If you read here at all, you know I read the Mercator Capital IP Communications Newsletter every time it comes out. This month's issue is now online here.

In the interest of open disclaimer, I do know some of the talent behind this fabulous newsletter. I'm suprised it doesn't get more coverage because it's being read in the halls of VC and other back rooms. I hope the innovators and entrepreneurs are following what's going on in some of the undercurrent of chatter in the Mercator newsletter.

I'm not going to dig into every story in depth, but I feel compelled to point some out and inject a few thoughts on what I saw as three reall important stories.

Hosted VoIP Market Begging For Consolidation And Transition To "HoIP"
In our October 2006 issue, we looked at how quickly the small and medium business (SMB) VoIP market was growing, if not on the subscriber side, then certainly on the provider side. With barriers to entry being low, and viable solutions emerging for this underserved market, a lot of attention has been focused on bringing hosted VoIP to SMBs. Our article concluded that this space will continue to attract new entries, but will reach saturation, and that consolidation will likely follow. [Read full story]

Hosted services. Managed services. Professionally managed services. All encompassing managed services. This is a very hot market segment. The Fortune 1000 companies are limited to just that - 1,000. What I call the Unfortunate Five Million pretty much covers everyone else. 5 million's a low number, but the small and medium business segment across every scetor of business has often been treated as second class citizens by the majod solution vendors.

The SMB market doesn't but Oracle for Saleforce Automation. They use Salesforce.com. And they don't go buy big, expensive solutions from Cisco, Nortel, Lucent, Avaya or [insert big vendor name].

These companies don't want to reinvent IP networking or telephony. They want solutions that work. And managed services of all kinds are one of the best ways for them to get what they need. I'm familiar with many of the companies mentioned in the article, but there's a whole new wave of managed solution providers that's really gaining traction and momentum

This is hot space to watch.

Sonus Strengthens Its FMC Story
Sonus Networks made plenty of positive news this month on a number of fronts, from partnerships to financial results, which were released on February 28. Financial and business performance was very strong, and they have a record cash balance of $361 million, and a market cap around $1.7 billion. With 2006 sales of $279 million, Sonus is a long way from being a startup, and despite pending restatement of financial statements, they are holding their own quite well, and still trade at a relatively high multiple compared to other companies in the sector.[Read full story]

This caught my eye because I view Sonus as one of the big sleepers that we haven't heard the last of. If the name's only vaguely familiar, think back to early IP telephony and think softswitch. Their roots go deep. They have fundamental knowledge of unified communications because they've been in the middle of it from the beginning. They were an early enabler who helped make it possible.

I've been working for quite a while with their PR team to coordinate a podcast briefing conversation. I'm not sure we have a date and time yet, but that's been my fault due to scheduling overload. Soon, I'll be talking with Sonus in a podcast chat about what they've going going on. 

Cisco Gets Social
Ever since they dropped “Systems” from their name, Cisco has regularly been in the deal mix, and February was no exception. Two acquisitions were announced last month, and this article focuses on the first one. The deal was actually quite small by Cisco standards, but speaks quite loudly to their ambitions. On February 8, Cisco announced its acquisition of Five Across, a small company focused on social networking. Financial details or terms have not been disclosed, and we suspect the value would be under $50 million. [Read full story]

This one's a head scratcher for me. Cisco - what the heck are you thinking? I have to side with my friend Om Malik on this. In his post last Saturday, Om said:

News flash for Cisco: This social software thing – it is too marginal, doesn’t make money and can’t make you cool. Stick to what you know best - plumbing hardware –sell tons of it, make money, and learn to live with the fact that you are rich and old school.

It feels like a lot of "me too" knee jerk from Cisco and looks like space they should steer clear of. I've yet to get a decent briefing that made any sense for 95% of businesses on Cisco's whole Telepresence initiative. I still think that is much ado about nothing. In their minds, Cisco could be thinking of more and how to tie presence, availability and social networking together with telepresence. I think they'll do poorly. As Om says, they really should stick to the network plumbing the excel at.

There's a quick brain dump of some thoughts as I perused today's newsletter from Mercator Capital. I encourage you to check it out and get on their mailing list.


Technorati Tags: Mrecator Capital, Managed services, hosted VoIP, Sonus, Cisco