But really to me it’s about retooling the GTM then spending more. We have enough money and we’re generating enough operating income that if we see an investment opportunity with a very high ROIC, we’ll go after it. We have margin room to play with. It’s not like our backs against the wall. And so right now, we’re more focused on putting the incremental dollar into reaccelerating growth in the company and just maintaining margins generally where they’re at plus/minus, depending on timing and a bunch of other things, trade shows and all those things that drive op margins in any particular quarter. But really it’s continued to strengthen the balance sheet, continue to strengthen the company overall and reaccelerate growth as quickly as possible.
I don’t think an incremental dollar right now in sales and marketing is the right play. As soon as it is the right play we’ll happily make that investment.
Kevin Kraus: And just to restate we are and continue to be investing in innovation. So, that investment is going 15% of revenue is our target. So we continue to do that because we believe it’s going to result in fantastic products that are attractive in the market. So that investment is going to continue.
George Sutton: As a follow-up on the contact center a couple of your large competitors have come out and talked about disruptive pricing with relatively new platforms. I think what I’m hearing from you is given your way of having built the platform you really don’t compete directly because you’re offering a lot of things that none of them have really even contemplated. Is that — am I hearing that correctly?
Samuel Wilson: I think that’s absolutely true. And a lot of the disruptive pricing models aren’t nearly as disruptive. I mean the one that comes to mind is the one that’s interaction-based. And anybody with like a calculator, leaving a basic calculator can quickly figure out that an interaction-based system and an average contact center cost you more than buying a per seat. So it’s great from a marketing billboard perspective but it’s actually not going to win that much business once anybody gets a calculator out.
George Sutton: That’s it. Thanks guys..
Samuel Wilson: George.
Operator: Our next question comes from Michael Turrin with Wells Fargo. Your line is open.
Michael Berg: Hi this is Michael Berg on for Michael Turrin. Just going back to the contact center space. Just be curious there on overall progress and pricing trends as you incorporate more and more AI into this? Any feedback there would be helpful. Thank you.
Samuel Wilson: I mean I would say on average I mean it’s hard to tease it out completely. But like when we sell a portfolio of products, we see the dollars of revenue that we generate from a customer go up. Now part of that is a mix of seat plus usage or C plus consumption based. Because like we said when you have a bot, you can’t charge a seat bot or bot per seat. I don’t know exactly how the math — the English should work because it’s not a user. You charge based on the interactions and so it’s a little different. I think one of the things and I’m going to expand your question slightly. One of the things that people talk a lot about is oh my goodness. AI is going to put the contact center out of business completely false.
I think us completely false for at least until I am 40 years retired. What we see today is when we deploy our next-generation technologies, we get more productive agents. Maybe we get one agent or two agents less than a 250-seat contact center. But what we see generally is attrition rates which 40% and 50% go down, the actual hourly paid to agents goes up because they’re adding more value. And the rote parts of their jobs go away and the value-added parts of their jobs increase. And so I’m super bullish on AI making contact center jobs substantially better. Last year based on Bureau of Labor Statistics data, the average contact center work in the United States made $18.31 an hour, which is about 30% less below the median wage of an hourly employee.
Corporate America is waking up that you can’t have your lowest priced employees the ones dealing with your customers, if you want customer loyalty. And that’s what AI is enabling a change too. We can have more productive contact center agents that we pay more to that offer better customer experiences that improve reorder and renewal rates across industries. And I think that’s the magic that’s happening.
Michael Berg: Got it. Thank you.
Operator: Our next question comes from Peter Levine with Evercore. Your line is open.
Peter Levine: Great. Thanks for squeezing me here. Maybe just one for Lisa. Your experience Twilio, Genesys. So I guess you’ve been in the role for a couple of months. Explain to us from a higher level, where do you see the opportunity? What are your priorities? And if you can share like what are some of the changes? Or I think anything on the technology to a market that you’re implementing today, where you think will have a change to this business over the next call it 12 months?
Lisa Martin: Yes. Thank you for that question. I think the first thing I would go back to is what I mentioned earlier, which is the way that our portfolio of products really starts to blur the lines between customer and employee engagement. And what that really allows companies to do, which is to use the insights and the analytics that we give them to drive the right business outcome. And I think we’re really uniquely positioned to capture that. I think when I look at the organization that I’ve come into, we were very much tooled to focus on the UC positioning in the marketplace. And the contact center discussion was not front and center. And what I’m doing is building out the organization from a skill set perspective, from a tools and sales motion perspective, so that we are coming to the customers with the right use cases to drive the right business outcome.
And that is number one my focus. So there’s a lot of enablement going on within my organization. We’re looking at the tools that we use, the insights that we’re able to provide, our teams in terms of the accounts they’re working with and making sure that we’re able to capitalize on that.
Peter Levine: And then maybe just a follow-up. You mentioned within the Fuze customer base you saw I think more downsells attrition. Is that something that popped up this quarter? Or any color you can provide on when you think that kind of trough out here?
Samuel Wilson: Yes. We talked about it last quarter. So far Fuze has performed better than our original financial model. And we had double industry churn rates in the first year and then we expect it to moderate. In the first year it was substantially better than we expected but the second year has been slightly worse than we expected. What we’ve seen is a little bit of – I think last quarter is probably the worst. It got a little bit better this quarter in the sense that we saw a quarter-on-quarter significant improvement in the number of logo churn. We’re still dealing with a little bit of rightsizing, especially as we upgrade the customers to 8×8. I think it will get better next quarter and the quarter after. What we are seeing really clearly is we’ve accelerated our move of moving Fuze customers to 8×8 and the CSAT scores when they get to 8×8 are awesome.
