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Here's Why Cisco Is Paying Nearly $2 Billion for BroadSoft

Cisco CEO Chuck Robbins Photograph by Adnan Abidi — Reuters

Cisco’s $1.9 billion plan to buy BroadSoft, which sells software that businesses use to manage communications systems and help people work together better, was driven by its need to push faster into the collaboration market, executives from both companies said Monday.

With this deal, Cisco csco , a company with deep roots in networking hardware, continues to push into software. Last spring, it completed its $3.7 billion purchase of AppDynamics, another software company.

This acquisition is all about what IT vendors call “the future of work.” That term refers to technologies meant to make it easier for workgroups and service personnel to communicate with colleagues, customers, or partners via voice, video, messaging, and/or web conferencing.

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BroadSoft sells cloud-based “call control” software. That product is often re-labeled and sold by traditional telephone companies to their customers. So if a customer calls a small design firm and is forwarded to a service person or routed elsewhere, the brains behind those call interactions are often handled by BroadSoft.

“Think of us as Intel Inside but for telco,” Mark Straton, BroadSoft’s vice president of product marketing tells Fortune. BroadSoft telco customers including Verizon vz , BT, Telstra, and Telephonica use BroadSoft to provide cloud-based business phone systems or call centers, he said.

Thirty years ago those same telephone companies sold pricey public branch exchange (PBX) switches for managing a company’s multiple phone lines and voicemail. Now they can sell BroadSoft software to do the same thing.

BroadSoft also offers call center applications and higher level software that provides features like call waiting and other capabilities. If a company buys call center software from Avaya or another provider, the total product typically includes call control software component.

BroadSoft’s other key product area is what techies call unified communications. That software is designed to let workgroups hold group voice chats, video conferences, and share screens and documents. That is also an area Cisco has attacked for the last decade, first with WebEx and then Spark. But there are lots of other players, including Amazon amzn , which launched Chime, a rival to Microsoft’s Skype for Business, earlier this year.

Company execs conceded there is overlap, but the pitch is that the combined companies can compete better both with software giant Microsoft msft and smaller rivals like RingCentral.

On a conference call announcing the deal Monday, Cisco senior vice president Rowan Trollope acknowledged that Microsoft is a communications competitor, but also downplayed its efforts. Microsoft already confused customers by saying it’s ending Skype for Business, he noted. (In late September, Microsoft said it was replacing Skype for Business with Microsoft Teams.) Microsoft is a “big dog” in this market in positioning—if not in actual sales—Trollope noted in response to an analyst question.

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Yet Cisco has also managed to confuse the market by launching Spark, a newer collaboration product, while continuing to sell WebEx web conferencing and chat products—and now by potentially adding yet another communications offering via this acquisition.

Straton says Cisco and BroadSoft have many opportunities to integrate Cisco’s meeting and collaboration tools with BroadSoft’s call center software, explaining BroadSoft’s software can provide tracking and analytics to these tools to show, how long it takes an agent, using the unified collaboration software, to resolve a customer’s issue.

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While he pitches the two sets of communications products as largely complementary, some analysts on the call seemed wary that too mays similar tools will end up cannibalizing each other.

Constellation Research analyst Alan Lepofsky understands those fears. He sees considerable overlap between BroadSoft Team-One collaboration software, and Cisco WebEx and Spark.”It will be interesting to see how they position the competitive offerings,” he says.

Lepofsky’s colleague and Constellation CEO Ray Wang says BroadSoft brings Cisco more new-age cloud expertise. “BroadSoft helps Cisco get to a smarter software-defined network,” Wang says. “BroadSoft has more cloud-based services that Cisco can easily sell into its installed base. Keep in mind these guys were cloud first, and it’s in their DNA, which is still new to Cisco’s approach.”

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