Azzurri CEO 'surprised' by pace of shift to cloud
Chris Jagusz tells CRN that sudden shift among customer base from on-premise to cloud-based UC was one reason behind annual sales fall
Azzurri Communications' chief executive says an unexpectedly rapid shift towards cloud spending among customers artificially depressed its 2014 numbers but will ultimately help restore the comms VAR to growth.
2014 was a "year of transformation" for Azzurri, the Mitel, Avaya, O2 and EE partner said in its annual report, which showed a 25 per cent drop in EBITDA for the 12 months to 30 June 2014 to £5m, on revenues that fell three per cent to £105m.
"Last year, we saw a turning point in the shift in demand from customers buying big systems they use on-premise to cloud solutions," chief executive Chris Jagusz (pictured) told CRN.
"We have been surprised by the pace at which that happened. The industry has been talking about [cloud] for years and years and not much has moved in the world of unified communications. But just in the last 18 months or so, demand has shifted."
Jagusz added: "The decline in revenue came about from that shift in demand to cloud and because we saw some pressure on pricing from the reduction in mobile termination rates, which tended to push headline mobile and fixed call prices down. We also had some sales execution issues."
Azzurri's refinancing in October 2013 and its subsequent completion of a £3m cost reduction programme means it is a very different beast from the start of its fiscal 2014, Jagusz said.
Office locations have been trimmed from nine to six, with headcount now standing at 570, down from 683 in July 2013.
"The investor and lender situation is now stable," Jagusz said. "We now have committed investors that are backing the business for growth. And that's very different to where we were 18 months ago where there was a lot of adverse coverage about our financial situation. Customers just don't ask us about that anymore."
Azzurri's revenues have been heading south for the past several years, with sales standing at as high as £149.5m back in 2009.
But Jagusz predicted that the Weybridge-based firm, which specialises in providing fixed, mobile, hosted and on-premise UC solutions to UK firms with 500 to 2,000 staff, would return to profit growth this year and revenue growth in its fiscal 2016 as it reaps the benefits of the multi-year cloud contracts it has signed.
Azzurri chief technology officer Rufus Grig revealed that a recent straw poll of Azzurri customers suggested none of them expect to be consuming UC on premises with a traditional support contract within two years. The vast majority said they expected to move to a cloud model.
Asked what has driven the sudden shift to cloud, Jagusz said cloud-based UC technology had taken time to catch up with customer expectations.
"Customers are now doing it because other customers have done it, and it's got referenceability," he said.
"But there are now far more product options available. It's taken the market a little while to develop to what customers actually want. And thirdly, it gives the customer a lot more flexibility. For instance, for contact centres, we're in a world now where the customer can move towards paying for the average number of licences they use over a year, so they can spin up extra capacity as and when they need it."
Jagusz concluded: "And finally, cloud gives the customer the opportunity to do what they are good at and leave their cloud supplier to do what they're good at. If you centralise your resource and put it in a very controlled environment and give it to the experts, you are far more likely to get a reliable, robust service where you don't have to worry about server patching, security, and things like that."
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