Zoom, the company best known for video conferencing software, faces major challenges. To keep up in a market where best-of-suite is increasingly preferred over best-of-breed, the target audience must know that its product portfolio has broadened considerably. The strategy: firmly commit to AI features, make much more use of channel partners and, above all, talk about everything that is not video calling.
“Our customers choose Zoom, nobody chooses Microsoft Teams,” is Chief Sales & Growth Officer Graeme Geddes’s straightforward answer to the question of what separates Zoom Meetings from Microsoft Teams. “After all, they just get that as part of the Microsoft 365 package.” Visiting Zoom in London, it is clear the company leans on the goodwill it built by offering a user-friendly, reliable, and affordable video conferencing solution during the coronavirus pandemic. It became an essential asset for office workers who suddenly had to meet from home.
The company’s claim to fame is ‘both a blessing and a curse’, according to members of Zoom’s management attending the opening of a high-tech demo space in the British capital. They are referring to the traction that Zoom’s video calling software gained during the coronavirus period. During that time, the company could chalk up growth rates of up to 300 per cent, as everyone suddenly needed an accessible platform that provided stable connections and was easy to use.
‘Customers came to us’
“All we had to do was write quotations, customers came to us anyway,” says Frederik Maris, now head of EMEA at Zoom for almost a year and a half. By now, the covid pandemic is (almost) forgotten, and many companies are summoning their employees back to the office for at least a few days during the work week. Even at Zoom itself, they were eager to see their employees in the flesh again.
Tip: Zoom CEO: Zoom doesn’t allow colleagues to have good debates
That huge growth of yesteryear has dried up to a modest 3.2 percent annual growth. That’s still growth, as CFO Kelly Steckelberg delicately emphasizes during her presentation on the company’s growth prospects. The market in which Zoom operates is supposedly worth 100 billion dollars. Zoom now takes a slice worth 4.6 billion of that pie, so as far as the company is concerned, there is still room to help itself to additional servings.
To do so, the company is pivoting its acquisition strategy from inbound to outbound. Zoom must go to the customer, or rather, members of Zoom’s extensive partner network must go to the customer. The company itself would rather not stand between those, especially in markets where the red carpet does not automatically get rolled out for Americans.
Network of partners
Indeed, Zoom likes to leave selling its services to channel and implementation partners. These include service providers, distributors, resellers, hardware suppliers, telcos, and local vendors.
According to the company, more than half of the top 100 deals in fiscal year 2024 (which ran from February 2023 to January 2024) involved such partners. That same fiscal year, the company accredited some 4,000 new partners in the EMEA region, and 8,000 worldwide through its Zoom Up partner program.
The company heavily relies on this extensive partner network for local markets and specific business cases. “A while back, Zoom had two markets—the U.S. home market and the rest of the world,” said EMEA head Frederik Maris. “Now, partners have a bigger voice. They know their local market well and often engage directly with our regional team leads.”
The focus on this partner network should enable Zoom to penetrate local markets better. The EMEA region accounts for a substantial percentage of sales (the company doesn’t publicize specifics), although there is plenty of room for growth. Maris: “Our goal is not to sell as many services to a customer at once but to deliver the right services in the right place through the partner network.”
Partners are closer to end-users
According to Helen Hawthorn, Head of Solution Engineering for Zoom’s EMEA branch, figuring out exactly what customers want can be difficult, but channel partners are extremely capable of doing just that. She leads the army of Solution Engineers (SEs) who implement the solutions that partners and their customers demand. Hawthorn likes to emphasize Zoom’s systems’ accessibility to the end user. “Engineers’ eyes light up when they see what our products can do for their customers.”
Partly due to regional compliance requirements (think DSA legislation and NIS2 guidelines), the EMEA region has a new data centre in Frankfurt in addition to the one in Leipzig it already shares with Deutsche Telecom (one of the company’s local partners). There is also a center in Amsterdam and two in Saudi Arabia.
Full commitment to AI functionality
In addition to focusing on growth through the partner network, Zoom’s strategy in the coming period focuses on the large-scale deployment of AI-powered tools. These explicitly include functionalities for use in an office environment with on-site staff, as well as solutions for hybrid work where part of the workforce works from home or elsewhere. Zoom works with multiple AI models from different platform vendors, leveraging the specific performance, insights, or functionalities of each.
AI in Zoom products has three functions. It should make workers more effective (amplify), it should make tasks easier to perform (simplify) and eventually be able to take over repetitive tasks altogether (delegate). As an example of an application that incorporates all three, Chief Growth Officer Geddes cites the ability to have the AI assistant generate a summary of a meeting, which can then be immediately viewed by anyone who was not present but needs to know what was discussed. “There’s no video involved in that,” he says, driving home the point of how Zoom is now much more than just video.
Geddes also emphasizes that paying customers get the AI assistant included at no extra cost. “With some other services, you quickly have to pay 30 dollars per user for such functionality.” Here, Geddes is referring to the hefty price Microsoft charges for using Copilot in services such as Word, Excel, and Teams. The AI functionality in Zoom products can be turned on and off per user or team.
“By default, AI is turned off. Users may choose to opt in consciously,” says Geddes, twisting the knife a little deeper into Microsoft’s sides. The latter company recently drew fire for its rather invasive Recall functionality that Copilot+ PCs are equipped with by default (even if that’s now opt-in based on the heavy criticism Microsoft received).
Comprehensive portfolio
Despite, or perhaps because of, these promises, Zoom seems to be in two minds. It wants to keep relying on its former image as a provider of easy-to-use, effective tools, while also showing that it offers a lot more now than the video calling service that granted the company this image in the first place.
Let’s consider the breadth of Zoom’s portfolio. Its Workplace suite provides stuff like e-mail and calendar services, Phone, Team Chat, Docs and of course, Meetings, the video calling service with which the company managed to win the heart of many a home worker during the covid pandemic.
In addition to these and other communication and productivity tools, it also offers on-site products. These include hardware and software integrations for hybrid conferencing, welcoming systems and digital signage, and a reservation system for meeting rooms and physical work spaces. The Workplace suite as a whole competes with (partly) similar products like Microsoft 365 and Google Workspace, as well as Slack and Webex (Cisco).
In addition to Workplace, Zoom offers tools for Business Services, including Workforce Engagement for tracking and managing customer service departments, tools for audience communication before, during and after events and Contact Center for CX management. Zoom has particularly high hopes for the latter.
AI assistant for customer service
Contact Center is a customer service solution with a starring role reserved for its included Virtual Agent—an AI, that is—which can handle customer queries and also act as an assistant for customer service employees.
Companies using Contact Center can choose which LLM model to use for this purpose. In addition to Zoom’s own Zephyr model, these include Llama 2, GPT 3.5, and GPT 4, as well as Claude 3 in the variations Haiku, Sonnet, and Opus.
To round things off, Zoom acquired Workvivo last year and integrated it into its portfolio. This ‘workplace engagement platform’ acts as a kind of internal communications channel, digital work environment and social medium rolled into one. The ‘digital heart of your company,’ as its tagline goes. In other words, where Zoom’s motto was once ‘meet happy,’ the company now wants everyone to ‘work happy’.
Optimal ease of use, but lots of possibilities
Zoom seems to be taking the same approach as Apple did in the heyday of the late Steve Jobs: an emphasis on ease of use, keeping the technology behind the scenes as much as possible and, above all, refraining from overwhelming the customer with technical details.
“We practice restraint,” Geddes stated during our conversation with him and several other Zoom leads. “We always start from the customer’s needs, we don’t immediately go all-in with all our technological solutions.”
Nevertheless, Zoom is keen to emphasize that this year, it is expanding its entire product portfolio with some 3,000 larger and smaller features. In addition, Zoom wants to allow customers to add more proprietary data and for the platform to integrate with various other tools, including those of competitors.
These already include integrations with Microsoft, Jira, and ServiceNow, and the company has entered into strategic partnerships with AWS and Avaya (i.e., call center technology). In the context of ‘One man’s trash is another man’s treasure,’ Zoom is the designated migration partner for Twilio’s deprecated video functionality and, in the case of Workvivo, also for Workplace, which was recently axed by Facebook parent company Meta.
Drawing a financial picture
With all these promising solutions under its belt, the task for Zoom is now to maintain, or preferably increase, its growth. Zoom says it has 3,880 customers who generated more than 100,000 dollars in revenue over the past 12 months and 270 customers who generated more than a million dollars during that same period. Contact Center, important to Zoom, saw 129 percent customer growth last year. In addition, the company boasts of having more than 7 billion dollars of cash in the bank, which it says is a sign of the company’s financial health.
Zoom’s net profit for the first quarter of the current fiscal year was 216.3 million dollars, compared with 15.4 million dollars a year earlier. The company expects revenue of about 4.6 billion dollars for fiscal year 2025 (which it’s currently in).
Opening of Experience Center
The meeting with several of Zoom’s leading lights in London last week had to do with the opening of a so-called Experience Center in its office there. This is an 18,000-square-foot demo space designed to demonstrate the functionalities of the company’s extensive product range in real time to (intended) customers and partners.
It consists of a “Lens Wall,” a 40-meter-long wall decoration, and an inner space with two curved, multi-touch LED screens, each with a 64:9 aspect ratio. Fun fact: Amsterdam-based company Downstream partly built this space. In addition, the office houses a ‘boardroom of the future,’ where Zoom demonstrates modern meeting technology.
Lots of visitors coming over
The idea is that every customer who visits will receive a customized demo or workshop. According to Helen Hawthorn of the Solution Engineering department, 160 partners will soon visit, and 15 workshops are already scheduled.
Zoom executives will not fail to notice the irony that the company that became big thanks to remote work is now very happy to have people over. In any case, you can tell from everything that, when all is said and done, the company wants to get away from its video calling legacy, however much it cherishes the goodwill built up with it.
Instead, the company now sees its role as facilitating office and business communications in the broadest sense. “When employees come to the office, they do so for a reason,” Geddes says. “To meet with someone, to have a meeting, to give or receive immediate feedback, and so on [and because their boss tells them to, ed.]. Our solutions cater to exactly such hybrid applications.”
According to the company, there is room for two to three major providers in the market in which it operates. So, that new demo space will hopefully make enough of an impression on potential partners and customers to entice them to take Zoom up on its offer.
