The game Monopoly is based on an older board game called “The Landlord’s Game.” It had two sets of rules, one favoring social equity and the other more akin to laissez-faire capitalism, where monopolies flourished. In the latter case, competition was crushed, which would hurt the consumers (other players on the board).
While the game involved physical property (in a theoretical way), are subscriptions that different? And can they survive and be fair in a monopolistic market?
Unfortunately, we’ve already found out what this can look like with the recent spat between Pantone and Adobe, and the implications are relevant to the UCaaS market.
Who Is Pantone?
Pantone provides standards for colours. If you want to produce a product from certain materials, you can send off for a book or a colour swatch with hundreds of colour options printed onto that material. That way, you have consistency between different companies around the world, from design to approval, to print.
We send off the code 5535 C to a printer, for example, and we know we would get British Racing Green back on advertising, shirts, flyers and shirts.
Pantone makes its money from the sale of the books and colour swatches (and they’re not cheap!). So Pantone is part of an extremely profitable ecosystem, and it holds an effective monopoly on colour standards (although it doesn’t hold a copyright on those colours).
So What Happened?
It’s all a bit complicated. Adobe announced (kinda) that it would be dropping Pantone colour support from its Creative Cloud in December 2021. Although it announced that this change would happen by March 2022, it actually pulled the plug in November 2022. From this date, to get Pantone colour standards in the Adobe Creative Cloud, you’d have to pay for yet another subscription. Some designers reported that their Pantone-defined colours were changed to black in pre-existing files.
This created a cycle of blame: Adobe claimed that Pantone wanted to charge directly, whereas Pantone claimed that Adobe was failing to keep up with its changing colour standards. It seems to a casual eye that both sides are correct here: Some of Pantone’s colour libraries in Adobe Creative Cloud haven’t been updated for years, and Pantone is now charging for its colour scheme use via an Adobe CC plugin. The fee? Close to what you’d pay for a monthly subscription to Photoshop, Illustrator or InDesign alone.
So Why Is This a Monopoly?
There are numerous alternatives to the Adobe Creative Cloud, such as Affinity, Final Cut Pro, Blender and Inkscape. But there’s a huge issue here: Graphics designers and most creative industry professionals are trained on Adobe products from the start, thanks to aggressive student-focused pricing from Adobe — get them as they enter the system, essentially.
And when you get out into the creative world, your company likely uses Adobe products. We pay for Creative Cloud licenses because there is no real alternative if you want to produce designs, products and various items without having to retrain all your staff.
It’s this aggressive pricing strategy and specific targeting of entry groups (e.g., students) that make it an effective monopoly with a huge market share.
If this sounds familiar in a UC&C context, it’s because you see much the same with many Microsoft products, especially in their dominance of the office software and operating system markets. Teams, of course, is the Microsoft UC&C platform, and although it’s not the best option out there for many UC&C scenarios (in our opinion), it’s got a large market share primarily because it’s a Microsoft product. It’s been heavily marketed towards Microsoft-focused MSPs and businesses that use multiple Microsoft products.
The existence of a “free” model from Zoom and Teams is also a problem for those seeking to challenge the status quo. This encourages end-users to try the product, and many brought the system to their companies when the pandemic hit. Even though Zoom and Teams offered more limited features compared to several alternatives, their ability to offer a free product hurt many MSPs and SIs. Larger providers can more easily absorb free models, resulting in a reduction of competition at the lower end.
MSPs can’t compete with “free.” And nor should they.
And there is currently no real alternative to Pantone, either. If a standard isn’t near-global, it won’t be adopted. This creates huge barriers to entry for a new colour standard, unless a company like Adobe creates its own.
There’s nothing wrong with standards, of course. USB has become a vital standard, as has WebRTC, something that Wildix solutions use. However, it’s the use of their position to reduce choice that’s the problem.
So Why Is This a Problem for Subscriptions?
Subscription models either rely on new features to enhance their offerings or need to have a continuous cost of operation. At Wildix, we’re continuously improving our products, notably through our WMS 6 operating system and various additional features. Most major UC&C vendors are going through this process of continuous improvement (although at markedly different speeds!). Smaller vendors may struggle to add new features due to the development time and cost, however, and some may simply be selling a product that’s hardly updated and based on old, buggy architecture, such as Asterisk.
So for us, the continuous cost of operation consists of access to the cloud, ongoing updates due to security, updates for new APIs and an understanding that the products will remain updated and secure by design. For many others, it’s broadly the same — except for the secure-by-design bit.
For relatively static products such as design software, however, there isn’t quite this continuous cost of operation. Sure, there are updates every now and then, but if it’s not updating libraries of colours or constantly improving its means of operation to improve your overall experience in a specific and measurable way, it’s really just a continuous expense that doesn’t deliver ROI.
You’d be better off buying it for the full price if possible as you’ll save money in the long run.
And the presence of a monopoly means that it’s relatively easy for companies to downgrade services through the subscription model and then charge more for those new “extras” as add-on bundles.
This is, in effect, what Adobe has done. What would happen if a UC&C company had an effective monopoly?
Monopolising the Market
The UC&C market is much the same. In any market, companies start consolidating, and these acquisitions reduce competition. Going back to the original issue, Adobe bought its competition, with its recent acquisition of Figma.
Had Adobe or Pantone been subject to equivalent competition, the threat of that competition gaining market share due to the fallout may have been enough to force both sides to negotiate a fairer deal for subscribers.
You can see industry giants buying their way through their competition. RingCentral, for example, has struck multiple deals to ensure its solutions are used by other companies (or even buying the company outright). This is the same playbook that Adobe, Microsoft and countless others have used that ended up removing competitors from the marketplace.
As competition reduces, consumer choice reduces. How many companies have reduced operations in the UC&C space over the past 5 years alone? Or even exited completely?
Monopolisation reduces options for partners, as well. Imagine having only one vendor to choose from — do you think they’d have fair terms and conditions that respected your business? Or would they require you to jump through a lot of hoops, and when you inevitably failed, they’d take over your clients? You might also see higher tiers exclusively offered through the vendor, reducing your ability to compete with their offerings.
Why would a company go to you when it can go direct and get more (even if they’re not completely sure how to implement it themselves!).
And we’ve seen how slowly governments move. It’d be a decade before their legislation caught up with the realities on the ground, especially when it comes to anti-competitive practices.
So What Should You Look For in a UC&C Subscription Model?
The cost of entry into the unified communications space, however, is relatively low at the moment — certainly compared to creating a suite of design-focused software or even a global colour standard. However, the market isn’t immune from monopolisation, particularly as it develops and matures and the cost of developing a competitive product drastically increases.
As the biggest players get bigger, they will seek to gain market share from one another, and they’ll seek to force smaller players out to reduce the playing field.
We’ve seen how RingCentral has swallowed up multiple businesses in its bid to maybe become profitable. Even 8×8 has joined in with the acquisition of Fuze. And as we mentioned, Microsoft has a long history of constantly being under scrutiny for its competitive practices.
So if you’re looking for a vendor, you need to review the market as a whole. Who is looking for revenue at any cost? Who is looking to corner the market and become the sole provider of unified communications to end users?
Essentially, work out who is looking to crush all competition regardless of the cost to the consumer.
Wildix takes the view that competition is good, and a healthy market should consist of multiple providers all seeking to outperform each other. Some, of course, will be bigger than others, and others will be stronger in specific verticals. Some will price as low as they dare, regardless of whether they’ll be profitable, and they take the risk of paying the price of this rush-to-the-bottom strategy. That’s their choice, although if they do go bankrupt, they’ll leave their end-users floundering.
The important thing is that competition ensures everyone has a choice and that businesses keep prices at a reasonable level.
Because in a monopoly, only the last remaining vendor wins.
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