Episode Transcript
[00:00:23] Speaker A: Welcome, everybody, to our latest Metrosite episode. I am Robin Garris, CEO and principal analyst of Metrogy, and today I am just delighted to be joined by Sam Wilson, who is CEO of Eight by Eight. So, first of all, welcome, Sam.
[00:00:37] Speaker B: Thank you so much, robin, thank you for hosting me. Thank you for having me. Love being on the show.
[00:00:41] Speaker A: Awesome. Well, let me start with a little bit of background on Sam and the company. Eight by Eight, obviously, is a very well known cloud based communications provider.
Its Xcast service is kind of what it's very well known for. It provides platform level integration of UC and contact center, something that everyone's wanting to do and seeing benefits of doing. Our research is showing a lot of benefits there as well. So Sam was officially appointed CEO on May 26 of this year, but had been serving in an interim capacity since November of last year.
And he has held a variety of positions at Eight by Eight, most recently CFO and Chief Customer Officer. And he has extensive experience in both the financial and technology sectors. I've known Sam for a long time, and he's just a great guy. So I'm really excited to talk to you today and just share with the audience some of your wisdom and insights. Thank you.
So let's start. You're obviously no stranger to the C suite, particularly at Eight by Eight. Like I said, you've been CFO, CCO, now CEO, and I will also mention that you served as captain, as a captain in the US. Army. Thank you for that. And I just thought it'd be interesting to understand what did you take from your military life to prepare you for this position? And what about all your other roles that you've had in the past six years? You've had entrepreneurial roles, you've had leadership roles, you've done all sorts of things, kind of summarize for us. What have you taken from all that to prepare you for this position?
[00:02:16] Speaker B: First, look, I have to give complete credit great question, by the way, but I give complete credit for the US. Military. The US military made me who I am. It taught me discipline, taught me leadership skills and those kinds of things. Now, how it relates to being a CEO or a C level officer? First and foremost, being an officer in the military taught me leadership. And business is a team sport.
We build software by people for people to accomplish people things. I mean, nothing streams people more than the contact center. And so whenever people are involved, leadership is instrumental. There's a few sub things I try to lead by. Example, one of the key tenets of being an officer in the military, and I try to believe in sort of radical transparency, I think is a business term for it. But in the military, it was everybody had to know the plan. And so inside of Eight by Eight, one of the things we really work very hard on is making sure that everyone understands what our strategy is, what our direction is, et cetera. Now, Big, Vermont was nice enough to hire me into eight by eight for Mobile Iron, and I sort of had a number of jobs here. What that gave me was a lot of context about the industry and the various things that people go through. I've run sales organizations. I've run sales engineering. So I now understand the go to market side. I've done deployments, professional services, customer support and those things. I understand the unstalled based customer side. And then I was chief financial officer, which really was all about the money and the business performance and those kinds of things. And so I'm pretty well rounded in terms of all aspects of the business. I'm not an expert in any of them per se. Probably finance the most, since that's my original background. But I really just think I know and my team helps me know all the bits and pieces about what's going on, and then we try to bring all that to bear. Look, the thing that almost all these jobs, the military, CC, et cetera, taught me, customers number one. The customer's always right, by the way, but the customer is number one. They pay the bills, they pay our salary, they pay for R D, they pay for everything. And so we're very focused on our tagline customer obsession. That's us. We want to be obsessed by the success of our customers running our software, doing their jobs, not whether I absolutely believe if we build great software, they'll be successful and then they in turn, will make us successful.
[00:04:30] Speaker A: Yeah, I mean, that makes a lot of sense, especially if you're being in a company that sells technology that helps companies serve their own customers. Right? So I would say under your tenure as CFO now, Eight by Eight shifted its sales focus from UC first toward contact center first. And I will tell you that our research totally supports that. Right now, we find that 43% of companies are buying UC and contact center products together, and 67% of those say that contact center is carrying more weight in the vendor selection. So you think at the same time you've got in our research, 65% of companies had planned to increase CX spending this year. So obviously this move made sense long before we even had the research to show that it made sense. Right. So given that, how has that shift to CX first or contact center first been working for eight by eight in terms of sales figures, are you also shifting how you spend your R and D dollars as well? And I got a couple of questions into this, but do you see UC as a commodity?
[00:05:40] Speaker B: All right, so let me answer a bunch of things there, and then we'll sort of just go back and forth a little bit. So, first off, one of the things that we caught starting in 2020, 2021, and I have no idea if Pandemic was part of it, was that corporations, after 20 years of cutting spending around the contact center, started increasing spending around the contact center.
What I liken it too is for 20 years it was all about acquiring new logos. It was about CRM systems and marketing operations systems, eloquoya HubSpot, Freshworks Salesforce Dynamics, these were all the buzwords that people were spending money on. And meanwhile, contact centers were being moved to developing countries and costs were being stripped out of them. And suddenly around 2021, people realized that retaining customers is as important as winning new customers, especially as the subscription business model has become more prevalent. But really just reorder rates, even if you look at a restaurant, the best thing you can focus on is returning customers. And so we noticed this uptick in spending and that's where we started to re engineer the company. At the same time, Microsoft Teams and Zoom really came into the UC market and started messing about. I mean, it's not really that we compete with Microsoft, they're a partner of ours, but they came into the market. And so it became less about voice, video and chat for employee collaboration and more about really that customer retention piece. The venture capital community has stepped up spending, et cetera. Okay, oh yeah, you asked me a bunch of questions there about my sales. So we still sell Xcas and each deal is generally 50 50, UC versus CC. So it's hard, like you're not going to see this big step up in contact center relative to UC because we're still selling the package. But the difference is to what your research shows is what our research shows is that the bundle is being led by contact center because there's more white space. So to answer your last question, do I think UC is commoditizing? No, but it's gotten more feature complete. And so look, we have 59 countries, so there's still geographic. We're blurring the lines between UC and CC with some products coming out later this year with our Conversational IQ product that brings speech analytics to the parts of the business that are touching customers but not using CC. So I think it matters still. I think UC is not going away, it's just changing and it's more feature complete. There's just much more white space on the contact center side. And to answer your question, yes, we have radically over the last year shifted R and D spending year, year, year and a half with Fuse acquisition into the contact center. 75% to 80% of our investments go into the contact center. And that's where, based on your research, based on our sense, that's really what's going to drive the buying decision on go forward years. And so we've really tried to make a differentiated strategy around the contact center, really focused on our ideal customer, which is kind of that mid market enterprise and really put our dollars behind that. The other thing is I've actually just raw increased R and D spending. So if you look at the company, four years ago, we spent nine and change on R and D and today we spend 15% of revenue. So it's almost four x increase in raw number of dollars. And you see it in the fact that we're launching ever more products now than we ever have. Right? So that's that white space opportunity.
And look, I think your research is spot on. I think your research is absolutely spot on.
[00:09:08] Speaker A: Well, another research project, you'll probably really think this one's spot on. This was our Metro rank study where we looked at actually it ranks companies in the CX space and you have to have a certain market share even to get into the ranking to begin with. And there's a lot of companies in the space as you can imagine, as you know. So just getting on the list is really an accomplishment. Eight by eight is in the top five. Yet I would say there's probably a lot of companies out there that are not aware of the extent of your contact center offering. So I want you to talk a little bit about what your plan is to get the word out more about eight by eight in the contact center in the coming year.
[00:09:44] Speaker B: It's a great question and by the way, I think you're spot on. Look, I think it's amazing. Look, in your survey, the part I'm actually most proud of is not that we ranked fifth. I think that's great and I love that we ranked in front of Dialpad and some of the other players of IA and Talk Desk, et cetera. It was actually that we maxed out the score on customer sentiment. That was actually the thing I was so proud of and I sent to the entire team and just yelled at the top of my lungs that's what matters. Make our customers happy. Yes. Your point though about our market awareness? Absolutely an issue. We historically have been a company that sort of our market awareness was around UC voice, video and chat for employee operation. And so we have stepped up our innovation days. We're doing a lot more field marketing led by what is our roadmap? We're trying to be more open as a company. I think somewhere along the way we got a little closed minded in terms of sharing with our customers the journey that we're going on as a company. So we are trying to do more, hey, this is our roadmap. What do you think? We've launched customer eight by eight customer labs. So as our innovation kicks in, we're having more and more beta sites. We're trying to involve the customers more and more and we are going to do more around big initiatives. I have over the next, let's say twelve to 18 to 24 months I want to jump start our user communities. So I'd like to see user communities throughout the United States and UK. And I'd really like to hold an ecosystem product partner channel partner customer conference next year. That's something historically we haven't done, but I really want to get around that contact center space because I think we have a unique advantage since we have UC and we have CC, and about 60% of your customer interactions are in the contact center and 40% are outside the contact center. We have the best ability to see what's happening. And if we can bring that technology to bear, I think we can really improve customer experience as a whole.
But we're not going to do it alone. As I said earlier, business is a team sport. There's a whole bunch of our ecosystem partners that are absolutely going to be instrumental in helping us bring this vision to bear.
[00:12:03] Speaker A: Yeah, I mean, I think a conference is a great idea because you see a lot of everyone that I go to is certainly very well attended in the CX space, that's for sure. And I like also what you say about customer sentiment and that being tough because it aligns very well with what you said at the start of our discussion today about how important that is to you.
[00:12:18] Speaker B: By far the thing I'm most proud of, Robin, I was just so super proud for the team.
[00:12:22] Speaker A: Fantastic.
So I want to shift a little bit to AI.
We can't talk about CX without talking about AI. It comprises a broad and in demand set of technologies, for sure. So where is eight by eight's focus going to be for AI? Given you can't offer everything, you can't do everything you can have to partner in some cases and then other things, you might offer natively over the platform. But do you have a sense at this point as to what type of AI technologies you're going to partner and where you're going to go natively on it?
[00:12:56] Speaker B: Absolutely.
We have a three tiered approach, so in our contact center space and even over on the UC side, but our main focus for our R D dollars is workflow. So having Omnichannel, intelligent routing, UI, UX and data and analytics, those four pillars, and those are really revolving around getting a case, in, getting it to the right location, making sure the agent is fully enabled and the supervisor is fully enabled to solve that case, and having the analytics around what was the case? How did it get solved? Meantime? Right?
[00:13:31] Speaker A: Okay.
[00:13:31] Speaker B: So step one on the AI journey is things that are common. Actually, I'm going to do it in reverse. Step three is our ecosystem. So we have launched, we launched it in July, technology partner ecosystem at eight by eight. And we've got about 20 some, and I think we've got a waiting list of another 20 some that are going to be technology partners for Mlai. And I know this is going to be radical, but I want to be the platform of choice for next generation, machine learning, artificial intelligence startups.
I mentioned earlier the venture capital community has picked this up, right? So we estimate well in excess now of 1000 startups and $100 billion of venture capital allocated around the contact center. And all of those need a contact center to ride on top of. And so I really want to be the choice. So we're building APIs, webhooks and user interfaces that can be completely natively integrated. One of our research points shows that contact center buyers do not want to buy these technologies and have them as an island out onto the side. So imagine a really simple use case, a chat bot. The chat bot, even if it solves 80% of the cases, still can't solve 100%, which means a live agent has to be involved. And so it has to be integrated into the workflows of the contact center. And that integration has to feel native. And that is absolutely our hope, is that we can provide a framework that allows those new technologies to be seamlessly integrated. So what are we looking for with our partners? Agent assist, chat bots, voice bots, health scoring, It services?
I'm doing this off top of my head and all the things around those pieces. Okay? And then the middle tier is AI technologies that can be used by our ecosystem. So they're a shared service that we can supply to our ecosystem. So we first talked to OpenAI to OpenAI the week they came out of stealth mode, and we've already since deployed their whisper technology. Okay, that's subtle here, internal to us. So we took OpenAI's whisper technology for transcription, brought it in house. So it's on our side of the firewall. I think one of the big issues, besides the island issue, is security, privacy, GDPR, et cetera, around AI and all cloud based products. And so everything we do with transcription is inside of our tenant, it's inside of our firewall. So it's completely safe and secure. We certify with compliance and certifications, et cetera. And so we're getting those next generation technologies, but we're getting it while it still maintains privacy. We're getting it while it's still secure, and we're making it feel native, and it's deeply integrated into the workflow of the contact center. So that's my vision. My vision is not to compete with the venture capital and all that innovation. And let's be clear, I'm a believer that R and D dollars equals innovation. The more you spend, the more you innovate. So if the Sandhill road crew is spending $100 billion and you look at us and talk desk and five nine S and Genesis and In Contact, whatever combined, we're probably spending less than a billion dollars. So we're going to get outspent 100 to one or more on these next generation technologies. I think we should embrace them. I don't think we should go a native strategy. And I think that within five years, the contact center will look much like Marketo does today or Marketing Operations does today, which is a core platform that handles all the workflow and then tons of plugins that are customized for each individual use case.
I think you guys are at Medig are going to have a full time job for the next five to ten years, helping customers figure out all this. Because if you're in the hospitality industry, the healthcare industry, travel, whatever the case may be, the configuration of the technology is going to be different. And that's what we want to provide to our customers. We want to provide the ability to take off the shelf technologies, stitch it together seamlessly, have it just work, and provide a solution that meets their desired level of CX.
[00:17:52] Speaker A: Yeah, and I like your comment about just the level of R and D because I think that makes a lot of sense, your financial background coming through. But I mean, it definitely makes sense to build that platform on which you can leverage that.
[00:18:05] Speaker B: And look, I just look at it at if you look at, for example, we have Cresta or Awaken or Balto, these next generation, they do Agent Assist way better than I could ever do. I mean, look, I'd love to claim that we don't. All we're working on is building the right gateways frameworks, APIs and Webhooks and UI UX to make Agent Assist work flawlessly. But they are better at it than us. And I love them. I don't want to compete with them. I want to embrace them.
[00:18:31] Speaker A: Excellent.
So what would you say then is AI's impact on eight by eight revenue?
Let me come at it this way.
Right now, those who do not use AI will hire about 2.3 times the number of agents compared to those who are using AI in 2023. So we're seeing already a pretty big impact on AI. I don't see layoffs yet. I'm just not seeing that. But looking at future hiring, I think AI is making those existing agents a lot more effective and efficient. But when you look at it from your standpoint, that affects the contact center license revenue. Because without AI, I was going to hire another 1000 agents next year. Now I'm only hiring 300.
That's an issue.
It's an issue for you because you don't get as much revenue from contact center licenses, that is. So where do you make up that revenue? If customers aren't buying as many pure contact center licenses, it just adding on to the existing ones. Is it adding on those new AI functions that will make up for it or even generate more revenue? How do you see that? Because I think that we're fundamentally shifting what happens in the contact center right now.
[00:19:44] Speaker B: I totally agree. By the way, right now, the thing we're seeing in our early adopters of these technologies about a 30% reduction. So I was trying to do the math in my head real quick. 2.330 percent. Yeah, I think you're seeing a little bit bigger number. It's fine. So, look, by the way, I agree with you. I think on the pure seat count, if the technology works the way it should, you should get higher productivity. I mean, chat bots should deflect cases. That's the whole point.
I'm going to give you a little bit of a nuanced answer and a little bit of a long winded answer. So I apologize up front. So, first off, the labor market for contact center is $220,000,000,000. That's Mackenzie's number, right? So what technology has done better than anything else in the history of the human race has been replace human labor with machines.
By far the number one thing. And so we don't fight this technology trend. We embrace it. Now we're going to make up for it by selling you intelligent Customer Assistant, Digital intelligent Customer Assistant Voice workforce Management, PCI Compliance, Digital Services, CPAs, et cetera.
[00:20:49] Speaker A: But.
[00:20:51] Speaker B: Number two is, if done correctly, Attrition should come down. One of the things that's most amazing to me is that in these contact centers that deploy Mlai, we're seeing a big reduction in Attrition, and the average Attrition and turnover is like, 40% a year.
Contact center people have to have one eye constantly on hiring, training, hiring, training, hiring, training. Can you imagine losing almost half your workforce every year?
Okay? If we get all the rote job out, if we get all the, hey, I need to reschedule my appointment, if we get all that move to bots, two things are going to happen. Number one is Attrition is going to drop, and I think that's a boon for contact centers. And number two, contact centers will invest in their agents to make them tier two agents and tier three agents. And you know why I know this for sure? That's my last point. We did it eight by eight. We deployed these technologies. We have them. We have a chat bot, we have voice stuff we're doing. We have health scoring all these things. We have less tier one agents than we did three years ago. We have more tier two agents. We have lower Attrition because it's a tier two agent. It's a real job. You can make real money. It could be a career. And number three, we have the highest retention rates we've ever had as a company. So it works. But I'm not spending less in my contact center. I'm spending differently in my contact center.
[00:22:20] Speaker A: Okay?
So when you think about the market itself, obviously very competitive. You've got startups entering regularly. You've got your long standing contact center providers. You've got just all different innovative new startups as you already talked about. How do you see yourself differentiating?
[00:22:44] Speaker B: So we break it into three buckets. Number one is the On Prem crew, the Avayas of the world, and the Cisco's of the world, those kinds of things, right? None of them have really invested in cloud. None of them are really set up for the Mlai revolution that's coming because they're not cloud based technologies. They don't have data stores and data warehouses and training data sets and all those kinds of things. So I think if you're on one of those today, your trick is when to get off, not.
All right. Number two is, I want to say the new emergence.
There's a whole crew of people who've made announcements, hey, we're in the contact center space. Great. How much have you spent? Well, we spent like $5. There might be a video company that starts with Z and ends with M that really hasn't done much in the space yet so far, but talks a big game.
Look. All of us and Bucket number Three in contact talk desk. Five nine s us. Genesis. We've spent like half a billion to a billion dollars and ten years building this software. This is not simple software you throw together with ten scrum teams a year, right? So I think there's a second bucket of new entrants. Now, they're making the market very noisy with all their over promise and under deliver, but I think the marketplace will that. And then number three is the true competitors. So who do I consider my competitors? Talkdesk in contact. 59 Genesis. These are great companies. I respect them all.
And the core way we're going to compete is with our ecosystem strategy. We're going to be an open platform that allows anyone to come in. All the previous competitors I mentioned that sell in house technologies that compete with the best in breed ecosystem products out there, and they comp their sales rep for selling native. They come up. I don't believe those companies will necessarily bring the optimal solution to market. I think the optimal solution market will be a series of next generation companies running on top of workflow that's just rock solid. And that's really how we're going to differentiate. I think once we've got them already, but once we get more and more reference customers that are deploying next generation technology on top of our contact center, more and more the market is going to come our direction.
[00:24:57] Speaker A: Okay, well, let's wrap up with one more question, and I always love to ask this question because the answers are always so interesting. So if you look at fast forward to, say, early June 2024, you've been in this role for a year.
Where does eight by eight need to be for you to consider your first year as a success? If you can be as specific as possible, even with metrics, if you have them, where do you need to be?
[00:25:26] Speaker B: So historically, we've been known as an Xcas company. So 41% of our revenue is Xcas, which is UC plus CC. I would love to see a double digit plus number where we're Xcas plus one plus two, plus three. So, look, we now two years ago, this was a company that sold two products, UC and CC combined, called Xcas. Today we sell UC, CC, CPAs, workforce Management optimization, PCI compliance, intelligent Customer Assistant digital the Chat Bot, intelligent Customer Assistant Voice, the Voice Bot and additional add on services. So we have eight things we can sell to customers. What we need to do as a company is show the marketplace the true power, the total cost of ownership and success of having a multi product company. All big software companies sell a portfolio of products. We're now at the stage where we need to become a portfolio company. Most of our competitors are not portfolio companies.
Some kind of are, some aren't. But my number one success right now is to show that a strategy of an open platform around the contact center mixed with our next generation technologies combined, solves customer problems. In the end, if we solve customer problems, everything else takes care of itself. Robin, I truly believe that.
[00:26:52] Speaker A: I do, too. All right, so I'm going to invite you back at your year mark and we'll see where you are on that goalie.
[00:27:02] Speaker B: Knows it. I bring it up to him every time. And look, I just want to say, the research you guys are doing is absolutely pivotal. I mean, we read it religiously inside of Eight by eight. We believe in it, we pass it around. I mean, I've got pieces of research on my desk from your company with twelve postit notes stuck to it, 15 highlights and a bunch of red circles around it. So, look, just keep doing the great work you guys are doing. I think it's absolutely amazing.
[00:27:25] Speaker A: Well, thank you so much, Sam. I really appreciate that. And it's been a great discussion, as always. I knew it would be. So I thank you so much for joining us today and just giving us your outlook on eight by eight and just CX. Overall, it's a fascinating time to be in this industry, and I really look forward to talking. To you at your year mark and just finding out how you think you guys are doing and what the next year is going to hold for you.
[00:27:49] Speaker B: If I have a chance to catch up with you, I would gladly do it anytime. I'd love your insights.
[00:27:53] Speaker A: All right. Thanks, Sam. You have a great day, and thank you all for listening today.
[00:27:57] Speaker B: Thank you.
