After several months of hard work, we have now completed the update of our World Unified Communications (UC) Markets study. The reason why I feel like celebrating (more so than after any other study) is because this market presents some unique challenges. Typically, we discuss and analyze markets by product or service category – e.g. the enterprise telephony platforms market, the enterprise media gateway market, the videoconferencing endpoint market, etc. But unified communications is all about … well, unification … that is, application integration. At the risk of repeating myself and stating what may be the obvious for some, here is how we define UC:
“Frost & Sullivan defines a unified communications application as an integrated set of voice, data and video communications, all of which leverage PC- and telephony-based presence information. UC applications are meant to simplify communications for the end user by making it easy to “click to communicate.” A unified communications application must contain the following:
- PC-based presence (online or offline)
- Telephony presence (on the phone or available for a call)
- Point-to-point voice calling
- Chat (i.e., instant messaging)
- Audio conferencing
- Web collaboration (application, file, and desktop sharing)
- PC-based video
- Find-me/Follow-me capabilities (for call routing)
- Unified messaging
A unified communications application may include the following:
- Mobile client
- APIs for easy integration with other applications
- Social networking capabilities
- Integration with room-based video conferencing
- GPS or other location information”
The past couple of years were challenging for communications vendors as the recession forced many businesses to suspend or delay investments in communications technologies. Tighter budgets limited the penetration of most UC applications. The telephony market was one of the hardest hit, as most vendors experienced double-digit year-over-year revenue declines. Conferencing applications and services fared better, as they allowed businesses to reduce travel costs while enabling virtual workers to communicate and collaborate more efficiently. Even conferencing markets, however, experienced increased price pressures, with the impact of the recession being most severe in conferencing endpoint markets and in the more mature audio conferencing services markets.
In 2009, UC vendors focused primarily on penetrating the market with advanced UC clients. IM and email vendors aggressively upgraded their customers to UC-capable IM clients and architectures. Similarly, telephony vendors bundled advanced softphones capable of integrating with IM clients and conferencing platforms with the rest of their telephony solutions to encourage adoption. While these vendor strategies help increase user familiarity with software-centric communications and their benefits, they are not strongly correlated with investments in the rest of the infrastructure required for a complete UC implementation. Customers deploying softphones from their telephony vendors did not always purchase the conferencing and/or IM/presence servers. Similarly, many customers who purchased Microsoft’s OCS Enterprise CALs did not choose to use OCS voice or to integrate OCS with the corporate telephony system.
Overall, we do not believe UC will be a big revenue source for the vendors (which is great news for customers!) That said, we believe it is here to stay. Vendors will give away UC clients to drive adoption of various advanced communications solutions – conferencing, collaboration, mobility – as well as telephony and IM infrastructure refresh. As business users become increasingly used to the convenience of certain UC capabilities such as soft clients, conferencing capabilities that are only a click away, affordable video, and so on, it will be difficult to take those away from them.
But who should customers turn to for their UC capabilities? There is no single right answer, of course. Two distinct business models have emerged: on-stop shops and best-of-breed integrations.
For SMBs, all-in-one appliances or application stacks are probably most appealing. However, few vendors are capable of offering, on their own, all the required functionality and features in the UC stack. Either the telephony component is still missing critical elements (such as E911), or the IM clients are not very feature-rich, or some other capability is lacking.
Larger customers with multi-vendor environments are better off selecting the specific applications that best meet their needs and then engaging their own (typically more extensive) internal staff or outsourcing the professional services expertise to integrate those capabilities in an end-to-end UC environment. Limited vendor interoperability along with scarce UC expertise will present some serious challenges to this approach in the near term but will become less of a concern in the future. Growing adoption of SIP and SOA and application enablement technologies, and vendor strategies focused on contextually-rich communications and communications-enabled business processes will have a major impact on vendor interoperability and will eliminate a great portion of the hassle and cost related to application integration and UC implementation.
Generally, UC adoption may remain limited to specific user groups (e.g. knowledge workers, marketing and sales people) for the next few years, until business models make it compelling for the average communications user to own a UC solution even if they are not using all of its capabilities and not benefiting as much as the early adopters.
Here are some recommendations to end users considering UC:
- Businesses should leverage their communications investment to gain a competitive advantage and should make new technology acquisitions with their key strategic objectives in mind.
- Vendors are engaged in a more fierce competition than ever before. Customers can exploit this opportunity to require exceptional value for their money.
- Customers need to future-proof their investment. They should seek to deploy open and flexible standards-based technologies. Further, they should demand extensive education and training on features and integration capabilities to ensure that they can easily switch among or integrate multi-vendor solutions.
- Customers should pay attention to their vendors’ and channel partners’ overall financial stability. The recession has weakened a lot of market participants and growing competition will further jeopardize their viability.
- Customers need to restructure internally to ensure they gain maximum value from their IT and telecom investments. They must ensure cooperation between the telecom and IT teams so they can effectively coordinate new investments and ongoing infrastructure management.
- Finally, customers should explore alternative delivery models (e.g. managed services, hosted solutions, etc.).
For more information on our study, please contact me at firstname.lastname@example.org or review related material on our web site at http://www.frost.com/srch/content-search.do?srchid=194001017.