In this Industry Buzz podcast, the UCStrategies Experts make their predictions for unified communications in 2011.
Transcript for UCStrategies Experts Make UC Predictions for 2011
Jim Burton: Welcome to UCStrategies Industry Buzz. This is Jim Burton and I am here as usual with the UCStrategies team of experts. And today, we’re going to be talking about our predictions for 2011. I am going to start with a couple of mine.
One is that I believe we are going to start seeing a lot of M&A action. I know others are going to be talking about their thoughts, but I’m seeing a number of important vendors out there, besides Cisco, that will be making acquisitions that will be very important to their long-term strategy and I think help us recognize where that particular vendor may be headed in the near future. There is no question that cloud is becoming important. We’re going to see a number of announcements from some of the traditional vendors that are moving into the cloud space. I believe that IBM is going to come out of their slumber and turn out to be an aggressive marketeer and that will probably happen in the latter half of the year, but I think that is something that we can see and count on. I also believe that we are going to see most of the vendors discuss UC-B or CEBP and that’s going to be an important part of what a number of the vendors will be pushing. A few vendors will start getting into the analytics and metrics that are going along with some of these applications. So those are my general predictions. I could talk for hours, but we’ve got some experts who know a lot more about particular areas than I do. I am going to turn it over to Blair Pleasant to talk about her predictions for the next year.
Blair Pleasant: Thanks Jim. First, I want to know if you have any insights into some of those M&A activities, so I can start buying some stock in those companies?
Jim Burton: I do, but of course, I can’t tell you.
Blair Pleasant: Well of course, I am going to talk about social media, because that has been my favorite topic lately. I see 2011 as the year when unified communications is going to be more integrated with social media. And even though we have seen a lot of activity in social media in 2010, it has still been standalone, and in its own silo. It hasn’t really been integrated with UC. I was at the Enterprise 2.0 Conference a couple of months ago and there were slews of these social media and Enterprise 2.0 vendors with great capabilities, but none of them or very few of them, were integrated with unified communications. So what I really hope to see and expect to see in 2011 is more integration for click-to-call, click-to-communicate, and click-to-conference capabilities from within those social media capabilities. And we will also see more integration so things like communities, activity streams, contacts, and projects – are all going to be integrated together in a single user interface, with the click-to-call or click-to-communicate capabilities added into that.
Also on the same lines as social media, we started seeing a big pick-up with customer service as a channel or social media as a customer service channel. And again, we saw the beginnings of that, but I think we are really going to see a lot of activity in 2011. A lot of vendors have kind of been ignoring social media or they are following what is going on, but not really interacting with customers and not providing the customer care through the social media channels, but I think that is really going to change in 2011. Nancy, I think you wanted to add on to that?
Nancy Jamison: Oh yes, definitely. I completely agree with you that it is an emerging market, but the big vendors are all paying attention and others besides the big vendors are starting to come out with products. But along those lines of what you said, and Jim said, I would kind of like to add on that I think we are going to see a lot of M&A activity and because social media is still emerging, I think we’re going to see a lot of little companies that we don’t even know and we may not know who they are at the moment, that are going to be picked up by the Cisco’s and the Avaya’s of the world, to do certain things. They will pick off these little technologies in order to do the integration and add the functionality onto UC in the contact center.
And I also agree with Jim that I think IBM is going to ramp up, and within one of my areas of interest, speech technologies, I am still interested in following up on this rumor that keeps popping its head up about Nuance being acquired. Every once in a while it happens, and I would like to stick my neck out and say maybe someone like Cisco might do that. So, anything to add on to that?
Jon Arnold: I wouldn’t mind adding to that as well. I think you are right about Nuance and before talking about who might acquire them, I think also talk about why they might be acquired.
The whole idea of integrating, not so much voice into telephony, but having voice recognition into web-based apps which comes back to what Blair was saying – I think this is going to be a big year for tieing a lot of these things together. I think we’re past the point now where voice is about telephony and I think it's really more about enabling other things, and that’s where UC gets much more interesting.
So when Blair talked about the click-to-call, I think we are going to see a lot of applications that are going to be built around that, and that’s where companies like Nuance can really add a lot of value, right? By applying these really high-level voice recognition technologies, they can start doing much more interesting things, especially for global, multinational-type companies, who have to communicate with employees and customers across the world. And when you start having to deal with different accents and speech patterns, speech rec technology like Nuance really comes a long way to helping. JAJAH – when you talk about acquisitions, JAJAH was acquired by Telephonica for almost very similar reasons. They had this application called “Babble,” and it was built around the same concept, and they launched something around the Beijing Olympics that was providing translation service for Mandarin into English. I thought the timing of that was great. Where Nuance fits in though, I think they have a broader scope to play with. Not just for the desktop, but in the contact center and I think there are a lot of options there. I think what might drive a deal here is the fact that we have seen what Google has done in the last year and I wish Dave Michels was here to add to this, with Google Voice, and it's pretty clear that they have all the pieces to do a lot of interesting things with voice. And I think if anything, a Cisco or even an IBM might acquire Nuance – strictly as a defensive move, just to shore-up that voice capability to make sure that A) Google doesn’t get a head start or B) acquire them.
Don’t forget that one of the deals that Google made, which I think was very important last year, was the acquisition of GIPS, Global IP Solutions. They kind of provide the voice CODEC for just about everybody out there except Skype. And the fact that Google has them now, I think takes a lot of technology off the market and so companies like Nuance are going to become increasingly valuable.
Blair Pleasant: Jon, you said companies like Nuance – I think that’s what I would say. I don’t think necessarily that it's going to be Nuance, but I think it will be other speech technology vendors that are going to be scooped up.
Jim Burton: And Microsoft has played such an important role there, with their TellMe acquisition and how they are positioning speech recognition as part of almost everything they do from Bing, as part of their search engine component, parts of Office, and also part of their operating system. So I think that that’s going to be a hot topic and a hot area and probably one that a lot of people will have missed.
Nancy Jamison: Well, I think about Microsoft, they already have a really, really deep speech lab and Cisco does not. I mean, they have a lot of speech vendors that they work with, but they don’t have their labs like IBM would. So that is one of the other reasons why I think that Cisco would make a faster move, because they can acquire a lot all at once and they have it integrated into their products.
Don Van Doren: This is Don. Let me say one thing on this whole discussion on speech recognition. I think that what we are seeing in another area that we haven’t yet talked about is sort of the explosion of endpoint devices and as we get more mobile and I’m sure Michael will jump in on this, but as we get into more mobility solutions, the key limiting factor – one of the key limiting factors – is IO, input and output and how can you do that more effectively? It clearly seems to me that speech recognition on the input side is going to become a critical – a really critical element for mobility solutions going forward.
Art Rosenberg: Amen, Don that’s exactly what I was going to point out. With all these mobile apps that are now being promoted independently – not as a suite of anything, but “hey, I have this little one here and that little one there,” and these are things that people can either get for free or they buy them very inexpensively and there are going to be thousands of them and they are all going to be mobile apps and they are all going to be highly dependent on speech recognition for input. As far as output, it all depends on what the output has to be, because a lot of stuff is not very good in voice, but is good visually. So that combination of speech in and visual output is going to just take over the world.
Michael Finneran: This is Michael. I was thinking more in terms of mobile development in two areas. First the devices; and I think we are going to start seeing some stabilization of market shares this year between Apple, RIM, Android, and Other. You had a big change this year with regard to Android’s market share, but I think we are going to start to see some stabilization—basically a base from which we can watch that market develop. The other thing that I will predict most certainly is Android backlash this year. Everything has been sweetness and light about Android – nothing ever keeps that halo for very long, so expect to see a number articles dissing Android. I don’t expect it is going to disappear.
The other big development is going to be in the policy front. More and more we are seeing companies allowing users to bring their own cell phones to work and that’s going to change things dramatically in the enterprise space. We’ll probably see plans that will have the company negotiating the price for the service so we’ll get our same sort of discounts, but user stipend and user paid, which is going to make things much more difficult for mobile UC. Because now it is not going to be a matter of selling that mobile UC solution to the IT department, it's going to be a matter of selling to the individual users. The Apple users, the Android users, the Blackberry users – so I think we are going to see much more individualism coming into play in the mobile space and enterprises really picking up on it.
Art Rosenberg: What about having standards to make all that easier to do in the first place?
Michael Finneran: Segmenting by industry – if we are turning it over to the users, it's more or less a move against standards. Now certainly it's going to segment by industry. There will still be some – particularly financial services has always been tight about security. But we have been starting to see changes on that front, with regard to UC device choices. There could be holdouts, but I would expect them to be traditionally conservative industries, but for the most part, it is going to be more individual choice. And with individual choice, if we are going to be developing a mobile UC solution, we’re going to have to be marketing it to our Apple users, our Android users, our Blackberry users, and whatever else happens to grab a significant share of the market.
Don Van Doren: Michael, this is Don again, let me just dote on that a bit, because I think that next year is going to be the year of the ecosystem. And I think that what we’ve seen over the past year is the really start of the growth of developers as a means to get applications into the hands of people and some of those are going to be as you point out, very industry-specific and that industry’s specificity I think, is something that really is going to require ecosystem partners who are very, very knowledgeable about those kinds of details. So what I am envisioning is that we’re going to see a plethora of plug-ins and apps that will run on iPhones or Android products or iPads and every other name of mobile device that we are going to get out here. And that in turn – I think is also going to also open the door to the thing that Jim mentioned, which is the real growth of the UC-B or CEBP market. That’s going to be an extremely strong contender I think, in the coming year and it is going to be driven by the ecosystem.
Art Rosenberg: That will help the mobile customers out there, which enterprises have no control of whatsoever and they are all going to be mobile.
Michael Finneran: Don, you hit one of the most important splits, which is smartphones and tablets – I think we are going to see a real divergence in those two and certainly with regard to CEPB – tasks you do on the smartphone versus tablet and probably splitting the applications, as well. Not everything we can do on a tablet works well on a smartphone or vice versa. But certainly, it will be along ecosystem lines.
Blair Pleasant: Question about tablets: Cisco came out with Cius and Avaya came out with their Flare experience and everything. What do you think about that? I am sort of thinking that people are going to say, “I want this to work on my iPad and I don’t want to buy a special device for video collaboration.” Is that just me or what do you guys think?
Michael Finneran: I can’t see anybody spending a premium price for another Android-based tablet. I think these guys should be concentrating on software. The days of selling the $700 color display desktop phone are over, and they are trying to replace that with a tablet – ain’t gonna happen.
Don Van Doren: Well, I think that where they may show up of course, is when we say purpose-built endpoint devices. You know you may find some things for example, in the medical field where a tablet can be exactly right for some particular application. I think they are going to tend to gravitate into a number of those kinds of things, and again it will be the developers that help fuel that move in my opinion.
Michael Finneran: The guys that will see that will be hardware suppliers. I am not expecting to see that from Cisco or Avaya. There will be guys that specialize in this and will be a lot better at it.
Don Van Doren: That’s exactly right.
Jim Burton: One of the comments I have heard about the Avaya tablet is that it is going to be used for video. And whether that’s a good application for that or not, is not the point. I think the big point is that one of things that we need to look at is video for next year. Everybody believes that video is on its way. I have talked to a number of the big vendors who have been surprised by the customers’ comments about how important video is to them and we’ve seen a little bit of negotiation around video with the initial formation of the UCIF and the vendors jumping around working on various video CODECs and how they are going to operate together. So, I think that’s another important space. I don’t think there is a surprise there, because we have been talking about it all year, but it will be an important component for next year.
Art Rosenberg: I think you need to be a little more specific about what kind of video you are talking about. Is it an informational video, is it face-to-face video, video calling – what?
Steve Leaden: It comes in a couple of different flavors, Art. It's point-to-point video, multi-point video on a collaborative basis amongst the smaller groups of up to ten people, and then you can have one-way video streaming, so we have clients who are actually looking right now, for 2011, to take a video feed and do a classroom kind of session, record it, and then you can come back and do your certification for that video session later on. And we are going to be using tools to acknowledge that that person took that particular course for that one hour. That is one app for example right there.
And then point-to-point video? Absolutely. We’re seeing that the market is definitely maturing, simply because I think it is an extension of where we are at with web conferencing and audio conferencing tools. Nowadays you want a meeting? Sure. Dial into the bridge. “Meet me” conferencing is here and has been here for a while. Travel costs are still expensive, so people are looking to manage those costs and with the meetings being recordable and now HD video being here and being driven by some of the smaller guys, like LifeSize, who were, by the way, through an M&A now owned by Logitech, to Blair’s point a little bit earlier, we are definitely seeing – I think – the next wave of what’s going to happen next year – I think 2011 will be the year of video, if you will, amongst other things. I think that’s actually a pretty exciting time.
And to Jim’s point too, I think we’re going to also see the tablet being – it's always a pressure thing, but is Avaya going to sell their proprietary tool via a soft client only and lose the hardware revenue, which they – in the market itself they make a lot of money from endpoint and in fact it is probably one of the richest areas where most vendors make money – are they going to give that up for software only? That’s a tough call. We are going to have to see where the market goes on that.
And to Don’s point just a little while ago, we have a CIO of a major healthcare provider who yesterday ordered five Flares to go play in the medical space and see what we can do about video, as well as pushing medical apps into this very large, multiple thousand healthcare client, and it's a big brand name. So it is very interesting some of the things that we are seeing with our enterprise users.
Jim Burton: You brought up a couple really interesting points. One is the business models that a lot of these vendors are facing. When you are changing from something where there is a hardware component, even though there are costs with that hardware component, moving yourself into a software business is a tough one and I think that that is going to be one of the challenges for our industry – how people reinvigorate themselves with new business models. I think one of those places where it's going to be a challenge, it comes with the cloud and it's the distribution of those technologies and those products, because the vendors—they don’t have a problem selling it, but if you are a reseller and you are used to getting a big chunk of money every time you make an important sale and all of a sudden it goes to a cloud service where you start getting an annuity coming in, like an insurance salesman would have – how do you change your business model from those big chunks to leveraging it out over a longer period of time. And I think that is going to be a tough one which I think brings up something that we haven’t talked much about and that is cloud, which I think we would all agree is going to be an important part for next year. So why don’t we throw the cloud thing out on the table.
Steve Leaden: So let me jump in here for a quick minute. We have actually have two clients right now, because there is not a lot of capital available because of the – again the recessionary recovery kind of transition period that we are in right now. People are looking to keep as much capital as they can and they want to move those costs out into the operations only areas, so we are looking at two hosted, even managed services models, with two very large enterprise customers, well over 5,000 endpoints, right now, because they just don’t want to invest in a lot of capital nor do they have it and they would rather someone else manage the headaches also that goes with that voiceover/IP/UC architecture. So it's very, very interesting what we are seeing there. But it is also driven by very simply, price point. They have to save money; we have to have a very short-term ROI in order to prove to the executive management that it's a worthwhile cause, but truly we now have not only two clients, but we have a third client now where everything, the entire PBX, i.e. VoIP UC infrastructure is off site in a data center. So like a Sungard or equivalent – it's very, very interesting what we are seeing. We are seeing not only a transition to an outsourced hosted vendor, but we are also seeing a transition out to – no longer keep anything on your premise, put it onto someone’s headaches, give them all of the security headaches, sign that agreement, and you’re renting space in someone’s data center. Those are the two main trends we’re seeing to your point, Jim.
Nancy Jamison: Do you see the vendors that haven’t had a hosted model are going to be joining in like we saw so many of them did this year do?
Steve Leaden: Yeah, they will. You will see them join. I actually received a whole bunch of information recently from some of the premise-based providers. They do have data center solutions that will be announced in ’11 and ’12, for sure.
Nancy Jamison: That’s where I saw a big acceleration this year; I’m trying to figure out who hasn’t been doing that that we track.
Steve Leaden: I think they all want to push toward the data center-centric model for sure.
Don Van Doren: Another thingthat that’s going to do of course, is make it more interesting to the larger enterprises, as well as what has been traditionally market in the SMB marketplace. And I think that as we see some of the leaders coming out with hybrid solutions, where they can basically offer these services both in the cloud and also on an on-prem solution and working seamlessly together – that’s going to fuel a lot of interest.
We talked regarding the cloud that one of the key drivers is this whole question of the economy and everything. The other thing I would point, as a key driver in this, is technology uncertainty, as you are entering times when the whole paradigms are shifting, which they are doing now. Quite often companies will wait and sort of see what’s going to win and what’s going to come out of it. So part of it, I think is just the shift in technology issues, but also it’s a shift in the vendors. We’ve seen a lot – let’s say upset and churn – within the traditional telecommunications equipment vendors and I don’t think we are done with that, by the way. So in those kinds of cases sometimes going with some sort of a hosted or cloud solution can make a lot of sense.
Jon Arnold: I just wanted to jump in on that and take a cautionary view of some of this. I totally agree that we are seeing everybody jumping in for all the right reasons and I think it's going to be great news for businesses and SMB’s – who will have a lot of choice. I also think we are going to see a lot of very price-driven kind of solutions out there, because there are going to be so many players jumping in. And I think this is going to be a challenge for the channel because you are reducing... the problem I see with the cloud is you are moving completely away from a hardware-based sale to something that is almost totally virtual and I think it becomes a very difficult kind of concept to monetize attractively for a lot of traditional channel partners. So I think this market will give rise to a lot of self-serve buying and you do see this from some of the hosted VoIP players out there, who work on a web-based model. So I think there is going to be some concern here for the channels, to see who is going to make money selling this and how is it really going to be sold and supported. And the caution I have here is that because I think a lot of this is going to become very price-driven, because it's easy to do, I think the value proposition of UC – the way we look at it – I think it's going to get a bit diluted, because if this becomes a very price-driven marketplace I think the valued-added stuff that we all understand here, might kind of get lost in the shuffle. And that is a bit of a concern for me and I think it could be ultimately a step back for some of these vendors who are moving away from a more traditional model of doing business. It's a bit like, you can’t ignore it, but I think it's the very early days and I think there are going to be some bumps along the way here in terms of who is going to do this right and make money at it.
Don Van Doren: Let me just comment on that, though. I think you are right in terms of the traditional approach, certainly from a UC-U standpoint. If we’re just offering these things on a price basis, for individual users, you are absolutely correct about that. But I think what this is also going to move to, and this is in part because of the very points you made about the channel. I think the channel members that are going to survive are the ones that are going to figure out “how do we build value into these kinds of solutions,” and that leads you toward the CEBP and UC-B kinds of applications that we have been talking about for so long. That’s why I think that is going to become a much more important part of the equation and some of those can be done in hosted solutions, as well or in cloud solutions, but increasingly that’s I think the way the channel is going to have to figure out how to make money in this new business model that is coming along.
Jim Burton: One thing is for certain. When you have a hosted solution, there still is premise equipment. It seems like people always ignore that – “everything is in the cloud”... well there’s got to be distribution of bandwidth and there’s got to be IO capabilities within a facility and then of course, there are applications running those facilities. So I think that the winning combination for the channel will be that they go to a services model where they’re providing systems integration capabilities and then maybe on top of that, they get part of the action for helping sell those particular hosted services. So I think there is an opportunity out there for the channel, but it's not going to be easy because it will be a business model change and we all know how tough it is to change business models.
David Yedwab: Hi, this is David Yebwab, and there were two issues that I thought might be worth addressing. Both of them might be perceived to be slightly exogenous to our overall discussion about unified communications, but I believe they do need to be raised.
The first is the exhaustion of IPv4 addresses and the needed transition to IPv6 and I believe that may take a significant share of mind, resource, and budget of the IT departments within our business enterprises, as the change may not be free and may not be resource-less to implement. While most private addressing is protected behind mats and firewalls certainly, our enterprises and businesses connect across the public internet to customers, partners, and others across the industry and there may some unknown, unforeseen problems around the transition to IPv6 addresses.
The second area is the yesterday-passed net neutrality decision of the FCC. This decision is likely going to have many of our service providers, managed service providers, and ISPs spending a significant amount of their attention on the legal processes to make sure that their business models are not going to be hurt, by the implementation of potential charging for quality of service, deeper inspections of transmissions, etc., that may be allowed under net neutrality, if it passes the legal hurdles of likely court challenges. The concern for our enterprises around net neutrality – short-term – is that our service providers may be deflected from focusing on the delivery of better quality, more improvement, and better price performance in the UC services that are being offered.
Lisa Pierce: Hi, it’s Lisa Pierce. I am following-up on the comments that have been made so far, with a couple. Number one: much of the discussion we’ve heard so far implies a continuation of the current economic state. I am going to be explicit. I don’t see a radical change in enterprise spending on IT or UC in 2011. I see of course, some acquisitions but a lot of pilots, trials and evaluation going on, both of the solutions and of ownership models, whether that’s buying and maintaining it as has traditionally been the case, or looking at managed or hosted models, or even UC as a service. I see this more than an evaluation process, even on Microsoft Lync. I see it ultimately as good for customers, because too often they rush into buying something new and suffer a severe case of buyer’s remorse later on. So I think in general, this is a good thing for enterprises and of course, because it is based upon economic constraints it is ultimately probably better for cloud providers than for traditional hardware or software vendors, who make their money essentially through large sales.
I also think that a couple of things deserve a little bit greater thought in terms of comments. You heard a lot about mergers and acquisitions among possible vendors; Cisco/Nuance was mentioned. If we take a look, Microsoft is mentioned as someone who has a lot good speech recognition technology. That’s only because Microsoft bought TellMe a number of years ago and has been incorporating its technology and intellectual property ever since and as you have already heard on this call, into a number of offers, not just into stand-alone UC functionality.
These are the big things I see for next year. I think mobility certainly is going to continue its major trends, but I also think that companies are going to be looking again at how mobility really can further profitability and customer relationships. I don’t think it's going to be done blindly.
Thank you all. Have a great holiday. We’re going to be off next week, so our next podcast is going to be on January 4th.