Unified Communications Featured Article

How Big is the Cloud-based UC Market?

September 03, 2013

Cloud computing is important, some might argue, because cloud computing represents the next wave of computing architecture, as there were earlier waves of mainframe, minicomputer and PC-based computing.

It therefore is not a surprise that suppliers or researchers say cloud services are “a key transformational technology for the business marketplace,” as does IDC.

IDC forecasts that global software as a service (SaaS) and cloud software revenue reached $29.4 billion in 2012, representing 28.1 percent year-over-year growth. IDC predicts further growth to $67.2 billion in 2016.

IDC (News - Alert) estimates that the collaborative applications segment of the U.S. SaaS applications market grew 10.6 percent year over year in 2012 to over $2.6 billion in revenue.

Current market research indicates that Web conferencing and videoconferencing and UC are at or near the top of the list of applications most likely to move to the cloud, IDC says.

IDC estimates that collaborative applications (including instant communications, enterprise social software, conferencing, team collaboration, and email) will account for 14 percent of the total U.S. cloud applications market and 51 percent of the total U.S. collaborative applications segment revenue in 2012.

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So there is virtually no question but that cloud-based apps of every type are moving “to the cloud.” The issue for telecom and other service providers is how big the cloud-based UC business might become.

Synergy Research Group suggests the U.S. cloud UC services market is about $84 million a quarter, and growing, suggesting an annual market north of $340 million.

Here’s the “problem”: the market is relatively small, as U.S. communications service segments go. The overall U.S. telecom service provider revenue stream is about $300 billion. So the service provider cloud unified communications or cloud unified communications and collaboration market is about a tenth of one percent of total U.S. telecom revenues, excluding the value of entertainment video services.

New data from Synergy Research Group show that between the first quarter of  2010 and the first quarter of  2013, unified communications as a service (UCaaS) subscribers nearly tripled to reach 1.6 million, and now account for 24 percent of total cloud UC subscribers. This is up from 21 percent three years earlier, Synergy Research estimates.

Together, four providers account for nearly half of UCaaS subscribers. 8×8 is the market leader, with 19 percent of subscribers. RingCentral, Vocalocity, and ShoreTel follow, with 10 percent, 9 percent and 8 percent, respectively.

Edited by Alisen Downey