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RingCentral: Finding The Right Growth Strategy For The Cloud

This article is more than 8 years old.

The sentiment for cloud operators seems to be to grow at a breakneck speed. While this may sound like a good idea, the strategy is certainly risky – and expensive. It may also be off-putting on Wall Street.

If anything, consistent growth may be the better path. After all, it allows for more time to focus on the customer.

An example of a company that has shown how well this strategy can work is RingCentral, which provides cloud-based voice, text and video communications.

During the latest quarter, revenues grew by 35% to $65.3 million and subscription revenues were up about 37%. The company also showed progress on the bottom-line as the net GAAP loss improved by 5 cents per share to 15 cents.

For CEO and founder Vlad Shmunis, he understands his main priority – that is to provide carrier-grade service. “We strive for reliability,” he said. “We make sure the plane stays in the air.”

With a rock-solid technical foundation, RingCentral has been able to put together key go-to-market relationships with companies like BT, TELUS , AT&T and Google .

“The channel strategy is the least understood part of our business,” said Vlad. “We have never competed with the telcos. We have never been about delivering dial tone or bandwidth. These are what telcos are good at. But they also historically have been resellers of other technology, sitting on top of their networks.”

No doubt, RingCentral has certainly been a strong value proposition for the telcos, allowing for stronger returns.

This is why Vlad keeps investing heavily in R&D. Just take a look at some of the recent offerings: RingCentral Connect Platform (tools to build custom integrations), RingCentral Contact Center and RingCentral Office (software for IT administrators).

“When I started the company,” said Vlad, “we were a PBX replacement in the cloud. The focus was on voice. But early-on we identified that business communications is much more than this, such as about IM, conferencing, video and collaboration.”

By being more than about voice services, RingCentral is also moving beyond its SMB roots. “We can support a company of any size,” said Vlad.

And yes, investors are catching on as well. So far this year, RingCentral stock is up about 19%, making the company one of the top performers among cloud operators.

Tom Taulli (@ttaulli) is the founder of Option Taxes, which offers an iPhone app for employee stock options.