Hosted UC Requirements Offer a Chance to Take Market Share
Hosted PBX and unified communications (UC) services are a growth market that has moved well beyond early stages, with revenue on track to grow 13 percent this year and positive activity in every major geographic region. To have success in this wildly growing space takes consideration, however.
According to survey firm Infonetics Research, hosted VoIP services have hit their stride, experiencing broad adoption among small, medium, and large enterprises. Meanwhile, interest from large enterprises in hosted VoIP services is escalating, with more companies evaluating and choosing providers.
“While sales of premises-based PBX systems have been stagnant to declining over the past few years, the market for cloud services continues to expand with businesses worldwide seeking out hosted alternatives,” notes Diane Myers, principal analyst for VoIP, UC, and IMS at Infonetics Research. “Hosted services seats grew more than 20 percent worldwide in 2013.”
But with such demand, there are a number of companies that have joined the competitive landscape — resulting in a highly fragmented ecosystem that features an increasing number of PBX and unified communications vendors, enterprise agents, system integrators and resellers expanding into the market along with traditional service providers. As a result, the biggest challenges for businesses evaluating hosted solutions are the wide variety of options available and inconsistent billing structures across the industry.
Those that will find success in this boom-town section of the industry will seek out differentiation points, while simplifying the buying process for end users.
For instance, cloud services need bandwidth to function — so connectivity and network services are a requirement and often bundled in the sale. Infonetics noted that vendors are increasingly pitching SIP trunking as part of the deal with hosted UC. But the right kind of connectivity is critical, because UC apps tend to be real-time (voice, video and so on), and thus very sensitive to latency and jitter.
“A run-of-the-mill Internet connection from your local ISP is not likely going to cut it,” said Paul Desmond, a principal with PDEdit, in a blog. “A better choice is a service based on MPLS, which provides the ability to classify traffic to ensure each application gets the level of performance it needs, as we’ve discussed previously. In practice, services based on MPLS are typically delivered as virtual private networks (VPNs), which provide additional security.”
Business users also need UC-ready endpoints — so this is another great bundling opportunity. For instance, take headsets: Frost & Sullivan is expecting the market for contact center and office (CC&O) headsets to grow at a 12.7 percent CAGR per year through 2020, thanks to UC requirements. That level of growth will more than double the size of that market to $2.45 billion.
“In particular, end users in the UC space are using CC&O headsets that improve sound quality, reduce background noise and boost comfort in a Voice over Internet protocol (VoIP) call,” the firm said. “Superior user experience accelerates adoption of advanced collaboration tools.”
Then there’s security. Gartner Research expects the cloud security market to hit $3.2 billion next year—and the functions are easy bolt-ons to hosted UC offerings.
Gartner said that the top three most sought-after cloud services moving forward will remain email security, Web security services, and identity and access management (IAM). However, the highest growth is in cloud-based tokenization and encryption, security information and event management (SIEM), vulnerability assessment and Web application firewalls.
"The cloud-based security market remains a viable one, offering providers many opportunities for expansion," said Ruggero Contu, research director at Gartner. "Encryption will be a new area of growth, but it remains a complex activity. The strongest interest will be in encryption products from cloud security brokers, which are relatively easy to deploy and have options for on-premises encryption management."
Making these kinds of considerations a part of the conversation when it comes to hosted UC will pay off in the form of greater market share. And it’s worth it: Infonetics expects continued strong worldwide growth for the cloud PBX and UC market over the next five years, projecting it will reach $12 billion in 2018 with 62.6 million seats in service.