Cloud Trends for UC Components and Solution Providers

Cloud Trends for UC Components and Solution Providers

By Clark Richter October 8, 2013 5 Comments
Clark Richter
Cloud Trends for UC Components and Solution Providers by Clark Richter

Building on our recent podcast and articles discussing Hosted VoIP and UCaaS by Blair Pleasant (An Update on Hosted VoIP and UC Services) and Joseph Williams (UCaaS and the Channel: Part I – The Vendors), according to Infonetics, hosted VoIP and UC services revenue grew 17 percent in 2012 over 2011. That was the highest rate in a segment that generated $63B in revenue growing 9 percent year-over-year. [see report] Cloud-based UC services are a great place to invest your resources as a solution provider in the space as adoption increases. The telecom carriers arguably created and have been operating in the "Cloud" business model for decades so it makes it difficult to determine the adoption rate for voice services hosted or in the “cloud.” I found some old slides from vendors listing as high as 20 percent hosted number for companies with fewer than 1,000 employees but no studies referenced. More specific data from the recent CompTIA “4th Annual Trends in Cloud Computing” [report brief] would indicate broad adoption of UC components and Solution Providers developing “managed services” around UC or any IT cloud solution is one of the best ways to increase your profitability and stay relevant with your customers in their journey to the cloud.

The second portion of the CompTIA study is focused on End User adoption of Cloud. They surveyed over 500 organizations and breaks the results down by small medium and large. The results paint a picture of broad adoption of several key UC technologies in the “cloud.”

CompTIA - Use of Cloud-Based Applications Survey

The numbers are for “use” so it doesn’t imply that they are exclusively using cloud-based solutions. The first thing that struck me was that the Small firms had lower adoption than large ones. I would have thought just the opposite. Unfortunately they don’t break out Voice specifically but with Collaboration and Email both around 50 percent adoption, with two significant UC components rapidly moving to the cloud it would make sense that the others would follow the same trend as well.

The other alarming number from the end user portion was that 46 percent of these “cloud” purchases are made by the “line of business” with final approval and the IT department providing input. Although the number is more like 22 percent for Email and Collaboration.

The first part of the study is more geared toward the solution providers that comprise the “IT channel.” It provides some great insight into the trends in solution provider adoption and integration of the cloud model into their existing business. I highly recommend reading it to anyone in the solution provider community.

Cloud Computing and Managed Services are two forces that are disrupting the business cycle that drove vendor and channel companies growth since the 80s. Technologies were developed with planned hardware replacement and regular software upgrades. Solution providers made their recurring revenue on the services, upgrades and replacements. In the cloud model you can still continue to make some money on the product sale although the margins are decreasing. There is also money to be made in migrating customers from premise to cloud just as there was with switching hardware vendors. But the upgrade revenue and in many cases the renewal contract business is evaporating. Managed Services if done right have the ability to offset those losses and create even greater valuation for your business with recurring revenue. If you want to thrive in the cloud era Managed Services should be a key component of your operation. Here are some numbers from the study to support that.

  • Services revenue growth is 50 percent for cloud versus 22 percent for their established

  • Profitability of 49 percent Cloud versus 30 percent for established

They conclude in the study that the cloud business model that is most strategic and important to solution providers is management and support. Many companies start out with build and migration services but they mature into Managed Services which has the ongoing sustainable profit to take your company into the next decade.

 

5 Responses to "Cloud Trends for UC Components and Solution Providers" - Add Yours

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Roberta J. Fox 10/8/2013 8:30:52 AM

Clark: Great article, but I wonder if their access to SMBs caused the results to show what they did? Many vendors, whether in US or Canada, don't have us SMBs on their research/mailing lists for this type of study, therefore wouldn't have reached out to us. Even the PR firms that do SMB focus groups don't seem to be able to 'find us'.

Our approach for our SMB analyst work is to tell folks to reach out through Chambers of Commerce or Boards of Trade, or other professional business associations as an alternative as these organizations have tens/hundreds of thousands of SMB members. Unfortunately, most tech firms don't do this, for some strange reason.

We know from our SMB clients who are tech dependent...we have coined the term "Micro-enterprise" that it is a challenge to get the time and attention of some cloud and hosted vendors even when we do want to purchase their services. There are exceptions of course, but still a challenge.

We will doing a Customer Cloud study for contact centre vendors over the next three to four months with the goal of bring a customer score and customer view to providers, rather than an industry feature/function view. It should be interesting to run and analyze...stay tuned.

Keep up the good work on bringing your industry analysis view to all of us.
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Helga Egan 10/8/2013 9:24:14 AM

Hi Clark,
I am glad you addressed cloud services from a business cycle approach. I have been trying to peg cloud services in the business cycle and I am confused. As someone who has been in the telephony business for many years, I implemented Centrex, a managed PBX service 30 years ago. It is a mature product in my mind. I will be working with Roberta to understand what drivers are making cloud services so desirable today, that the market is treating them like a new product.
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Clark Richter 10/8/2013 12:27:10 PM

Thanks Roberta, Good point I don't have the details of who they surveyed, they break it down by size, but now idea of verticals etc. I agree most companies with less than 75 employees don't even have an IT person or department so hard to find someone to answer a survey with enough knowledge to give you an accurate response. They usually use outside firms to help conduct the actual research.
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Clark Richter 10/8/2013 12:41:29 PM

Hi Helga, Yes there certainly is a lot of marketing going on in the space i scratch my head sometimes as well. There is a whole section in the CompTIA study on end users who move from public back to private / on premise solutions. The # 1 driver was security #2 was couldn't successfully integrate.
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Clark Richter 10/24/2013 1:57:44 PM

Here is a link to where you can download the full version of the CompTIA study if interested:

http://syndication.comptia.org/Fossa/CloudStudy/html

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