ciena and the other from Autodesk. So we got a full schedule. We're going to end promptly at 145.
And so again, appreciate all the time. We are going to show some non GAAP financial metrics, just so you all know, just make sure you see the reconciliation in the back of the presentation, which is available online, in the IR site. And please familiarize yourself with our Safe Harbor statement. I know it's a bit of an eye chart at this point, but it again is going to be in the presentation. And with that, let me bring up Kelly.
Thank you, Tom. Good morning, everybody. Welcome to our 2nd Annual Investor and Equity Analyst Day. How many of you were here with me last year? Okay.
So we have like quadrupled our attendance. I think we even beat Zoomtopia. For those of you that were here last year, we were across the street in a little room without a sign. So we've really made it to the big time this year. Thank you all for coming.
Everything that we do at Zoom is focused on delivering happiness to our customers and our employee. And this is evidenced in a few metrics that are showing up here, our Net Promoter Score of 70 plus as compared to the industry average of approximately 20 as well as a CSAT score of 95%. But I think even more importantly, it's evidenced by what we hear from our customers, which is video usage increases 85% when they adopt Zoom as compared to their legacy providers. And this has led to a current annual run rate of minutes of over 80,000,000,000 80,000,000,000 minutes we're providing to people on an annual basis today. I think that's amazing and also up double at least year over year.
This has culminated in a unique financial profile. So year to date these are all year to date numbers for the first half. We made it through Q2 with $268,000,000 of revenue, up 99% year over year. We have a non GAAP operating income of $29,000,000 up over 6 80 percent and our free cash flow of $32,000,000 year to date. And while we're really excited and proud of these numbers and our performance to date, there is a lot more opportunity ahead.
IEC estimates the TAM for this space to be over 43,000,000,000. There's over 200,000,000 business and a 1,000,000,000 knowledge workers in this world that have the need for potentially using Zoom. There are 90,000,000 conference rooms in the world. You guys, if you heard the keynote, you heard Eric address this. He talked about the penetration.
I'm going to give you the number in a minute. But it's only 4%, 4% of those conference rooms are video enabled today. There's 480,000,000 desktop phones around the globe and 195 countries in the world. And Zoom has the solutions to address the needs of all of these. The growth strategy for Zoom started about 6 years ago when Zoom meetings became GA.
So one product really focused on SMB. Our growth strategy today has evolved to focus on these four pillars: expansion into the upmarket. We hired our 1st enterprise leader at AE, Jeff Schwartz, 2.5 years ago. We've made lots of progress in this area to date, as evidenced by our largest initial deal land we announced last quarter of HSBC. And we're going to talk a little more about one of the amazing cases we also have in the enterprise in a moment.
International. We also opened our first 2 international offices 2.5 years ago in London and Sydney. Today, the number of offices has quadrupled, and we're super excited that also our largest initial deal was also just happened to be an international deal as well. Zoom Phone. Really excited about Zoom Phone, which became GA in Canada and the U.
S. In January and in London or in the U. K. And Australia in March. And you guys heard some really cool announcements this morning.
I'm excited that we're going to have Graham come up in just a few minutes and tell you more about that. And then of course, Zoom Rooms. This is really our key to winning in the conference rooms. And you guys heard some really great announcements this morning about how we're simplifying that and really making it easier and easy for adoption, especially in the upmarket. Okay.
Stepping through each of these pillars, expansion in the market in the upmarket. So in Q2, we ended our with a customer count of over 66,000 customers with greater than 10 employees. The metrics that we're going to provide on a quarterly basis to help you understand the progress we're making in the upmarket though is customers with greater than $100,000 of trailing 12 months revenue. And we ended Q2 with 4.66 of those customers, growing 104% year over year. So really exciting to see that that base of our customer that group of our customers is growing even more quickly than our broader customer base, which grew 78% year over year.
Another way you can measure how we're making progress in the upmarket is through our net dollar expansion rate. We ended Q2 with a trailing 12 month number of greater than 130%. And this can be due to either the sale of more licenses or additional products like Zoom Phone. And I want to walk you through an example of how this works in one of our customers. This is a new case study that we haven't shared before.
So this is a large retailer that many of you probably know and love. And like most of our sales cycles, it started purely organically. So you can see that in the Q1 that we ran this customer, we grew to almost 300 licenses purely organically. And then we had the opportunity to go in and do a pilot of our meeting product. And you can see in that quarter then, it grew to 6,000 host licenses.
Fast forward basically 3 quarters and they decided to do an initial purchase of 150,000 meeting licenses. So super exciting to see that tremendous growth. And then you keep going and now they decided to expand into Zoom Rooms. And in Q3 of FY 'nineteen, they bought 2,000 Zoom Room licenses. And in Q2 of FY 'twenty, further expansion, again pushing them to the very top of our largest customer list today, buying another 30,000 meeting licenses and almost more excitingly, 10,000 Zoom Phone licenses.
So today, this customer has 3 of our product lines and a total of 192,000 licenses deployed. And this is not unique. Some of you probably have seen the previous case study we were showing, which is a financial services company. It had a very similar trajectory, which is what's witnessed in our net dollar expansion of 130%. Come on up, guys.
There's space up here. Welcome. But there remains tremendous opportunity in the upmarket. I'm really excited about this. So you can see here in the Fortune 500, 55% of them have at least 1 paid host license, but only 5% of them actually have revenue today of greater than $100,000 So that means there's a tremendous opportunity for us to continue to make meaningful progress in the Fortune 500s.
And I'm excited to share with you a never seen before metric, which is the number of accounts we have today with greater than $1,000,000 of ARR. And you can see that in FY 2020 Q2, we ended with 27 accounts greater than $1,000,000 of ARR, up 2 86% year over year. Just to manage expectations, this is a metric we're going to only disclose here at the Zoomtopia Analyst Day. So we invite you all to come again next year to hear this lovely metric. All right.
In terms of international expansion, so this is a really important part of our growth strategy. On the left hand side of this slide, you see our top 10 markets by revenue share. And 2 of the top 3 are the U. K. And Australia, which again, as a reminder, were the first two offices we opened.
So this highlights that our investments there are really taking hold and paying off today. We have 8 international sales offices around the globe today. And in Q2, our international revenue grew at well, sorry, year to date, our international revenue has grown at a rate of 120%, in contrast to our domestic revenue, which grew at 94%. So this highlights that our investments in international are really helping accelerate our revenue growth at this point. And with international representing 20% of our total revenue year to date, there is tremendous room for expansion in this area.
And Zoom Phone, the man himself, Graham, just entered the room. He's going to give you an update on this in a minute. And there are many exciting aspects about the progress that we're making in Zoom Phone. But I think the most exciting one to me and frankly the most surprising one is I think we all expected this to be a product that resonated well in the SMB, and yet we have seen tremendous uptake in the upmarket space as well. And you can see here that our exit ARR as of Q2, 41% of that was within upmarket customers, and that's for us defined as customers that's greater than 1,000 employees.
And as I mentioned again, our largest deployment to date is 10,000 Zoom Phone licenses. As you can imagine, many of the early adopters for Zoom Phone were in the technology space, as you can see here, 24% of our ARR, but also some really nice representation across other verticals, including retail, manufacturing, professional services and communications. So a really nice broad base of Zoom Phone customers already to date. All right. In terms of Zoom Rooms.
So again, this 90,000,000 number you've heard a few times this morning, that's the number of conference rooms around the globe. As of 2018, it's estimated only 4% of them are technology enabled. That number though is expected to triple by in 2023, in the next 5 years. That means there are 10,000,000 rooms up for sale to become Zoom rooms, and we are laser focused on converting these to Zoom customers at this point. Even within our existing customer base, though, there's also a lot of opportunity.
If you look at our upmarket customer base today, the attach rate currently is 37%. So that means we have lots of room to continue expanding and growing in our existing customer base as well as that number the goal for that number is certainly to have it be 100%. Okay. So how are we going to do all that? Every day, we are focused on continuing to build and enable a team that scales and provides happiness to our customers while carrying our culture.
The culture of delivering happiness to our customers' employees is probably the most thing and key to our success at Zoom. Aligned with that is our maniacal focus on continuing to innovate around our products. As you heard, lots of really cool exciting announcements this morning. We will not we will continue to invest in that as it's a super important part of our strategy. Our partnership ecosystem helping us expand around the globe is really important.
You guys heard some really key announcements this morning as well. And in Q2, we also announced the Verizon partnership and then customer happiness. This is at the core of everything we do every single day, and that's not going to change no matter how much we grow. All right. With that, I'm going to turn this over to Graeme and let him talk to you about Zoom Phone.
Thanks, Kelly. Perfect. So welcome, everyone. Just by way of introduction, my name is Graeme Geddes, and I recently joined Zoom last quarter to lead the Zoom Phone efforts. Prior to Zoom, I spent the last 15 years at Cisco Systems.
So I've been in the collaboration space for quite some time. So really getting into it, I want to cover probably one of the most common questions I've gotten since coming to Zoom is what exactly is Zoom phone? And really to answer that question is it's really a logical extension of what Eric and team have built with the platform. So if you think about it in its most simplest form, it's just a video meeting and you turn off your camera, right? So the capability is part of that platform.
So it's that same underlying scalable platform that we're leveraging for telephony, but we're adding some of the more common telephony feature set to that to provide a modern cloud PBX or as you may have heard from Eric's keynote, a video first PBX. So from that, expanding out the capabilities to say what is it from a video first PBX perspective, It is a full fledged modern phone solution hosted in the cloud. So everything that you could expect to come with that full fledged. That same centralized dashboard and management capability that our admins have come accustomed to as part of the platform on the meetings side. They now get that same advantage for managing their phone system.
And so that's where Kelly had alluded to. The focus for Zoom has always been on simplifying ease of use. And so that's not just for our end users, but it's also for the administrators. And so giving them that single place to administrator both is important. And then obviously, the last comment here about it being secure and reliable, it's that same architecture that we use for meetings just extending into the telephony space.
So with that said, we were here 12 months ago and we kind of introduced to the world Zoom phone and my, what a busy 12 months it's been and we have just some amazing results to kind of share. So since last year, we went GA in January. We've had a couple of major releases here, so 5 about every other month, expanding into 7 countries, we'll get into that in a little bit, supporting over 50 different hardware devices from some of our hardware partners. A lot of people when they think Zoom Phone, they just think of it as a software, but it is a full fledged phone system inclusive of support for hard phones. And we're already processing millions of minutes of voice per month.
So definitely a lot of customers that have already jumped on with us that we're excited about. So you see some names here and we can share some details, but I actually believe we have the team from Ciena. So Craig will be here sharing a little bit about their journey and the expansion with Zoom Phone later this afternoon. So I talked about how busy we've been. I think the key thing here is really it's not just any one core PBX feature set, but it's really about the speed of innovation.
So not only is it just a rapid pace of innovation at Zoom, which has been amazing to see, actually I've just been really, really impressed by, But it's the rate at which the teams are even speeding up. And so really excited about the progress that we've made. And you see here for the second half, a number of features that we've already delivered and then those Asterisk are the ones that we intend to deliver on the roadmap for the remainder of the calendar year. So kind of rounding out the announcements that we have for you all this week. The first is we're really expanding our contact center partnerships.
So currently or previously, we partner with Five9 and Twilio and we're expanding this with announcing partnerships with Genesis, NICE Incontact and Talkdesk. So really rounding out the who's who from a cloud contact center perspective and giving our customers that flexibility and ultimately knowing that we're going to have the solution that's going to meet their needs in the cloud. Next is the announcement of our bring your own carrier direct peering partnerships. And so just to kind of level set and recap, back in the June timeframe, we announced bring your own carrier or BYOC for short. And ultimately, what this does is it allows our customers to get a fully managed cloud PBX from Zoom in the cloud while maintaining their existing telco relationships that they might have from a premise perspective, giving them a lot of flexibility.
So maybe they have a long term commitment with that vendor for whatever reason giving them a lot more flexibility with deployment. And with this new model that we're talking about, that peering relationship rather than that routing through the customer premise, we're actually going to do that directly between the Zoom cloud and the service provider cloud, really alleviating some of the challenges and making it a lot more flexible for our customers. So we're really excited about this. We have a lot of customer interest and we're going to be expanding upon this as well. And then the last one is our aggressive expansion internationally.
So this week, we are announcing that we will be expanding beyond our current markets of the U. S, Canada, U. K. And Australia. We're adding New Zealand, Ireland and Puerto Rico from a GA perspective and then announcing beta of 11 different European countries that you see there.
So really getting aggressive in that international expansion and that's A. We'll start here.
Hi, Sterling Auty with JPMorgan. So one of the most frequent questions we get from investors is to understand you laid out the timeline. So even with the stuff that's coming in the second half, where do you think you are in terms of feature parity visavis like a RingCentral 8x8 in terms of a full blown capability on this front?
Yes. So from a feature parity perspective, I mean, we have global multinational companies that are moving forward and moving on board. So I'd say we have a very robust feature set today to meet the needs of customers. So I would say we're there today. I think you heard from Eric in the keynote where he said for customers that hadn't taken a look, now is the time to jump on board.
Bless you. And we're just going to be getting even more aggressive. And what I would say is the one thing I just want to mention is from a development my on premise PBX that were there and developed 50 years ago. It's about what are the use cases that our customer is trying to solve, how can we partner with the customer in a more modern way to solve those needs. And so it's not just a typical kind of punch down list of capabilities.
So I hope that answers
your question. We have one back here.
Okay. Hi, Pat from JMP. So what's like the main reason that customers pick it, right?
And I'm going
to combine 2 things with that. Is it do they save money? And also do I still have a telecom contract after this or does it go away? Yes. So, 2 part question.
I would say the most common thread that I see from customers is we are it's a natural upsell to our base. So our customers that are already Zoom meetings customers, many of them, they have Zoom. It's a cloud solution for video, and they've moved other workloads to the cloud. And frankly, their PBX is the last thing that remains in their data center. And so they've come to us and said, hey, well, Eric and team, can you help me solve this challenge of migrating this workload?
And it's just the ease of use of having that as a natural extension of a platform and an app that the teams are already using for every single meeting throughout their day. So it's really that simplicity as the cause and the reason. To answer the second question as far as the telco relationship, so the answer is it depends. In the markets where we offer native service and so you saw on the previous slide, actually I can go back. So where we offer native service, we would be a one stop shop from that perspective.
In the areas where either we don't have service or you want to do something like bring your own carrier, you would get your cloud PBX from Zoom and that would be part of that contract and then you would maintain your telco contract with that service provider. So dual role there. So number 1 is because of that relationship, we now get the footprint that that SP owns, right. So wherever they can provide you telco service, frankly, we are now operating in, so dramatically expanding where we can offer service. And so we see kind of an equal mix of customers that say, look, I want the simplicity of kind of native full one stop shop or others where they say, look, for whatever reason, I already have a partnership with my carrier and I want to go that model.
Next question.
Thanks. Meta Marshall from Morgan Stanley. Just maybe a question on do you envision these being multi vendor evaluations or just kind of add on where they may not evaluate others in that? And then maybe
are there
any number 1 of these features that you've added kind of since originally going GA that you feel like that was the hurdle to getting more people to take a look? Like was there any one feature that got added that you feel like cascade results?
Yes. So to answer the first question, I think it's actually, the first question around I'm sorry, I'm trying to I was thinking about the second question. Yes. So on the first question, it's both. So we have seen, I would say, there are a lot of customers that are just very happy with Zoom and the relationship, and so it's just the natural extension we're seeing upsell.
But that's not to discount the fact that we have had customers that have done an extensive kind of side by side evaluation and ultimately chose Zoom Phone as kind of the phone system of choice for them. Does that answer your question? And then the second question was?
The second question about any one feature.
Oh, any one feature. So I would say it wasn't any one feature. It's hard for me to pinpoint, right, because we lump so much into each release. I would say that our latest release in the September timeframe was really where we kind of knocked out a lot of what I would call the core telephony feature set, and we've kind of seen a dramatic ramp in interest.
Great. Jonathan Key Summit Insights. Just curious in terms of margins for the phone, especially if you're offering bring your own carrier, you have to share the revenues you're using their network with the carrier. With the carriers, they usually have lower gross margins. Just curious how profile it is for phones?
And then second question, it sounds more like this is more of a confirmation. It sounds like your partnership with RingCentral doesn't restrict you from approaching customers with a phone first solution directly?
Yes. So you saw Kelly step up on stage. So the good news is from a margin and all that perspective, that is out of my hands and into Kelly's. So no, no, no, I will differ.
So from a gross margin perspective, when we model Zoom Phone on a standalone basis, it does have 3 to 4 points lower gross margin. Today, you're not seeing any impact though due to the overall the minimal contribution we're seeing from a revenue perspective. And the goal is by the time that Zoom Phone is a much more meaningful contributor to our revenue that we've had a chance to negotiate further and further with those carriers to start to minimize that overall impact.
And then just confirmation, I guess, the partnership with Ring doesn't restrict you from approaching customers first with a phone solution.
It sounds like Yes.
So I'd just say that Ring's a strategic partner for Zoom. We I don't believe there's a contractual restriction, but there's tons of market out there, tons of TAM. And so for us, it's right now, the primary focus is on the natural upsell to the customers that we already have on board with Zoom.
Matt Stottler from William Blair. You mentioned a lot of the innovation here being use case driven. So what are some of the most popular use cases you're seeing that's driving adoption
just a demo, right? It was actually use cases that customers were coming to us and saying, hey, could you potentially solve this? And so just to recap for those that might not been able to attend. So the ability where a telephone call can originate and terminate on a hard line phone, on my app, on my Zoom app, on my desktop or even on my mobile, the ability to change those modalities, right, and intermix between those 3 all while on a live call, inclusive of a Zoom room, right? So you think of the video that was shown where a user today's proliferation of common space areas where I start with a telephone call, my mobile or even on my desktop app, right?
And then I put that on hold, transfer that to my mobile, seamlessly go into a conference room and have that and then I escalate that into video. So, as I shared earlier, I've been in this space for a long time, right? So, I was for the past 15 years. And I've seen a lot of people have this vision of and we talked about what unified communications is, but it's been a vision. Frankly, it's been more like loosely coupled communications, and we've put the onus and the burden on the customer to kind of stitch and bolt things together.
What's been amazing about Zoom and Zoom Phone is it is a single architecture, which allows us to really deliver these use cases and the switch between our modalities in a way that other people haven't, right, because they've obfuscated that. They've said it's simple, but it's different stacks on the back end. So you can't see it. It's a single wrapper, but it's not a true single architecture. So just sorry, just to share a little bit about that, but that's like that's the really exciting stuff that I that we can deliver for our customers that we've heard real use cases for that I think is really, really fun.
No. So it would be both, right? So the question was more internal collaboration versus customer facing. I mean, like that potentially, I mean that meeting or that talk track of who's on the other end could be an external participant, it could be an internal participant as well. But the ability to kind of seamlessly ebb and flow between video and kind of just traditional telephony, I think is what's really, really powerful.
And frankly, I think it's going to be the differentiator that you're going to see become more and more important in the future. If we think about it, if you just kind of ask yourself, is video going to be more or less important to an organization 5, 10 years out? I think it's a no brainer to say yes. And so the idea of buying based on a video first system that also supports telephony is going to be kind of the way to go. Just a quick time check because I do know I have a customer meeting.
Okay. Yes, so we'll just take probably 2 more questions.
Ronny Agwemes from Stephens. So Zoom meetings, Zoom will allow new customers to use meetings for free for the duration of their existing contract with a previous vendor, provided they signed an additional contract with Zoom after. Is there a similar dynamic in place with Zoom Phone?
Yes. So the question as far as Zoom getting aggressive by saying, hey, we'll kind of give you service throughout the remainder of your contract. So Zoom Phone is an add on. And so by natural extension of that, we do have the ability to kind of co ride on those types of offers. I would say to date, we haven't done a ton of that.
Frankly, a lot of customers have just kind of fully signed up. But yes, the answer is we will have that flexibility to do that as well. Last and final question. Actually, the winner of the day with 2 questions.
One question, one follow-up, if I can. The first one is, so you mentioned the upsell, but in those situations where a customer decided not to go with Zoom Phone but went with 1 of the other competitors, is there a common thread in terms of why they decided not to go with Zoom Phone?
Yes. I would say, primarily it's just how aggressively we can get into those additional markets internationally. One of the reasons why we're pushing so aggressively on expanding the service availability. So that's probably the primary one.
And is there special permissions that you need to get live in those countries? So the beta countries, are you all set from a regulatory standpoint?
Yes. So as far as that process, there's, I would say, kind of 2 or 3 different I mean, like each country is unique in its own right, whether it be regulatory challenges, product capabilities that we need in order to be able to address those regulatory challenges. So we kind of treat each one individually. But yes, we're expanding those, but each one is kind of evaluated independently. The beta ones are the ones that we've already made through that kind of regulatory progress.
And now it's just about kind of doing that testing with the customer just to make sure that we're delivering on that customer happiness.
That makes sense. And then just a follow-up, and I'm sure Kelly will go into it later as well, but with the announcement of the partnership between RingCentral and Avaya, is there any sense is there any initial reaction that you've seen in the marketplace from customers and any thoughts that you can give us on that front?
It's a meaty topic. I would say I'd defer most of it this afternoon. I know you're going to be sitting down with our new CRO, so Ryan Azuz. So I can definitely ping him for his thoughts. I would just tell you kind of my initial takes, having been in this space for a long time, especially having a lot of experience on prem, I would say that if there was ever a question whether or not the cloud was the future or if they're going to kind of live simultaneously or like how is that going to play out, I think it just really illustrates that prem is going away, right, and the future is the cloud.
And so I view it as a very welcome sign, a very welcome thing that the future is the cloud. We're here. We're seeing a lot of customer interest, and we can help solve customers' pain points around that migration. And then if that kind of answers the question. So, yes.
One more question?
Yes. One last question.
Great. Make it
a good one.
Well, I'll do a 2 parter then. Yes, Will Power with Baird. Thanks, Graham, for all the color here. I guess, first, just a bit of a follow-up to Sterling, but thinking about as you move up market, you talked a little bit about international and the need to add capabilities there. Are there other key features or product sets that customers are asking for that you're getting pushed back for not having that you have a roadmap for?
And then secondly, I wonder if you could talk about distribution and the importance of the channel because most of the UCaaS providers have relied on the channel. There are a lot of great relationships there. How is Zoom thinking about opening that up for distribution?
Yes. So a great question. So to answer the first part, so my background having come from 15 years at Cisco, Cisco is really thought of as an enterprise company. And so I have a relationship as far as I understand the needs and the use cases of what it takes to deliver there. And the questions we're getting from customers is, I believe in the vision, I believe in the capabilities.
This is all amazing stuff. How do I get from point A to point B? And so what we're really spending a lot of time doing is sitting down with those customers and kind of about how we do that migration. So that's a key capability, I guess. As it were, it's not a feature set that would kind of ring on a punch down list.
But of those migration opportunities of how do we allow a customer to maintain their existing dial plan and transition seamlessly onto the Zoom service, so those are things that we're absolutely focused on. And that rings true of kind of when you look at the bellwethers from a premise perspective or not even on premise perspective, but from an enterprise perspective, it's the Ciscos and the Avayas of the world that kind of have that share. And so we have customers of both that have already done the migrations and we're partnering with. Great, last question. And then sorry, the last you had 2 parts, so.
Yes, the second part was just about the importance of the channel and how you're thinking about developing relationships there to further accelerate your opportunity?
Yes. So I think I apologize if I didn't see it, but Kelly probably mentioned as far as the distribution today, Zoom has historically been a very direct kind of vendor that will be expanding to what level which I know that Kelly and Ryan have a focus on. Ryan, having come from his background, you can ask him this afternoon, had historically been very channel focused, Cisco doing roughly 90% of the revenue through channel. So I think you starting that are very comfortable with the channel model. So I think you'll see that expand to what level which.
And I'll kind of leave for Ryan and Kelly. So I appreciate the time. I have to run to a customer engagement. And I just want to say full disclosure in that if I ask you to repeat your question, it's not because I'm hard of hearing, but I had a baby 4 days ago, so I slept probably 3 hours in the last 4 days.
So yes.
Well, and we're thrilled to have him, but Graham got subbed in about an hour ago, I think. So thank you. You did an amazing job. Thank you so much.
Thank you, Graham.
Okay. So we're going to take a quick grab a lunchbox and something to drink, and then we're going to come back and have some other special guests with Oded and Eric and Ryan. So we'll see you guys back here in like 20 minutes,
please.
I'm Harvey Jones. I look after all the global collaboration at Atlassian. I'm the global collaboration leads. We have a really heavy video first culture at Atlassian. Every week on a Friday morning in Sydney time and Thursday afternoon, the US time, we join all our global town halls together and, our leadership presents on strategy, on various other aspects of what's going on in the company and it's been a really powerful way for us to share that culture and that message across the organization globally.
We've been able to consolidate our VC platforms quite significantly. We were previously using a number of different bridges, number of different endpoint technologies. We've now standardized on Zoom, both from meetings and our webinars. And we've been able to retrofit a number of smaller rooms, which previously didn't have video conferencing technology with very cost effective software based Zoom rooms.
At Atlassian, I'm a Senior Product Marketing Manager working on the Jira Service Desk product. The most useful Zoom feature that we see customers love is the fact that you can just, by one click, immediately start a Zoom conversation within the ticket without ever having to leave to your service desk. So you can get back to resolve the issue quickly and get back to what you're doing straight away. A lot of our customers are globally dispersed IT teams. And to be able to walk someone through, share screens, troubleshoot really quickly in a matter of minutes rather than going back and forth on email is hugely beneficial to them.
We really love Zoom touch screen. A lot of our project at the moment is in the design development phase. So we are always ideating over drawings that we put up on the Zoom touch screen. And someone, generally at our end in our Sydney office, will mark up a drawing to highlight an area on that drawing that might need to be changed or shifted or to highlight an area that we need to zoom in on as well.
Our staff love the recording and transcription technologies because we're quite geographically dispersed.
It's
been very handy to be able to record meetings, share them with people out of the time zone.
I love Zoom because it makes communication so accessible, so fast, and I never have to leave the environment that I'm already working in. You just can't beat face to face communication. It's critical for our customers.
Thank you. I'd like to bring up Oded, who's going to talk a little bit about the technology strategy.
Thanks, Oded. The clicker. Where
Hi, everyone. Just to know who did see the keynote, can you raise your hand if you watch the keynote? Okay, not everyone. What I'll do today, mostly go over what I spoke about in the keynote. So I'll give an overview for those of you who haven't been there and people who were there, feel free to ask questions if you want to understand more.
I think we just to give overall how we see the product and how it ties with different aspects that we spoke about in the keynote. You can see the core different products that we have for meetings up to the phone. And at the bottom, we have the integration layer. And between them, of course, there is a layer of APIs that we either use ourselves from the other services and they use on the other side. But really the idea is to provide that flexibility for our customers to use us in multiple fronts in terms of the whole suite of unified communications or if they want to choose the best of breed approach, they can kind of mix and match however they want their services to be.
And then what we started talking about today is the new technologies level that is on top of our services, allows us to introduce new capabilities into the product that make it more seamless and more automated. The idea is really to make communication really easier to use, but do it in an automatic way. And we have demonstrated some of the things we're doing. It's like the first step for us, but this is a direction we will double down on. And the other aspect of it, to be able to do that we also have the data, the usage data aspect of it so that we analyze the usage data, of course, in a private way and in a way that our customers appreciate because we will be able to share with them that data so that they can get insights about how they use our product and overall how their organization is run.
Any questions on this slide? So let's move forward with the demos. One of the things that really helps us with the bottom part of that diagram I'll show you is the marketplace, where there are basically three levels of integrations. 1 integration is the ones we build ourselves, what Zoom builds using our APIs. And then there is another level, which is partners and third party developers that build with the marketplace.
And the 3rd level is customers. We actually have customers like Walmart building their own chatbots or their own integrations into their own applications, their custom application that they have themselves. So the marketplace is really the tool to provide that. What we announced today is what we call the pitch competition for developers on the marketplace. For us, it's not about having more and more apps, it's having the right apps.
And that's why it's a competition for a single app that will be the best. And so we're going for quality rather than quantity, but really excited about this competition so that we get more innovation and really support the startup community. Any question on the competition? Okay. You can see also our investors really pitched in and very supportive.
We always talk about the secret sauce behind our service and the network of data centers is really what makes everything work seamlessly together. And I spoke about it too in terms of why people say about us, it just works. One aspect is the UI and the other aspect is how the media is routed across all those data centers. And of course, we have a very a team of very experienced engineers and that's what they do. They kind of live and breathe this network, make sure it's up and running.
They monitor it constantly across the 24 hours and they provide this unique architecture that we have. And when people ask, okay, what makes you different? Why is Zoom different than other services? One of the reasons is this network, because it really requires a lot of attention and focus, experienced people to make it so reliable, to make it high performance. This is not like a web server network of web servers.
This is a network of free time communication servers that need to work all the time, 24 hours in high performance. It's hard work and this really separates us, this network. About 16 data centers right now and we keep adding. Last year we had 11, so by now we have 16. We keep adding based on usage, based on our sales program and how we want to extend to other countries.
And that's like the current situation. Any questions? Moving on. So virtual background is a feature that we were surprised about. And initially it was something that was an Eric feature.
He was really trying to be engaged with the customers he was meeting and really wanted to have that engagement through customizing his appearance when he met those customers. And then we kind of shared that idea with a few customers and we found out that this is really exciting for a lot of them. And it was really adopted very fast with so many customers, especially now that you don't need to have a green screen behind you. Any computer, you can just turn it on without pre preparation. And it does a lot of things for our customers.
One is that kind of personalized experience where you can personalize your appearance, but it's also a security feature because you can actually hide whatever is behind you if you don't want to show the whiteboards or if you are in a place where you have other people that you don't you know how it is when you sit in an open space and people are walking behind you. Sometimes you don't want to show who is behind you. If I walk around someone who is walking in an open space and they're meeting with 1 of the partners, maybe I don't want them to know that I am in the office, for example. And so I know that those people in the open space use the virtual background so that it's hidden. Now we also can we keep improving it.
One improvement that we showed is that now you can see it before you join. We actually added the preview window, which allows you to prepare yourself for the meeting and now you can also prepare the virtual background. The other aspect that we added is really the video. So now you can upload a video. It's not just a still image and I think the demo showed it very nicely how it makes it feel really.
Now you're like you're on the beach, having fun, but you're actually in the office. And then the virtual background for PowerPoint is something we had customers asking for. And the idea is really people wanted they use our background, our virtual this is an example on how we take feedback to the market and we enhance it based on customer feedback. So people were using our virtual background and were manually uploading images of PowerPoint presentation and switching it themselves using our existing virtual background. So let's make it easier for those.
So now you can just simply upload the presentation and you will automatically show up as your virtual background instead of doing it manually in multiple steps. This is a really good example of how we take a feature, basic feature to market. We enhance it over time based on how people will use it and how people envision it moving forward. Raise your hand if you used our virtual background ever. Yes.
Good. Yes. See, so it's very powerful, very useful. Before I go, there was one more feature on the virtual background. So now it's also available in Zoom rooms.
Back to the story of how we have a suite of products that work seamlessly together. Now you can do it on a Zoom room. The Zoom room use case is more of a studio use case. For example, we run our earning calls over Zoom. We're the 1st company, hopefully, we'll productize it and we'll not be the only ones.
But the idea is that when Kelly sits with Eric and Tom, they put the virtual background even when they're in a conference room, not just individually. And that allows them to personalize the earning call and provide some kind of relevant information to the earning core using the room, not just a personal PC. So we had like a set of use cases that we described. This one I feel is the most compelling. We actually have this competition.
About 2 months before Zumtopea, we sent a note to our customers, please send us videos about how you use us in a unique way. And those 2 professors from University of Otago in New Zealand sent us amazing video where they were actually on board this ship that is in the middle of the Pacific Ocean. It is the furthest point away from land on Earth. And they showed us on the video how they run a lab with all the results of the lab, taking soil off the ground, taking water samples and they were showing
it to a classroom in New Zealand live
using our room in New Zealand live using our product just through a cell connection. And actually you could see the videos, it actually works very well, very engaging and it's exciting to see all those use cases by our customers. Moving on with other features, really based to how we make the product work more seamlessly using new technologies. These are great examples on how we plan to do that. Now we really will make it more and more engaging for our customers to the point where at some point it will be better to be on a Zoom meeting than meet face to face.
We're not saying it's every time, but in some situations you will want that because, for example, you will get the live transcript. And that's especially for international teams and especially for accessibility reasons. This is groundbreaking in the sense that today to do closed captioning, it's very expensive. You have to have special person sit down and type in. We support that for a while, but it's only being used in very limited situations.
Now it's available to everyone. It just works using back end machine learning technology from our partner Otter dotai, That's like a big thing. The other one, the live or the simultaneous interpretation. So in that, I can kind of if you have any questions about the live transcript before I continue with the other features. So if you've seen the simultaneous interpretation, a lot of people say, okay, but you still need to have those human beings interpret the language.
So what's the big deal? Actually it is a big deal, because if you want to run such an event today, you have to go to some kind of another service that will work for each language separately. And if you want to participate, you want to send an email invitation that is different for each language And you have to set it up in a way that you know which people have which language, send them the different invitation, have that separate service work, have the capability live working together and tell people, hey, instead of using this audio bridge, you need to use a different audio bridge with that language. It's really complicated both to set it up and for the end user. We had one of our employees who came from another company who just did such an event and they had 8 people support this whole setup.
And here what we did here is you it's just limited to the interpreters. So you didn't need to worry about human interpreters, but the interface itself for the end user and for the admin is much more it's like easy because if you know Zoom, you can do this. What we do with the live interpretation is you have the participants as a special role, the interpreters. And when they speak, the language that the actual original presenter speaks goes down to 20% of the volume and the interpreters goes to 80%. So you can still listen, you can still hear the tonnations of the person who speaks in the original language, but then hear louder the interpreter.
And I
don't know if you noticed in the meeting, it actually was working. This was a live demo with real people interpreting the people who were speaking in the original languages. Then the last one is really kind of first deep into the automation aspect of meetings and kind of taking not just the in meeting experience and making it better, but also in this case the post meeting experience, where think about yourselves trying to kind of concentrate and run meeting notes and action items during the meeting instead of listening to the people who speak. With this, you'll be able to focus more on connecting with the people in the meeting, so that the action items are extracted automatically. And that's the idea.
Now it will take time for us to get to be really completely bulletproof and efficient because the way machine learning works, you start running the service and you learn from it and you improve over time and keeps improving as more people use it. So if you use it now, it will still be not as accurate, but over time it will get more and more accurate and will be really efficient. That's the idea. The idea is to all of those features, the idea is to make it seamless, easier to use, using new technologies. And really, we call it empowers communication in a sense we empower people to accomplish more with our product.
And what we showed here also on the Zoom client side, if you've seen the demos, what we wanted to convey is, really it's been a year since we announced it and 9 months since we launched it, it's a fully featured product. It has everything and more than that, right? So we have the core capabilities and we added the ability to do things that other services cannot do. And you've seen how you can transition from a phone call on your desk phone to your mobile phone and then you walk around with a mobile phone, find a room and you start a phone call in the room and then you have a button in the conference room to upgrade it to video. Everything works seamlessly and because we have this full product suite, we can really control the experience end to end and provide that transition from one modality to the other, from one device to the other.
And again, the value is having that single client. You've seen also if you've seen the presentation, we showed several points where you have the chat very useful and our chat capability is really getting stronger and stronger. I shown the way we are planning to add reactions and comments to our group chat. That's coming by the end of the year. Then we showed also how you can have services integrated with our chat.
So we have ServiceNow supporting our chat. If you have a case or an incident, it will send you a report in chat and then you can go back to the ServiceNow and ServiceNow is integrated with the Zoom room, so you get the alerts from the Zoom rooms directly. So everything kind of working seamlessly together. One of the things we are noticing is really so far we kind of played down the chat capabilities and work very closely with Slack. They are a great partner.
But what we see really moving forward is as soon as you have the phone, then people expect to have chat with the phone functionality. And that's really showing our chat is becoming more and more popular, especially with our phone customers. Any questions? I can't share the exact numbers. What I can tell you is that Slack on our marketplace is the number one integration.
So it's extremely popular. On the Zoom phone side, we can share several names in terms of who are those customers. But I can tell you that the majority of the customers who are on Zoom phone use our chat.
Thanks. A couple of questions.
First of all, the live transcription that you're doing, is this your engine that you're using or using Google for this?
We are not using Google. We are using a company called Otter AI.
Okay. So you got
a 3rd party to do this. Do you think that's a technology you need to own or do you think it's a technology you need to I
think right now there have really a specialty in live transcription, in speech to text that we leverage their capabilities. At some point, we may take it and have it around. We are building teams around NLP. So that can be something we'll do in the future. For now, we're very happy with the way it works.
It's very accurate. We took the technology and we actually run it on our own hardware. So it's not running separately outside of our cloud. It's inside our own network. It doesn't move out of our network.
Got it. And I guess follow-up to that, to pick up on the interpretation side and tying it into transcription. Do you have live translation in transcription?
Yes. We actually take we took a good look into that. And what we saw that if you combine the speech to text and the text translation, it becomes inaccurate to the point it's not good enough for business media. So we're kind of right now doing it more manually. As soon as technology will be faster and more accurate, we'll be able to switch to fully automated.
Is that transcription a feature that everyone gets or there's an extra payment for that?
We're still running the beta. We'll see based on the beta, we'll decide how it will be rolled out. We haven't decided yet.
Thanks.
Okay. Several times. Yes, I think the Zoom Rooms is for me the biggest news announcement. It's really groundbreaking. And few of you maybe known me from my past work.
It was always a challenge to get really tight experiences between the best service and the best device in the room. And now with those two partnerships with Poly and with Neet, we provide the best experience overall. And this is like a dream come true for me. If you know Poly, really they have this brand name for conferencing devices, great channel, go to market on one side and we have Vito on the other side, a group of people from Norway who are experts in building room systems. This is the team that builds the Tundra devices and then build all of the Cisco devices so far.
That team is actually working with us now. If you think about it, when I was at WebEx, I was the product manager who built the integration between TelePresence and WebEx, first phase of it. Until today, it actually doesn't work as well as Zoom works with TelePresence. And that was a challenge. And now we have an opportunity to fix it and really build the best experience out there with the best teams.
So Zoom providing the best software and service with Poly and It providing the best devices, really exciting. So just if you I don't know if you guys know OJ. Can you please raise your hand if you know who OJ is? Just may give you some background, okay. OJ, he was the Chief Operating System for Thandberg, the company that Cisco acquired for the room systems.
He was probably number 2 after Fredrik, who was the CEO. And after moving to Cisco, he headed he was the General Manager for the room systems business at Cisco. Then he left and built a startup called Acano that worked both on conferencing solution and endpoints. And then that company was acquired again by Cisco. So we went back to Cisco to have the same general manager role and built all those devices that are available today, the Webex kit, the Webex board, all those advanced beautiful devices that are designed in Norway, Scandinavia.
And now think about it, that team is moving to work with us. It's very simple. So we'll have the best solution very soon as soon as this product comes out and they add a suite of products. This is really great news for us as a company.
I
think I did speak about the evolution and how we can improve the Zoom Rooms over time really for the devices that still run on the Windows operating system, we lock it down with Windows IoT. We build into Interop and that's also something that will come in the next few months where really work well. You can call from a Zoom room into a Teams meeting or a WebEx meeting. We provide that and we actually will work closely with companies like Microsoft and Google in the future to make it even more and more seamless. That would be the new interop of video conferencing and expect more news on that in the future.
Device management and I think OJ mentioned that the device that they have built will fully be managed by Zoom. So you go to the same back end, same capabilities that we have today to manage all your users and all the phone devices. The room system devices are also managed by the same single pane of glass for the IT. And that's huge. If you want to scale, if you think about Uber, who is running about 3,000 room systems, Zoom rooms today.
How do they manage 3,000 devices? You need to have all of that back in place to be able to do that. And then the last piece is really we think about the experience not just in meeting itself, but overall the meeting experience. How do you find a room? How do you see a map of all the rooms?
Which ones are available? We'll take that map, we'll put it on your mobile application. We'll also take that map that we have with availability. We put it on a digital signage screen, so you can go through the corridor and see which rooms are available. And again, that suite of products across the different modalities will be so beneficial for our users because you really need that end to end experience.
I spoke a little bit about the appliances. This is images of the 3 vendors that are working with us. You can see on the left that's the Neat product. You can see on the right the Poly. The controller is part of the same devices.
So you buy it together and for $2,500 list price. This is the price is groundbreaking. I think a Cisco device like that will cost you about $4,000 So this is much cheaper, affordable, but better quality because it runs our software and it runs neat hardware, which is comes from the same factory as the Cisco devices conceptually, right? And then the poly, so you have options. And the last one is the board from D10.
But now instead of working on a Windows operating system, it will use the same embedded system and will run as an appliance. So really moving on with options for our customers. Either use the open system that we already have today that people love and use or you can choose to use more of an appliance system that we announced today.
Thank you, Odette. Really appreciate it.
Sure.
And I'm going to bring up Kelly and Eric now for Q and A for about the next 30 minutes. Thank you.
Thank you, Oded.
Thank you, Oded.
And thank you for joining us, Eric. We are really excited to have you. So we have an audience full of our investors and also equity research analysts. We don't have any prepared remarks since you guys haven't had the opportunity to have time like this with Eric before. We thought we would just yes, start rolling.
Itay, you want to take it away?
First question in the 2nd Investor Day. Thanks for the event today. It was very interesting. Fantastic to see all the progress on the technology side. I did want to ask about your mass market.
I mean, it's very clear why you're trying to move up The opportunity is massive and largely untapped. So I completely understand the investment there. What I want to make sure though that you don't drop the ball on the core. A lot of companies have tried to move up market somewhere somehow things catch up to them and they find out that they under invested in mass markets. So help me understand, clearly a lot of the incremental investment from this point going forward is aimed at the up market, but how do you still target the mass market?
What are still some undiscovered opportunities in mass market? How do you make sure you don't lose or drop the ball in that part of the business, which is still the majority of your business?
Yes. First of all, good afternoon, everyone. My name is Isiam, okay?
So thank you. I'm not Eric anymore.
So I think it's a good question. So I think you're right on. I think as we move up to other new market opportunities, don't lose our focus to our core technology, right? Today, look at our core R and D spending, I think most of the engineering resources are still working on our core technology. That's still the video conferencing, but the phone is part of that.
We truly believe video and the phone are the same opportunities, same market. I think we just spend more time with our customers, right. If they all talk about how to migrate their existing video conferencing solution of phone systems to us, we do it. Or we never see the new opportunities, for sure, we are going to allocate resources because we really want to build something for the future, right. And even if we become number 1 leader in video universe, what's next?
What's next? That's why I mentioned, hey, to 20 certified, a lot of innovation will happen. We have to invest now. I think that's our focus.
And remember, the amazing thing about the product is it works whether you're an individual sole proprietor all the way up to a large enterprise. So it's the same product and the same infrastructure that it's running on, whether it's an SMB or large customers. And then in terms of a go to market approach, we are continuing to invest across all segments of our sales organization. So, Ryan will be up here a little bit later. You can talk to him about that as well.
By the way, my first investor, Bill Tai, excuse me.
Hi, Bill.
Sterling Auty with JPMorgan. So in the demonstration both in the keynote and here, you had the language interpreters as part of that. Are you actually hiring interpreters to be behind the scenes to be live and on demand? And is that going to be something that's an upcharge for users?
Yes. So we would like to focus on the technology side. Quite often, those big large enterprise customers, they already engage with those like live translation company. They already have stuff already, but they do just do not have technology. From our perspective, just offer this feature to our customers.
They are going to engage with SquareWorld is going to help them. We do not offer that live translation service. And those are free. We don't want to charge customers.
Tom Rodock with Stifel. Eric, as you I'll take the other tack, because there's one question on mass market before. And I want to talk about going upstream a little bit. So as you move upstream, regardless of all the features that customers love, talk a little bit about how customers are demanding additional security features. That's always a hot topic with big enterprises.
You've won some big customers like HSBC and some others. Can you just talk about what they're asking for from security and how you're evolving that strategy? Thanks. Yes, yes.
That's a good question. I think it came from a WebEx, right? When we build a WebEx, we never realized we need to add those security features. We just built all the features. Later on, we never received a report about any vulnerability issues.
We try to fix the security problem. I learned a hard lesson. That's why when I did a Zoom on day 1, security is already built in from each layer, right, what's the security interface, what's security interface. I think if you look at our product today, from a security feature perspective, I think we pretty much already offer a lot of security features, some features very unique, better than any other vendors. Like, hey, I share a PowerPoint, it's very sensitive meeting.
If you want to take a picture, you cannot because we can add your name as watermark, right, a lot of unique features there already. But today, I think if you look at security, mainly if you talk with a lot of enterprise customers, mainly from like a data compliance perspective, right? We have customers of Europe, China, from other countries, make sure we follow the local regulation, that's one. Another thing is more like a customer data privacy, it's very important. Customers use our cloud recording the meetings, maybe they pay for with their credit card, we need to make sure, show customer those layers, what we can do to have a customer privacy.
But most of the time, as a customer look at our security white paper, they do not have lots of questions about security features, just data privacy and compliance, yes, on that front.
Hi, John Kiki, Summit Insights again. Thanks for this event and really enjoying the disclosure and information here. I wanted to ask about, I guess, this is more for you, Eric, your vision in terms of how this company is headed. You talked about this point in 2019, 2020 or what, 2,050, when you retire, Zoom is going to offer all this. I guess before you retire, especially with such a large cash flow, what could be possible areas to fill out your product offerings?
I mean, part of them, what the product presentation was, was all these features to bring your phones up to parity with what your UCaaS peers are providing. Your UCaaS peers are going out and buying CPaaS providers, contact centers and other stuff. Just curious where would you see some other product fits with Xunghi Video?
Yes. That's a great question. Yes, yes. Kelly, if you can chime in. I think if you look at total addressable market for the unified communications by 2022, I think this is dollars 43,000,000,000, dollars 43,000,000,000 market, right.
Also, we truly believe video and voice indeed are just one market. Today, it's 2 separate products, separate product experience. I think that will be gone. Video is a new voice. That's still our focus.
And if you look at it from a customer perspective, when they deploy our PBX system, they really enjoy video conferencing already, just add one more tab where you can use Zoom for the phone call. However, customer also asked about a contact center solution. That's why we have wonderful partnership with Robin, Doctor. 59, with others as well because that's not our company DNA. We really want to partner with others together, build seamless integration to serve our customers.
And also other market, I think, in this I do not see the product ready, but seriously, we are working very hard. Really, the reason why I share with you our vision in 2,035, that's exactly something we think that will happen in the next 5 to 10 years. And we are going to allocate resources, right, to focus on technology now. More like we 80 years ago, we did our platform. Now you see the application because our early investment into the platform.
The biggest opportunity, I think, at this point for Zoom Phone is the international expansion, as Graham touched on this morning. We have lots of requests for even U. S.-based multinationals who would love to buy the product but needed to be able to use it around the globe. So we're working as quickly as we can to clear those hurdles to be able to sell it. And there's like a list of like 30 prioritized countries we're working on today.
And also, you look at a lot of large enterprise customers, quite often they're still using on prem phone system, IP based phone like Cisco Call Manager or Avaya system. I don't believe they are going to migrate it to like existing cloud with PBX. They are going to migrate to Zoom PBX. That's a cloud based video PBX. Otherwise, if we migrate to other cloud with PBX, we still use Zoom or maybe WebEx or other solutions, it's still 2 separate solutions.
You look at the phone business, over the past 20 years, all the innovations were on the back end side from on prem to the cloud. From any of the perspective, let's do any innovation elsewhere. I call your phone number, that's it, I cannot do anything. But if you deploy Zoom phone system, it's very, very different. I call your phone number, one more click, I can share content, I can launch the streaming video as well, that's a totally different experience.
That's what customer asked about.
If I may, one more question. Speaking of international, you have you're currently offshoring a lot of your R and D overseas. And just curious, in terms of intellectual property production, IP production, are you just continuing just your standard NDAs, that kind of stuff to yes, with the overseas locations? ND, I'm sorry? NDAs, non disclosure agreements.
Yes. For the researchers, the engineers working on your IP overseas.
So approximately actually 20% of our engineering team is here in San Jose with the balance of it being in China. All of the IP is owned here in the U. S. And Eric, if you want to talk about the way the team is structured in China. But the team that's here are really the team leads and the thought leaders who work very closely with the product team and then help lay out the work plan for the team that's in China.
And as I understand, the way the team in China is structured, right, Eric, is that nobody has access to all of the codes.
And also the 2 things I think really important. All the core technologies are still developed here, just across the street in our headquarter. If any engineers become very critical in terms of understanding our core technology, Normally, we bring them here either through the H1 visa or airline visa, they can join us here. And that's why I can sleep very well. So in China side, the engineers' molecule, I inherited that from WebEx time, some of the UI, QA, non core technologies.
And plus, I have 3 side and no single website, they understand everything. And also, as Kelly mentioned, nobody can access entire source code. And also another thing compared to the 20 years ago, you get your source code, let's say, worst case, somebody got your entire source code. But today, the software as a service era, even if you get all the source code, what can you do? 50% of software, 50% of you need to run a service, 7 by 24 reliable, that's also a lot of innovations.
That's why I learned this when I built a team in the end of 1999, we established a team in China for WebEx. 20 years experience, we have high confidence how to our IP and how to make sure there's no any impact. It's not that easy, right? If you start a company, I highly recommend don't do that.
Ryan McLellan from Stephens. Impressive growth of customers over the last year with over $1,000,000 in annual recurring revenue. Are there any key factors you attribute to this growth? And what percentage of these customers pay for additional Zoom Phone products outside of Zoom meetings?
So, Eric, we disclosed this morning that we have 27 customers with greater than $1,000,000 of ARR ending Q2, and that was up from $7,000,000 a year ago. So the growth is due to the focus and the continued expansion of our enterprise team. Again, that team started about 2.5 years ago and in the last year has approximately doubled. It's also due to the continued focus on the product features and requests that these types of customers are asking for. And in terms of Zoom Phone and that customer base, I think there's, off the top of my head, I think there's probably 2 customers in there that are using Not
support. Yes.
Yes, 2, yes, that
are in there.
More and more, I think the real enterprise customers will deploy Zoom Phone System because on the one hand, our phone system architecture use experience much better. On the other hand, I think if you knew that, we should have become a public company last year because this brand recognition really helped us a lot.
Nita Marshall from Morgan Stanley. Just a question on competitive landscape and just how you embrace Microsoft getting more aggressive with Teams and where your insertion point is in that? And if Cisco kind of refreshes some of their products next year, just how to capitalize on them transitioning some of their video solutions?
That's a great question. I really love Morgan Stanley. I'm pleased
to hear Morgan Stanley.
The reason why your IT team is so awesome, they tested everything, they still use Zoom, they do not use Microsoft Teams, Zoom really. And I think the reason why is I truly believe millennials, they played a very big role for our success. The reason why it used to be CIO will make a decision. You like it or not, you do not care, right? Just say, hey, I just want to deploy one solution for one company, that's it.
For now, because of 1 third of workforce today in the United States are millennials, they want to use the best bridge service. That's why they have huge influence to the IT decision making process. That's why for every IT team, when they try to evaluate every solutions, they want to find the best bridge service. So we focus on the real time communication service. In the Microsoft Teams, it's great, more like for file sharing, for I'm and more like a collaboration platform, right.
When it comes to real time communication like video, customers still want to deploy Zoom solution. Sometimes some enterprise customer, we complement to Microsoft Teams solution and coexist. But I do not think they will catch up, because we are working even harder than that. That's why I think the best way to bridge service with ZYO, very well. We do integrate with Microsoft Teams very well.
By the way, I forgot to mention one thing. Today, IT team, they are also very smart. See, if you deploy the solution for 1 company, I just made it up, see, video, voice, chat, everything, that's it for MacSoft. But what if, say, like video does not work, what can you do? You're stuck.
You need to wait for Microsoft or any other vendors, right, because you cannot go with any other service anymore. The beautiful part of the software service is that if you do not like any vendor solution, you can go with any other vendor. That's why this is the reason why software service will win.
Eric, it's Sterling. Just two follow ups. Maybe just an extension on that with Microsoft. Maybe highlight, I think one of the big benefits versus like a Skype or etcetera is when you had intercompany communication was so difficult on their platform versus Zoom. Has that changed with Teams or is that still a big part of the competitive advantage of Zoom?
Yes, that's a great question. I think for sure Skype done our work when they talk about Skype anymore. And Microsoft, I think you got to give credit to Sanya, right. It's a product CEO, really understand how important this market is, that's why they decided to retire Sky. However, when they started building the team, you know the history, right, they tried to buy Slack, there's a lot of conversation, finally, they decided to build their own solution.
Because their time to market pressure, they build a solution just to focus on Slack competition. And after that, they realized they also need a video and a voice, But however, how to migrate that real time video and voice architecture into the Teams architecture, that's not that easy. We write a lot of native codes to optimize. In our iPhone, we write assembly language code, right, so Teams has a different architecture. I think when they started to focus on the within the company, the intranet communication, right, as in the team to team, but now they also want to expand into the intercompany communication, but I think they're not there yet, but they are going to get it there, but still from messaging perspective.
But for real time communication, I don't think they understand that well. Otherwise, why their Skype not as successful, why their link not as successful? You need a totally brand new architecture and stack.
And then I want to revisit the question around China and hit it from this angle. So one of the questions we get from investors is just because of the uncertainty trade negotiations and the rest of it. I think they understand that the IP is owned here and your leadership in technology is here. But one of the increasing questions I get is, well, geez, if there's all that development that's happening in China with everything that's happened with Huawei, is there any concern in terms of something being put into the code that could allow access? So anything you could comment to in terms of code reviews or other things that and frankly, do you get pushback from any potential enterprise customers around just the development side?
That's a
good question. That's why if you start a company, don't do that. It's very, very tricky. But I have more than 20 years' experience. I really know how to manage that.
First of all, core technology got to be developer here. And second thing is for every code checking, you needed to have another person to review. That's our process. You cannot check-in the code by yourself. The code review and also with automation tools as well to review the code.
And also another thing that's very important is because we keep everything open transparent for our enterprise customer, take Wells Fargo for example, our customer, Once every year, they send 1 or 2, last time, 3 people to come to our office to review our source code. We offer this service to most of our Lightning Red customers. If you do not feel safe, if you do not feel comfortable and you can come to our office, we show you all the source code. And plus, today, look at the top security companies worldwide, except for Cisco. All those security companies, they already use Zoom.
Reason why before they deploy our service, they already focus on all the penetration testing. And with the penetration testing and process source code review from a customer side, from internal tools and also another peer to review the code, we feel very, very comfortable. I also understand the code. You cannot take in any bad code to our source code system.
Kelly, Eric, we've got about 5 minutes left and I've got a question right here.
Great. Thanks. Yes, Eric, Will Power with Baird. So I guess this morning at the keynote, pretty significant focus on Zoom Room, some of the technology partnerships, you announced product announcements there. We had a stat earlier today that I think suggested that something like 37% of your upmarket customers subscribed to a Zoom room today.
Do you now have all the pieces in place? I mean, are there additional friction points to getting that number to 100%? Really, how do we think about the size of that opportunity given the base of customers you have with meetings today?
Yes. So in terms of the conference room opportunity, I think that's huge because the reason why because that's a trend, right, we also. I'm sorry, my mic
Right now it's back.
Oh, that's good. So not as reliable as Zoom services. So in the future, no offices anymore. Everybody will use an open space cube, but we will have more and more conference rooms. That's why that number is growing, 90,000,000 could be 180,000,000.
That's why we need to have a solution. That you look at a traditional conference room solution, it's on prem software, customized hardware, only focused on video conferencing. You look at what we are doing, we completely changed that landscape, cloud software, commodity hardware, not only for video conferencing, but also screen sharing wireless screen sharing, digital signage, meeting scheduler and the process recording studio as well, everything built in and there's no extra charge. And also after we have a solution built for the business conference room space, Think about today as another trend. A lot of there are a lot of remote workers and we are going to have a smaller skill and to focus on the remote workers as well home.
Because today, if you look at the home use case, I do not think there's any good solution available. I think we want to be the 1st one to come up with something specifically designed for home for remote workers and based on our Zoom Rooms technology. I think that's huge opportunity and also we're sticky, right. Customers, they like one click, they use like Uber, really like Zoom experience. It's really hard for you to switch to any other solutions.
That's why that's our core opportunity, core focus. Do I answer to that question, Wael?
Yes. No, I think that's helpful. I mean, I guess the broader question just thinking about the market size and how big a business that can become for you.
Yes. Thank you.
And for one more question.
Thanks, guys. It's Bob and Shaw from Credit Suisse. I think part of the messaging on Zoom and Zoom Phone is being able to seamlessly move a conversation to video. Can you just provide any stats qualitatively or quantitative information on how often customers are using that value prop? You mean the Chad?
The moving from phone to video, upgrading a call from that.
I think today, especially for those young generation, right, they are using FaceTime, right, make a phone call, one click, turn on the video, they really like the experience. Similar experience will happen in the business environment as well, especially because before we demonstrated our phone system, customers say, oh, what's the difference? They did not see that, but after they demonstrated the same front end user experience, the same back end architecture and with one unified client and one click, wow, you see the video, share the screen, customer really like it. As long as we demonstrate that feature, I think we win the deal.
Okay. Thank you, Eric. We really appreciate you being here with us today. Okay.
Appreciate for that. Thank you, Kelly. Okay.
We're going to bring up our customers and Ryan, and if everybody could just sit tight for a minute, so we can just swap out some mics. Thank you.
All right. So first off, thank you, everyone. My name is Ryan Agis. I'm the new Chief Revenue Officer here at Zoom. I've met a few familiar faces from my past life out there.
With me, I'm really lucky to have 2 distinguished guests that are here with us. We have Craig Williams, the CIO of Ciena and also Prakash Kota, the CIO of Autodesk. So just and what we'll do is I'll drive them through some questions and then we'll also, of course, open it up and let you ask some questions too. So just for starters, first off, thank you for taking the time. I want to show you both have very busy schedules.
And I guess start with just your kind of your background, your company, just help us get a baseline.
Yes. My background, well, I feel like I've done everything and nothing at all. Really started in DoD space, moved to then Cisco and then to LinkedIn and ran IT there and read out for a little bit, now CIO at Ciena. Yes, we've been using now Zoom for about 1.5 years, 2 years probably at Ciena. And Ciena, just for you now, in case you haven't heard of us, we're about 6,500 people, probably about 70 locations across the world.
So fairly sized, probably a good medium sized business.
Awesome. How about you, Prakash?
Good. I'm Prakash Kota. I'm CIO for Autodesk. I've been with the company for over 14 years. And for those who don't know Autodesk, Autodesk we make software so that our customers can make anything.
And so we've gone through a huge business model transformation taking all of our desktop products to the cloud. So for us creating frictionless experience to our customers whether it's end users, partners or employees is one of the big goals as a corporation. And so that's where Zoom also fits in where about 2 years back when we decided how do we take the friction away from the collaboration tools if we want to start creating radical collaboration between our employees worldwide. And that's how I became we became a Zoom customer. We celebrated 2 years anniversary right before Labor Day weekend.
And so we are one of those happy customers.
We like removing friction. So talk to us even about that journey, like the initial landing, if you can remember back, You're both fairly deployed and we'll talk about that. But when you got started, like how does something like Zoom get started? Do you remember where that got going?
Yes. So just like any other enterprise companies, we used to have a lot of collaboration tools. And one of the biggest challenge that we are trying to look to solve was, as I mentioned, how do we remove friction away, especially when we have global teams. And it's a solution that needs to work every single time. It's not like, oh, it worked in Fluke.
And we didn't want any users to be stressed out before going to the meeting about whether the tool will work or not. And that was one thing that was my responsibility because I want them to be really focused on being productive in what they are going to the meeting for and not whether the tool will start working or whether will I get the required help. And sometimes it's in front of customers and whatnot. And so the challenge was how do we get one tool that gives them that experience consistently every single time. And so while we are evaluating several tools, Zoom was one of them.
And then we brought Zoom in and we started doing pilot. We wanted to do pilot for about 200 users worldwide over the course of 3 months. And then 1 month later, I get to know that there are 2,000 people in the pilot. And I'm like, how did that happen? We never marketed any of these things.
It's the word-of-mouth that something starts working, everybody starts getting hopping on to the tool. And then it made it very simple for us to hop on to Zoom because it just worked. And that was our journey.
Okay. How about Craig on your side?
Yes. Pilot similar? Actually, a little funny. We had such a bad experience on video before. The company kind of scoffed at any time we tried to use the video solutions that we had.
And so not a whole lot of resistance, it's just a lot of people have given you the stink eye all the time over like, this ain't going to work here. It's not the company culture, if you will. So we did a bake off and I was bound and determined to challenge status quo with it. And we selected Zoom after the bake off, rolled it out across the company. And I want to say within 4 months, we had probably 90% adoption because we didn't have to train anyone.
It was very easy to consume, hit the button, it works. And the only challenge I really had, I think I've told you this before that, was to get people to turn the camera on. We're in a company culture where they never use it. That was the biggest challenge I had. So I often challenged them like I wouldn't sit in a room with you and close my eyes.
So I'm sitting here talking to you, why don't you flip your camera on and you look fine, right? And that was basically the challenge we had rolling it out. And from there, it's been an easy adoption level very high adoption levels and then that led us over to Zoom phone eventually too.
Awesome. Hopefully, virtual backgrounds could help people more.
Virtual backgrounds are awesome. If you haven't tried that, everyone needs to try virtual background. In fact, it's gotten so funny at our company now that we are now a video company. We weren't really short. Now people are really bold about picking a pretty crazy background just to kind of throw it in your face.
Exactly.
Internal competition. And how about some of the use cases? Is it salespeople helping sell? Is it all internal? Is it helping drive the culture you're trying to drive in the company?
What are some of those internal use cases?
For us, everything is from recruiting. We do all of our recruiting over Zoom now. A lot of times, we don't even need to fly people in anymore because we have very high-depth experience with the candidates via video. All of our internal meetings, all hands, I host a regular all hands with my staff and we have 200 or 300 people on it. To sales and customers as well.
And we usually let them pick what they want to use, but a lot of times they also choose to use ours, which is new.
How about Prakash? I know your company is one of the best companies to work for. Usually, a lot of those lists on Fortune all the time.
Yes. No, I think we have very similar processes, Greg was mentioning. Like we use it from recruiting standpoint for employee retention. We also our field operations team also leverage it when they're out there in the field or when we're talking to prospective customers doing demos and sharing our products from there to between with our partners, employees across the board, everywhere, I would say.
And there's been a lot of discussion here, Jim Tobey, about Zoom Rooms. And I know you're both fairly deployed. The numbers I got are roughly right. I think over at least over 100 rooms on your side and 6, 800 maybe even on your side. Talk to us about the Zoom Rooms experience, how that's different from other things that you used before?
Yes. So the biggest challenge I have at Zoom Rooms is everybody wants a Zoom Room. So that's my challenge. As CIO, especially when we have multiple locations like we're talking about 90 plus locations worldwide, when will my side get the Zoom room? And why did how did you prioritize this room to be a Zoom room than this room?
Those are some of the challenges that we are running into because everybody wants a Zoom room. And naturally, it works. It's one click to start a meeting and you don't need to really start working about the second click is if you want to turn the camera and we do have the culture of doing video collaboration wherever we have. And that also helps us making sure we have an inclusive environment. When we have global teams over 90 locations, people feel like they are in the same room with immersive experience that Zoom gives that they don't need to be in that location to contribute to any of these conversations.
So we have been big into Zoom deployment. Just this year alone, I think we have crossed over getting close to 400 Zoom Room deployments. And we have a big roadmap for next year to continuing to increase Zoom Rooms worldwide. Okay.
Awesome. How about on your For
us, yes, we only have a little over 100 right now. But the interesting thing for us was when we deployed Zoom, our real estate strategy started to change. We started realizing we could work anywhere and be anywhere, anytime, any device even. And so the need for office space started to kind of go down. So our real estate strategy has changed significantly since we rolled it out.
But for the rooms that we do have it in, very easy experience, it's very similar experience in every room. You don't to fight over the configurations. It's just one touch.
Awesome. We're seeing a lot of that trend towards more huddle type rooms, less offices. Of course, always still having the boardroom, but lots of informal collaboration rooms.
Yes. In fact, I would say that all of our conference rooms at some point will be Zoom rooms. It's just a matter of getting to them all. And when we don't have it, everyone just brings their laptop, flips open the camera and has the experience. They're just all in a room.
And then also, there's been discussion, of course, here at Zoomtopia about Zoom Phone. And I know for you, Craig, you happen to be a customer and deployed. Talk to us about that whole experience. I guess, What's it been like so far? What did you have?
What drove you to Zinfon? And what's that like?
I think in the industry, you look at the video world and you go, no one's really captured that market. So Zoom went in and took it because you guys made it frictionless. It's easy to consume and it integrates whatever collaboration tools you have. On the voice side, the phone side, it's like, well, it's always worked. I've always had dial tone.
Why would I change that out? But if you really think about it, the video solution paved the way for voice. If you want to transform that space, that's exactly where you go next. And for us, it was easy. We already got everyone on video.
And if I could do that, we could do the phone rollout. So we now have about 3,500 or so on phone, and we're going as fast as you guys make it globally available. So very, very logical next step. But from a disruption perspective, no one's really touched that market to disrupt it, and I think that's where you guys have really come into it.
Cool. What
kind of feedback are you getting from your end users? On the phone? Yes.
It works. It's simple. And the great thing that I think for them is that they can now use it on their mobile phone. So they will have their own personal mobile phone number, but they can also have their work number ring on it too. They can use their laptop, they can use a handset if they want.
So they got a lot more flexibility. But I think the biggest thing for us has been for the network operators where they can now make better network decisions about their routing patterns, circuits that they need to have, which before you really didn't have the data. You have such good quality data. And I often say like for us, we use Zoom as probably the best network software to analyze the health of your network because of all the analytics it gives you back. And so we use it to in a lot of other ways than just phone or video.
Analysts are now writing Zooms in the network, analysts. Come to this. So be careful. We do have a really cool application to really let you see how your usage is and of course analyze your network. And ironically, it wasn't built for that, but ends up being used to troubleshoot networks, especially when you have lots of locations and divisions and things like that.
And then on your side, I know we're not there yet. Today, talk about like what you're using for PBX and how you think about that?
Yes. No, that's a topic like we're exploring with Zoom, looking at all options. We definitely want to go to soft EV with phones too. We want to go away from the desk phones as such. That's part of our roadmap for next year.
And Zoom is one of the companies or vendors that we are working with. And it makes it easy because employees or workforce are already using Zoom on their phones. So one more we don't want to introduce one more tool along with so many other tools. So when if it works and looks like it does work from Craig's thing, we are in the early stages and we are exploring and but we do want to get to a softphone way of handling things.
There was a question earlier, Craig, about video to phone call to video. Any experience with that? Or can you talk about that for your organization? Yes.
I think it opens up the door of being able to do that type of thing. But quite frankly, too, it's like there's so much voice demand out there still. You don't have to make that your imperative. Like for us, video just works and we want to make that work. But a lot of people who still use traditional voice for what they do and they need that flexibility.
The great thing is that you can swap between and you can pick what you want to do that day. So for us, it was just another option for employees and they could totally mesh the 2 together. In fact, when we rolled out phone, we got rid of, I think, 90 plus percent of the handsets And half of those people chose to use the softphone capabilities. So they still want a number, but now they have the flexibility of just having it ring their
mobile phones.
Was that hard to change and manage through that or was that
the Yes, in fact, if anything, we went through the first set and educated them and a lot of them were like, this is my handset. I don't want to let it go. And then when they did, now we have analytics to say, look, you're not even using it now, so let's take that next step and get rid of the phone. So you have that normal change management paradigm shift you have to go through, but you don't have to force people. You can take that next decision after the people, the laggards, if you will, come around.
Yes.
Good. And then Prakash, how about just what surprised you the most in kind of the journey with Zoom so far?
The surprising thing was the adoption, I would say. It went very fast, very viral. Typically, we have a change management process to onboard users to have them start using tools when we launch anything as a service, but this one through the word-of-mouth went really viral. And that's the credit to you guys when it consistently works, the users are also looking for tools and we don't need to really push them to adopt. And there's nothing like FAQ document or process on how to use.
People figure it out. And that's the other aspect, keeping it simple to the core of what the value should be and then delivering that consistently is what was critical. And once you guys started delivering all of that, people started using it. We never tried to push this tool to anyone. While there were so many other collaboration tools, there was gravity around it and people started coming and starting consuming it.
Viral adoption, okay. How about you, Greg?
Yes, I would echo the same. I think once it becomes so easy to consume, you start opening up the ideas of what you can do. And for us, being anywhere doesn't matter where you're at, what time you're at, what device you're on, whatever. Whether it's the audience that we do in the company or mine, we introduce people in my team and ask them to lead with a talent like people can play piano or they can sing and that sort of thing. And over video, it's so easy and it feels like you're right there.
It's just the natural extension of how do you better use your time. I was saying earlier that time is the only real thing we all have, right? How do you better leverage the time we have together in different unique ways? Just video kind of opened that door for us.
Cool. And then what about adoption? You talked a lot about that. Any trigger event for either of you? I think you're both fairly deployed at least on the meeting side, the room side, we're in that process, definitely in telephony, maybe not yet.
But just is especially on the meetings where you went from like this is a pilot that this is going to like we're all in, any specific trigger events or anything that you remember in that journey?
For me, it was when we did the bake off with you and a few others, it was what are you waiting for? Why are you taking so long to get all the other input? It's obvious. And it really it was that way for us. But once that happened, it was just that what I mentioned, it was the culture change that you have to be a zealot over and make people maybe turn their video on.
It was when something is that easy to use and it fits into something that's been missing for years in this industry, it just fills a void and it's not something of an adoption problem. We have well over 90% using it on a daily basis here and I didn't have to train them.
Yes. So for us, too, right, like if pilot was supposed to be 250 users, but it went up close to 2000 to 2,500. So there's no way to go back now. So we had no option, but actually in a good way because people have all started consuming and started using it as an enterprise service because of us rolling it out. So it was not how do we make sure that it met all the criteria and other things, checking all the stuff that we need to check from an enterprise standpoint and then making sure it was rolled out globally, now as a standard, was the only step we had to do.
But pretty much the users just started adopting.
Cool. And then how about kind of usage trend, like what do you see, like how is that even now that you're adopted, is it still growing? What do you see on your end? And then ROI, which is probably somewhat related. How do you look at the ROI for these types of services, hard costs, soft costs?
And is that something you still keep your eye
on? So when I was coming over here, I was looking at the metrics in general of the number of minutes that we are consuming. Like this fiscal year with 3 quarters close to 3 quarters completion of this fiscal year, we are at we've consumed as an organization or a company 87,000,000 minutes in 3 quarters, which is about 25% more than what we consumed last year. And we have about 650,000 minutes and there are about 13,000 workforce including our employees, contractors and everybody collaborating on this platform consistently. And having radical collaboration in this frictionless experience is a big goal that we had as a corporation for continuous employee engagement and to get the most value across the globe.
And clearly with that spike in usage and continuous growth year over year and the number of meetings and the meetings that we're having with our customers, partners and internally, I think the trends show that the value that the product is bringing.
And I mentioned the adoption is like 10,000,000 meeting minutes a month, and that's for about 6,500 global users. And that's high for us. I didn't think we'd ever get half
of that. But when we rolled it
out, I think from an ROI perspective, we saved in the order of 30%, 40% by doing this with video and then another 30% -ish, if not more, on the phone side because that was less circuits we needed. It was licenses we could recoup back. And so we actually paid for it really in many ways. It wasn't just a great service to have. It actually paid for itself.
So what do
you do with all that extra money?
I don't always have that budget.
That's why
I didn't answer that question. No, that ROI, right, I think it's more about than hard savings, it's the productivity impact that you probably cannot give a hard calculation to it. And employee engagement is significant. Those are like you cannot measure them and you start putting dollars associated to it. It will be big.
And actually, there was some tool consolidation that has happened
as
part of this whole effort so that we don't have now 4 different tools. We were able to shut down all of those tools that naturally brought some savings that we were able to divert to use for this and some other things and to also add more Zoom Rooms so that we get more infrastructure put in. But naturally, it is the uncalculated heart savings is what I'm more interested in that employee engagement, productivity gains that we are having. And people are happy in general, ability to collaborate across the globe. Those are things that are super important too.
Thank you. I guess one last question before we hand it over to the crowd. What from your seat like differentiates Zoom from other vendors? I mean in your types of roles, let's be fair, you're buying, using all kinds of software, hardware, you name it. You work with lots of partners, lots of vendors.
What would you say is different and unique about that?
For me, it's like consistency in what your core is. You may add you make ad features every week and every month, but your core video collaboration, as an example of a Zoom platform, consistently works every single time. And then of course, naturally, I know Eric also very well. So he's approachable as a humble leader and he's brought in that culture across the company as well. So you can totally see it when you interact with the team members and when you collaborate and when you bring up any problem or anything, they have a complete empathy towards what we are trying to get done and trying to solve the problem to make customer really happy.
I don't think that he just says that he wants to see customers happy. I have seen that in experience, which has given me a lot of belief that the culture that he's trying to bring is important. And we want to be associated with partners. And so that makes it unique. Yes.
I'd echo that. I would
say that customer happiness thing is not just a marketing thing. It's actually real. And in this space, you really don't have that. So when you have a vendor or partner really who comes in and says, I want to make you happy and your company happy with us, it's weird. It's weird.
It's cool. And then on top of that, the technology really works. And the thing is, I don't have to train what I used to do is I had to train a bunch of people to run the tools and the systems and the back ends and all this stuff. I really don't have to do much of that. It's some admin stuff you have to learn, but it's not the deep level of knowledge that you used to have years ago.
I share your sentiment. I've only been here maybe 2.5 months or not even, and I'm already a happy person, but I'm even happier being here. And part of that is just working with such great customers. And when you're spending time with folks like yourself that are so positive, how do you not enjoy your day? And so it's definitely a great place to be.
So with that, Tom, why don't we open it up to some different questions for
Sure. Great. Thanks for sharing your experiences and adding to the Zoom story. I guess this question is more for Craig. I want to dig deeper into your bake off.
Just curious the other vendors, were they more legacy? And you've talked about just now your experiences with Zoom versus the other vendors, just back then before you experienced the full happiness and also the benefit of less training, I guess, what were the factors that you found between Zoom versus the other vendors? And did anything like you come back on price?
Yes.
You can't pay I mean, you can make something free and not want to roll it out, 1st of all. And there is always a price point where you'll pay for something and might even be expensive, but let's roll that out because everyone's going to love it. I save money by going to Zoom because of all the legacy infrastructure and the systems that I had. I've had experience running, whether it was BlueJeans or WebEx and Skype and all that stuff. And they usually hit you up on licensing costs for the complexity of the infrastructure you have to run or the people that you have to send to training to make this stuff work or really what we touched on earlier was I really didn't know why it was choppy video.
Really, if you ever have that, there's a network problem you need to go take care of in your So it's just a So it's just a total different paradigm shift to just video. And by the way, it's so easy to consume. You got to look at it. And but if you have a background in the history of all the different vendors and solutions that are out there, you would definitely want to pick Zoom if only for that reason.
I can just add one more for you, Craig. You're also a phones customer. I'm surprised at Ciena, you didn't get executive persuasion to go with your 2 largest customers, AT and T or Verizon in terms of their business services?
Any persuasion with them to pick their
solutions? In order to pick, yes, to go with someone else with phones?
Yes. At first, we did. But it was very obvious that the solutions that they had, quite frankly, are legacy solutions and they're just reselling whether it was Cisco's TelePresence or WebEx and the such. So for us, it wasn't a big deal. When it came to voice moving off of legacy, whether it's PBX infrastructures or AT and T, Verizon, Sprint type of systems and stuff, it's really not much of a conversation for us because I don't think it was really on anyone's radar for them that was such a big deal for them in terms of like cost or revenue for them.
So for us, it was just a natural progression from video to voice. And I don't think many people even noticed me, quite frankly.
Quick one for Prakash. You mentioned already the growth in minutes or usage. If you're at liberty to say how that translates into growth and spend, is it it's clearly not going to be like 1 to 1, but how do you look at what the incremental spend is relative to incremental usage?
I think our licensing is not based on the usage of minutes or whatnot. It's based on the number of users we have. So when we first joined about 2 years back, it was not at least for all the employee base that we subscribed to, it was not based on the number of minutes. So that doesn't have an impact. And that's the other thing.
We're not watching over people or restricting them from using it. And that's the way that typically we would want to partner with companies where we are not always trying to have a usage based consumption model where it becomes challenging. Then if people are not using it, we'll start challenging people, why do you need to use it? That goes in a very wrong direction of where we don't want to go. So our licensing with Zoom is not based on
this. It's
a cost on the number of licenses and number of users. And as we grow as a company, we buy for those number of users.
Yes. And that for us is very different. I one of your biggest competitors, they tried to lock you in. And so if you did grow and adoption went crazy, then you're stuck. Actually with Zoom, what they did is they said, hey, it's going to go crazy and we're going to cap it at so you know, so you understand that upfront.
So that was the difference for us.
Kind of employee privacy. So some of the analytics features or meeting transcription, some of the more advanced analytics features and kind of which ones you're using or which ones have kind of run into employee privacy?
Host whoever is running the meeting has ability to record meetings and the recording goes in the cloud and goes link goes to them whoever is hosting. So it's not publicly available as an admin portal or even for the IT teams. And we are not listening into any meetings or we don't have transcripts for all the meetings or whatever data. But naturally we do collect analytics of the performance like if you're in a Zoom call, if the you sometimes get a message saying that your network connection is bad or you get hints clues that the video quality may have issues and what not because of network quality. So those kind of data is what we are looking for.
And especially for VIPs, VPs and above, we track those, make sure that their quality of service is not impacted. But we are not tracking as such what is going on in the meeting. From a privacy standpoint, we are not putting into any of the actual content of those meetings or who's. Correct. And that's what we are setting it up.
Yes. Same thing. They know they're being recorded and that's about it. Question over here. How are
you guys thinking about chat based collaboration? I know it's not something that Zoom has emphasized today, but think about a couple of years into the future, if the product is more fully featured, does it make sense to have that as part of the unified suite in your opinion? Chat.
So today we have Slack. We use Slack for chat. And especially for a set of engineering community, they like that too. And we're not planning to really disrupt that equation today. But as Zoom evolves or other companies whatever we get and Zoom also has an integration to Slack as such if you look at it.
So if people are chatting and then you want to start a video call you can do that through that integration. So and we have from a user base standpoint, we have articulated to the teams what to use from an enterprise standpoint, what do we recommend for them to use for chat, what do we recommend them for video collaboration, for phone or instant chat, whatnot? So we have given those for the existing tools so that people are, our employees are not confused, which one do I use to what? But there is naturally this correlation that will happen eventually when Zoom also starts increasing their capabilities on chat or everybody starts chatting on those things. We will need to figure out and watch this market how it evolves.
But today, in our environment, Slack is predominantly used for chat purposes.
We're a Teams shop ourselves and we have Slack. Slack. Slack for use case for engineers and stuff, but we turned off Zoom chat for the wide company, but we leave it on for the meetings themselves, which is a really important feature to have within the meeting. There's tons of questions and things that come up during the meeting and people place in there or a hyperlink out to something that you're talking about. But the good thing is you can choose, You don't have to be all in on something.
You can pick certain parts of things that you like, which is hard to say that about other companies, at least a lot of companies, I would say.
And that's how we kind of look at the market. I mean, we have perfect examples, right? Companies that are on Slack and it's great if they're happy, companies that are on Slack for part of their workforce, companies that have teams and part of that's integrating into all those products and services as much as possible and then also offering our own application for those that choose to do it that way.
Thanks for the time today, guys. Given your current customers today, but just curious, out of all the new features that were announced today, what would have made you kind of the most excited to potentially adopt Zoom? And then secondly, actually, I'll take that question first.
Well, we have the Hyatt option. So assuming you're not a new customer and if I heard that, I think I would explore the Zoom room ideas of the one box. It was called the what was it called? Yes. In Nido?
No.
Nido.
Nido sounds good. Yes. I would explore that because that's a real tough challenge to actually make it that simple to work. We typically have 50 different types of vendors to choose from, and they all have pros and cons. In fact, I'm personally going to take that one back with my team to see what they think of it.
So for me, it's like anything any new capabilities in Zoom Rooms, especially when we have 400 plus Zoom Rooms, it adds more capability, that's a plus win. And also Zoom Phones, which we have not explored yet, they have it already there, but we are still exploring with them. That's still something of interest.
Got it. And then kind of follow-up to me and actually to your answer. Do you have any concerns with sort of consolidating down to 1 vendor like Zoom at all just from a like keeping the whole keeping every vendor honest in the space? Or would you be willing to go completely Zoom only?
I asked him to ask that question.
So at least we have not seen that we have not so far seen that kind of behavior from Zoom where we feel like we'll end up getting choked as long as there is value. Because when we had so many vendors overnight, almost within a quarter, we shifted to Zoom. And if over time things change, then we would not be hesitant to make the change. And all vendors including Zoom also realize that because technology changes are happening very fast and companies are coming and disrupting. So as long as there's continuous value that is coming out, there will be partnership.
And then tomorrow somebody else comes and disrupts, then we will be looking for those trends. And I'm sure Zoom are disrupting themselves too to continuously give that value. That particular thought, especially based on how Zoom works with their customers has not come at least for me or my team so far having that concern of we are closing down everything into one vendor because teams are asking us to consolidate platforms. Otherwise, they feel like I'm confused when you have 4 tools. Like I was traveling here from SF this afternoon with my VP of Investor Relations, Abbe, and we both were talking during our drive here.
And we have these 3, 4 tools, any plans to consolidate. So the users are asking for consolidation if you look at it than really having more than one tool because that makes their life easier and simple to operate. So I don't have from that standpoint, I don't have any concerns really locking down to 1 user as long as there is value that is coming up.
I think the other part to that, and you're right, because you want consolidation in this space, at least for your company, so that you guys can all use the same thing. Otherwise, you got 20 different tools out there to try to video conference, which would kill you. The one thing that's really important is to have the integrations available so that when you if you choose to use Slack, chat or Teams, you can have the integrations right into the video solution you choose. So no concerns at least from my perspective on having too much control, if you will, with one company like Zenith.
Maybe one last question.
Thanks. On Zoom Phone, both of you guys perhaps, what else have you looked at maybe for Craig first and kind of what really made you and what made you choose Zoom? And then for Prakash, I think you mentioned next year you're going to look at Maybe give us a little bit of background what do you currently have as your PBX solution and kind of what will be the determinant factors for that decision next year?
Okay. On the voice side, it's pretty much like PBX, right, your dial tone in your office, whereas opposed to the house, you might have different choices for how you get your dial tone, if you will. In the corporate world, there's not a whole lot of choice out there. There are some. And really, historically, I think the demand has been around softphone.
How can
I get softphone capabilities so I can take my office calls in the hotel, if you will? And so when we did Zoom Video, it just opened up the next logical discussion about why don't you just extend that to voice. You don't really need to do much of a bake off at that point because it's so easy that people were consuming the video, and now we're just giving them a phone number and they can have it within the same software. So it really was that easy for us to make that determination. And then, of course, I mentioned the cost, it paid for itself.
You had Avaya, is that right, before?
Yes. Yes. And our CEO was on the Board at that time,
too. I
won't say that. Anyway, yes, it was an easy choice for us.
Yes. So for us, right, it's like there used to be days when you used to have desktops and you come to work to work at your desktop. And now you don't need to come to work to be productive. We are all always connected and engaged wherever we are. And so in the phone space too, I think that's the next wave that we are looking at.
Today we have some softphones in certain countries. Again, we have locations, global locations, 90 different locations worldwide. So we need to have softphone capability across all of those locations. That's why we are exploring. And we are a big Avaya PBX shop today.
But my goal is to get away from desk phones to get to the phones where the phone travels along with you, the work phone too, wherever you are. So you don't need to be in your work location to have that capability. It's a capability and I don't know about you guys, but I never turn on the volume of my I don't have a desk phone. Even for my software, I never turn on because most of the calls go to my admin. I don't pick up my phones on the desk.
So people the number of people that are using that real desk phone has changed drastically unless your roles require them to use. And so that's why we need to really make sure that the capabilities are we are not introducing one more tool for the sake of giving them, rather combine it with the tools that they already use so that there is value and usage for those tools. And with that in mind is where we are exploring how could Zoom come and play in that space.
All right. Thank you, guys. Thank you.
Prepared remarks and presentations for today. We thank you all for coming and for all your support. And secondly, I want to announce I'm very happy to say we survived the lockup release today. In case you guys have been watching the stock, we actually closed up. So thank you all.
We appreciate your support that got us through this day today. So we unfortunately do have to clear the room because there is a big customer delegate coming in after this. But if you guys have questions, Tom and I will be around. We're happy to see you all and spend time with you this afternoon. Thank you again.