In a surprise move, global communications provider NEC Corp. has decided to exit the cloud communications sector in most regions of the globe.

Earlier this year, NEC announced it would exit the on-premises PBX business everywhere except Japan. It would shift its focus by reselling Intermedia’s Cloud Communication solution under the brand name of UNIVERGE BLUE.

On Tuesday, Intermedia announced it would take over NEC’s cloud operations in North America and parts of Europe. The move significantly enhances Intermedia’s footprint and strengthens its position in the cloud communications market.

Since starting the partnership in April 2020, Intermedia has been NEC’s underlying provider for cloud-based unified-communications-as-a-service and contact-center-as-a-service solutions. NEC and Intermedia will continue working together in Japan and Australia, where NEC will retain control over its business.

However, customers outside these regions will no longer be able to purchase new systems after the end of this year. As a result, Intermedia will assume full responsibility for NEC’s UCaaS and CCaaS in North America and Europe.

The transition is expected to be seamless for NEC’s customers and partners since they already use NEC-branded versions of Intermedia’s services. According to Mark Sher, senior vice president of product marketing at Intermedia, Intermedia will assume all customer and partner contracts and provide direct technical, sales, marketing and billing support.

“The transition will be almost invisible for customers. So, nothing changes in their user experience. Over time, they’ll start calling Intermedia for support, and we’ll swap the branding,” said Sher.

Meanwhile, existing Intermedia partners will benefit from a broader partner network, creating new collaboration and resource-sharing opportunities. Intermedia will also help NEC partners with on-premises customers transition to cloud-based solutions.

Sher said the development should not be surprising, as Intermedia has long been the underlying provider of NEC’s UNIVERGE BLUE platform. Intermedia offers a comprehensive suite of cloud solutions under the UNIVERGE BLUE brand. This includes unified communications, advanced video conferencing, contact center services and artificial intelligence-based tools for multi-channel archiving and real-time analytics.

The transaction is expected to close in North America by the end of September, with Europe following soon after.

The trend of on-premises providers partnering with cloud companies is certainly nothing new, with Zoom Video Communications Inc. announcing recent partnerships with Mitel Network Corp. and Avaya LLC and RingCentral Inc. having a cornucopia of alliances. This is the first legacy provider to waive the white flag and exit the business.

The move is surprising, given the historical size of the NEC business. Two decades ago, NEC had a massive installed base in every region of the world. The company was such a large solution provider that it was the lead sponsor for the NEC World Series Of Golf PGA Event in Akron, Ohio, which many consider the “fifth major.”

In 2004, the company became embroiled in an e-rate scandal and agreed to pay a little over $20 million in fines. After that, the cloud communications wave began, but NEC refused to pivot its business and saw slow and steady declines, as did many of its peers.

This week’s announcement is the culmination of the bad decisions of a once-great business. It’s certainly not unique to NEC, as all the on-premises companies have seen their share shrink; it’s just the first to throw in the towel.

This decision should be a boon to Intermedia. While the other cloud companies, such as Zoom and RingCentral, need to work through the on-premises companies, some of which are just learning to sell cloud, Intermedia now has direct control over the sales motion and customer relationships.

It can now interact with buyers directly, which makes product innovation easier. Also, Intermedia should enjoy more significant margins without NEC being the middleman.

Every technology transition creates new winners and losers. Intermedia isn’t as well-known as many other “big name” cloud communication providers, but it has a solid solution and high customer satisfaction scores. NEC’s exit hands it a nice book of business it should be able to parlay into raising its brand and challenging for greater share.

Zeus Kerravala is a principal analyst at ZK Research, a division of Kerravala Consulting. He wrote this article for SiliconANGLE. 

Image: Intermedia