The Hosted IP Communications Market

I am currently updating Frost & Sullivan’s North American Hosted IP Telephony and UC Services study. This is one of my favorite enterprise communications markets and I have tracked it closely over the past nine years. To many that may sound unbelievable as hosted IP PBX and UC services have only recently gained popularity, boosted by the cloud hype.

Over the years, hosted communications services have evolved and matured – both on the platform/technology side and the business model side. BroadSoft has gobbled up two of its original competitors – VocalData (aka Tekelec, aka GenBand) and Sylantro; softswitch vendors such as Sonus and Metaswitch have more aggressively pursued feature-rich services; Nortel’s carrier group has been acquired by GenBand; and a host of PBX vendors have launched various hosted/cloud platforms. Fortunately for these vendors, service providers are becoming increasingly interested in hosted IP communications as traditional voice loses ground to mobile and consumer PC-based communications. On the demand side, economic factors coupled with greater awareness of the benefits of hosted communications are making enterprise decision makers more open to discussing outsourcing alternatives.

I will delve deeper into market trends, market size and competitive factors when I complete my research. In this article, I would like to focus on Mitel and its portfolio of hosted solutions. As always, Mitel is at the forefront of technology development, but this time also venturing with some new delivery models.

Mitel MICD

For about a year now, Mitel has been offering a multi-tenant platform – the Multi-Instance Communications Director (MICD). This solution is targeted at service providers looking to brand their own hosted IP communications services and provide all billing and management support. MICD is a high-density platform that competes directly with the more “traditional” hosted IP telephony platforms (such as BroadSoft’s) and appears best suited for SMBs looking for standard PBX functionality, along with voicemail, twinning and basic conferencing. Its architecture makes it more flexible than most other hosted platforms, however, enabling service providers to deliver more distinct sets of capabilities to each customer, resembling single-tenant hosted PBX implementations.

MICD has so far found appeal with CLECs, traditional VARs, as well as for in-building multi-tenant deployments. Service providers can purchase either perpetual licenses or a licensing subscription. Mitel claims about 15 service provider customers globally.

Virtual MCD

Mitel has been one of the first communications vendors to offer a virtualized solution – Virtual Mitel Communications Director (MCD). It is available to service providers looking to target a slightly different customer base – typically larger businesses with hybrid (hosted and premises-based) environments. Distributed organizations typically have different needs across their geographically dispersed sites. While larger locations favor premises-based implementations, smaller remote sites are more suited for hosted services. Virtual MCD allows service providers to deliver highly customized communications solutions to businesses that require integrations with premises-based platforms and databases. For service providers, the virtual MCD architecture is comparable to MICD in terms of implementation and management costs. It is less scalable, but delivers some superior features and functionalities, such as virtualized contact center, web conferencing and UC capabilities.

Virtual MCD has been commercially available for approximately one year and, to date, Mitel has mostly marketed it, directly and through its channel, to the traditional CPE base. More recently, it has enabled hosted providers to also take advantage of this cloud-based offering. Resellers can use this solution to generate additional revenues and differentiate, leveraging their existing customer relationships, knowledge of customer CPE infrastructure and close familiarity with Mitel’s portfolio.

Mitel Anywhere

For a little over two months now, Mitel has been offering yet another hosted alternative – Mitel Anywhere. With this solution, Mitel steps in as the communications service provider hosting the MICD platform in its own data center. Mitel recognizes that, while demand for hosted communications is growing, a lot of the service providers are not equipped to host advanced communications infrastructures. Mitel has identified the SMB customer segment up to 100 users as the sweet spot for Mitel Anywhere services. It can, however, meet the demand of larger, distributed organizations using Virtual MCD.

Mitel plans to add some advanced capabilities such as contact center ACD to its suite of messaging and audio and web conferencing apps currently available on the platform. Eventually, the full Unified Communicator Advanced capabilities are likely to become part of the offering.

Datacenter Accreditation for Cloud-based Communications Services

On February 7th, Mitel announced a new initiative. The Virtualized Datacenter Accreditation program is targeted at datacenters, and Platform-as-a-Service (PaaS), and Infrastructure-as-a-Service (IaaS) providers. The program is intended to certify partners’ infrastructure capabilities required to support Mitel voice and UC applications. Mitel announced three certified IaaS providers: Artisan Infrastructure, Host.net, and Hosting.com, who intend to support or offer hosted voice and UC solutions to the market in the coming months based on Mitel cloud-ready software.

Mitel acknowledges that there are many partners who wish to be between an agent and a service provider. They have the capabilities to interface directly with end users and design and market hosted communications to them, but are not well equipped to manage a datacenter or a sophisticated communications platform with the required billing and management infrastructure and processes. By enabling IaaS and PaaS providers to deliver the appropriate infrastructure to VARs and managed services providers (MSPs), Mitel effectively creates a new business model that leverages the specific skills and capabilities of different providers to extend the reach of advanced communications to a larger number of market participants.

Conclusion

The value chain in the communications marketplace is likely to disintegrate further as vendors and service providers choose whether to develop technologies, manage datacenter infrastructure and/or communications platforms (now increasingly part of virtual datacenter environments), or specialize in marketing, sales and customer relationship management. New business models will emerge and market participants will have to find the formula that best works for them.

Mitel has been fast to market with its hosted/cloud initiatives and is now offering some appealing deployment options to its partners and business customers. It is likely to face competition from other carrier and traditionally CPE vendors pursuing similar strategies. For example, BroadSoft has a cloud service delivered out of its own datacenter in beta trials and claims overwhelming interest from the service provider community. Microsoft is likley to launch a multi-tenant VoIP capability on its Lync platform in the future, even though it has so far declined to support service providers in customizing Lync for hosted voice. Alcatel-Lucent, Cisco and Siemens are developing technologies and strategies for the cloud market as well. As the market evolves, functionality, partner relationships and financial viability will represent key success factors.