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This morning Comcast Business announced its intent to acquire managed service provider Masergy. This move brings enterprise class network capabilities to Comcast Business as they attempt to move up market and take on Verizon and AT&T in a bigger way.
Comcast currently has its own SD-WAN offering, leveraging its partnership with Versa Networks, but it’s geared at small businesses. Comcast has had its sights set on growing its enterprise business, but it’s been unsuccessful in doing so.
The bulk of Masergy’s business is with enterprise class companies, making this an ideal acquisition target for Comcast. Masergy currently has over 1400 customers in about 100 countries, which gives Comcast a bigger international footprint. Although no financial terms were provided, I’m estimating the deal to be in the $1.5B range, based on Masergy’s current revenues.
Masergy has been a network innovator for twenty years
For those not familiar with Masergy, the company has been one of the most innovative service providers in the past two decades. Its network was built from the ground up to handle video traffic with the first “killer app” that drove its business, being Cisco Telepresence.
That market never flourished as many had predicted but the foundation had been laid for Masergy to deliver a high-quality network that delivers mission critical services. The recent rise in video as people shifted to a work from home model has been a real boon to Masergy as it had one of its best years in its 20-year history.
The company has continued to drive innovative services, including the recent release of its Performance Edge product that brings Ethernet-like performance to broadband. More details on how this works can be found in this eWeek post where I interviewed Masergy CEO, Chris MacFarland. Given Comcast is one of the nation’s largest broadband providers, this service could give its cable broadband a big boost in performance.
The core of the acquisition, though, is Masergy’s managed SD-WAN services. As mentioned previously, Comcast Business has its own Versa based service. Masergy has taken a different approach and partners with Fortinet for SD-WAN and SASE. While the Versa powered network-based offering is ideally suited for companied that want a thin branch, many large enterprises want to maintain local infrastructure for performance purposes.
The argument against keeping infrastructure local is complexity, but Masergy offers high touch managed services as a fully managed offering or co-managed for customers that want to continue run parts of the network. Fortinet has flown under the SD-WAN and SASE hype radars but has one of the best offerings, which has been validate by its leadership position in multiple Gartner Magic Quadrants.
Masergy also uses Bitglass, another Gartner MQ leader, for CASB and other cloud security. These two services are highly complementary and create a nice portfolio of services for Comcast.
Masergy has a mature AIOps solution
Another likely area of interest for Comcast is the innovation Masergy has done in the area of network management and orchestration, highlighted by its AIOps platform. Masergy offers high touch services with some unique SLAs in an era where networks are growing in complexity. AIOps can see things and fix things much faster than people, which has enabled it to move to a proactive management model. Comcast should be able to leverage these tools across its network.
Masergy is also has a mature channel program, which is critical in selling into large businesses and enterprises. Comcast does not, which makes sense given most of its business is down-market. Comcast could have spent lots of money and time in building its own, but this short circuits the process and gives Comcast a top tier channel program that has established relationships.
UCaaS plus SD-WAN plus SASE is the new triple play
One aspect of the acquisition that I haven’t seen mentioned is the UCaaS solution Masergy offers in partnership with Cisco Webex. Comcast does have its own VoiceEdge service that has calling, voicemail, a mobile app and some basic features, but nothing nearly in the class of Webex. This is notable as SD-WAN deployments are often tied to the move from on-premises voice to cloud based UC. Having a single provider offer UCaaS, SD-WAN and SASE is a strong “triple play” type of bundle.
Lastly, there’s the aspect of brand. Although Masergy isn’t the best-known brand, it is associated with high quality and has had an NPS score of 70 for the past four years. On the flip side, Comcast’s NPS score is -3. In actuality, this NPS score is more reflective of Comcast consumer services, versus business but it can create a negative bias in the mind of business buyers.
I’ve talked with network engineers that have been skeptical about using Comcast for any kind of critical service because of the company’s poor service reputation. Comcast Business does offer much better service but the acquisition of Masergy will help raise its service quality and reputation.
For Masergy, the acquisition by Comcast should give it more money for R&D, marketing, sales and other aspects of running the business. The company has been owned by private equity firm, Berkshire Partners for the past five years. Berkshire hasn’t held Masergy back as some PE companies tend to do with their acquisitions but getting money to drive additional projects can be tough. Comcast is a network provider and will want to invest heavily in Masergy to let it do what it does best and that’s create innovative new services.