BizTechReports Analyst Briefing: Frost & Sullivan’s Elka Popova Discusses Her Take on North American UCC Market

Frost & Sullivan noted recently that businesses in North America are expected to turn more to IP telephony and Unified Communiation and Collaboration services as they look to mitigate the cost and hassle of integrating multi-vendor solutions on their premises, enabling greater flexibility during growth or downsizing.

To get a better idea of how the UCC market is evolving, BizTechReports caught up with the report’s author, Elka Popova Frost & Sullivan’s program director for North America unified communications.

Here is what she had to say about her report, the implications for the enterprises, and the imperatives for the vendor community:

BTR: Were there any findings in the study that you found particularly surprising or out of the ordinary?

I have been tracking the North American hosted IP telephony market for more than a decade. Market growth and evolution have been shaped by fairly consistent trends, with few surprises, if any at all. Most businesses are now aware of the benefits of IP telephony and UC and understand the specific advantages of OPEX-based delivery models, such as hosted and cloud services. So the conversations have shifted from “why VoIP” or why “hosted”, to “why this specific solution or provider?

Most service providers are competing on functionality and price. They are all focusing heavily on adding new enhanced features such as presence, mobility, contact center, video, integration with CRM and productivity applications.

What I would like to see is greater focus on service reliability, QoS management, customer onboarding and ongoing tech support. These are very important factors for the overall health of the hosted IP telephony and UC services market and can have a major impact on both customer acquisition and customer retention (or churn, respectively).

BTR: What distinction, if any, is there between “Cloud UC” and “UC as a Service”?

Hosted services is the most generic term for outsourced communications, managed on a service provider network versus the customers’ premises. Hosted services can be dedicated, multi-tenant or multi-instance. Cloud is used to describe a specific type of architecture characterized by virtualization and a high degree of automation. Cloud UC could refer to a premises-based architecture or a hosted solution. UC as a Service indicates that the solution is outsourced and delivered as a service by a third party. In most cases, UCaaS could also be considered cloud UC.

Today, most hosted IP telephony solutions covered in my analysis are supported by multi-tenant platforms such as those by BroadSoft and Meta Switch. The PBX vendors who introduced multi-instance platforms (such as Cisco’s HCS, for example), choose to differentiate their solutions by calling them UCaaS. Few solutions out there are truly “cloud” – fully virtualized, automated, etc. Most do have a cloud element, however.

BTR: Does the emergence of UCaaS and/or Cloud UC change the way end-user organizations are investing in these technologies? (For instance is there a particularly dramatic shift from CAPEX vs OPEX oriented funding from buyers?)

There is a lot of untapped potential for all types of hosted IP telephony and UC services. Multi-tenant platforms are usually most cost-effective for service providers to deploy and they can pass those cost savings to their end customers. I expect most SMBs to continue to deploy such services from the majority of the service providers in the North American market.

The multi-instance platforms (touted as UCaaS) have certain advantages that larger or more security-sensitive businesses may appreciate. Since each customer organization receives their own dedicated software instances, they perceive theses solutions as more secure. Also, such platforms are more appropriate for hybrid implementations. For example, a business with existing Cisco premises-based infrastructure can choose to keep it in some of its larger sites and then deploy Cisco HCS in branches. “Since it is the same vendor technology, the business can enable tighter integration of the premises-based and hosted applications than what can be accomplished if another hosted solution were deployed at the branches. Also, the customer can continue to use the same vendor’s terminals, which typically account for a very large part of the investment. So, the key factor here is that it is the same vendor technology, not so much the fact that the PBX vendors are choosing to call it specifically UCaaS.

Therefore, UCaaS solutions will create new opportunities and drive market growth, but will not have a dramatic impact. I do not expect such solutions to cause a major inflection point in the growth curve. They will just combine with other factors to drive steady market growth.

BTR: Is there any change in how organizations are cost-justifying their investments in these technologies? (Or more simply: how are organizations determining business value today from UC investments?)

Businesses are now convinced they need to converge their networks and deploy IP communications. But some also realize they need further operational efficiencies and greater business agility. And they realize that to accomplish this they need to eliminate some of the silos in their IT and communications infrastructure.

Therefore, they are looking to better integrate their various applications and technologies at the back end in order to enable more efficient IT management. On the end-user side, they acknowledge the need to: a) deploy some advanced capabilities such as presence, mobility, etc., and b) enable more convenient access to these apps for their users (e.g., a unified interface for all apps on desktop PCs, mobile devices, etc.).

All businesses are taking cautious steps, though. The global macro-economic challenges combined with rapid technology development are compelling businesses to consider their next investments more carefully in order to avoid sunk costs or the need to switch solutions or vendors too soon after that.

Hosted/cloud solutions present a more flexible alternative to deploy UC with less concerns over technology obsolescence. But even such solutions require a commitment so many are actually delaying decisions, trying to decide if hosted solutions are the right choice and if this is the right time to make the switch.

Every business has different business objectives and monitors different KPIs (key performance metrics). Therefore, their justification for UC or hosted UC would vary widely. Service providers that offer analytical tools that demonstrate the value of UC and more specifically the value of their specific solutions can help their customers make faster and better decisions about their next communications investments.”

BTR: Have you noticed any misconceptions or outdated beliefs about the pros and cons associated with Unified Communication from end-user organizations?

UC remains a very broadly-defined term. For some businesses, it is about the proliferation of various communications apps and providing more tools to end users to better do their job. For others, it is all about the integration and operational IT efficiencies at the back end.

But not everyone needs everything. And businesses do not need to overhaul their entire infrastructure overnight. In fact, businesses really need to take their time and plan a structured transition to UC or hosted UC. The process needs to start with a thorough assessment of their business priorities and their existing assets. Then, they need to pick the most important criteria for selecting their next solution and provider.”

BTR: From a vendor perspective, what appear to be the key success factors in harvesting the growth that you are projecting in this sector.

Hosted communications service providers need to properly identify the features and capabilities that best fit their target audience (by business size, geography, vertical, etc.). Then they really need to make sure that it “works”. They need to focus on service reliability, QoS, and customer service and support.


About Elka Popova:

Frost & Sullivan North America Unified Communications and Collaboration Program Manager Elka Popova has more than 12 years of market analysis and strategic consulting expertise, with a focus on enterprise communications and next-generation technologies.  Her knowledge base is oriented toward market and competitive intelligence, trend analysis and strategic insight, market forecasting, strategy development, and client growth consulting. 

Elka leverages long-standing working relationships with leading industry participants within the enterprise telephony and messaging, unified communications and collaboration, hosted/cloud-based communications and SaaS, and SIP trunking and VoIP access services markets.  She has a Master’s degree in International Management; Master’s in English, American Literature and Linguistics; and a third Master’s degree in Financial Management.

About lcooper

Lane Cooper has over 20 years of experience as a researcher, reporter and editor analyzing the business and technology industry. On average, Lane meets with 600 CIOs and senior enterprise executives every year to understand the impact of evolving technological developments on organizations of all sizes across all industries. He has organized and moderated many live and online events and works with a variety of high-tech organizations to ensure that information is presented in a context that is useful to an audience of sophisticated technology buyers and implementers. He is a Contributing Content Partner to CIO Magazine, Network World and Computerworld. Other news services and magazines that have carried his by-line include: Voice Report, Network World, Byte Magazine, TechWeb, Optimize, Information Week, Telephony, Communications Week, ComWeek International, and Enterprise Systems Journal. He lives in Washington DC, where he is the Editorial Director of BizTechReports, an independent reporting agency that analyzes user trends in business technology.

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