Following the Money at the UC Summit

Following the Money at the UC Summit

By Marty Parker April 24, 2014 1 Comments
Marty Parker
Following the Money at the UC Summit by Marty Parker

You can usually figure out a lot of what has happened and what’s going to happen by "following the money." It works in real estate, politics, economic health, and many other areas, including technology. 

This year, at the UC Summit in La Jolla, CA, we will see far greater shifts than ever before when we "follow the money" (let’s just say FTM). Here are some top trends in FTM from my perspective.

1. Changes in Total Cost of Ownership. In a recent in-depth study by Brent Kelly and me, we determined that enterprises from 1,000 users to 50,000 users have these important patterns:

  • There’s almost no money left in selling hardware or licenses. Each of these is less than 10% of the 5-year TCO for a 5,000 user enterprise. Increasingly the licensing is bundled into enterprise agreements. The general purpose computing hardware is increasingly economical and is purchased, by most customers, from their server vendor, not the UC VAR.

  • The biggest TCO factor of all is the cost of staff to operate the systems.  If the surveys by Nemertes Research or Aberdeen Research are to be trusted, customers are spending between 60% and 70% of TCO on the staffing to operate their UC and IP-PBX systems.  We think that these costs are coming down based on learning curves, but this is still the biggest, often hidden or ignored cost.

2. Cloud Is Disruptive, and Moves the Money. Many sources, including our TCO study and the Enterprise Connect mock RFPs, show that cloud-based UC and IP-PBX solutions do not offer a lower TCO. Yet, folks are moving to the cloud, anyway. Why is that?

  • They want to get rid of those high in-house costs of operation. The cloud will do some of that, but will just hide the cost in the monthly per-user charges.

  • They want more flexibility. This is a big factor! Cloud solutions are ideal for rapid growth situations, for field or remote workers, and for portions of the workload. For example, TCO for cloud-based conferencing services is lower than on-premises costs in all size configurations. But when you follow the money, the winning cloud solutions (Cisco WebEx, Microsoft Office 365 plus Skype and Live Meeting, and Google Hangouts) come from the new global network and software powerhouses, not from the carriers who used to dominate the voice and video conferencing markets nor from the IP PBX players who had a day in the sun selling on-premises conferencing services.

  • They want to buy communications the same way they buy their applications. Many enterprises, small to large, are using the cloud for some of their business applications. This ranges from Payroll and HR to sales (Saleforce.com, Microsoft Dynamics, SAP, Oracle) to healthcare (Cerner, McKesson, GE, Siemens) and other vertical market apps. Also, most of us have smartphones and tablets that loaded with personalized cloud-based applications. Thus, it is natural for both the enterprise and the employees to want communications in the cloud, integrated with our apps. The tough news is that this is often happening with no involvement from the traditional on-premises telecom group. The cloud-based communication functions, beginning with IM, email and conferencing, are just bundled in with the cloud-based apps. FTM in this case leads to other departments and other budgets.

3. The Big Money Is Not in the Telecom Budget. The entire global UC and IP-PBX industry is reported to be roughly $30B to $40B per year. The global payroll, based on the World Bank and other data sources, is roughly $70T per year. Yep, that means the payroll of those who use communications tools is about 2,000 times larger than the total communications budget. 

  • If you FTM for a typical user who may be on a voice or video call one hour per day, the tariffs or bandwidth and the amortized IP-PBX and UC system may cost $2 to $4 per day, but the cost of the two persons (minimum) on the call for an hour will be more like $60 per day. If the UC industry will FTM, they will emphasize tools that shorten or even eliminate those calls. Who wouldn’t agree to spend another $4 to $8 per employee per day if they could save $30 per day in labor costs? Contact centers ‘"get" this, but we seem to forget the lesson elsewhere in the organization. 

4. Winners Will Provide Services. One conclusion is that the winners in this game will be those who develop and then deliver services to help the customer FTM and then, based on the findings, apply selected UC technologies in order to produce big savings or big financial gains by optimizing communication-intensive workflows. 

The money trail is pretty visible. This transition has happened in plenty of other industries and technologies in the past. The evolution from mainframe computers to the present day is one very relevant example. This year’s UC Summit will definitely be a forum where FTM is the topic du jour as the enterprise communications technology industry undergoes a radical change.

Hope to see you there. If not, we’ll report the experience here in early May.

 

1 Responses to "Following the Money at the UC Summit" - Add Yours

Gravatar
Art Rosenberg 4/26/2014 10:47:25 AM

Marty,

You got it!

I would also describe the FTM shift in business communications as moving away from person-to-person contacts to direct online access to information and basic business transactions (self-services), and, with greater mobile accessibility, automated notifications that speed up business processes and avoid time-sensitive delays in taking action.

Self -services reduce operational costs, while faster notifications will improve business process performance. I'll be talking about that at the UC Summit 2014 under the title of "Mobile Customer Services."

Your other points about "cloud" service application flexibility and third-party support expertise are, of course, also valid arguments for change.

See you at the UC Summit!

To Leave a Comment, Please Login or Register

UC Alerts
UC Blogs
UC ROI Tool RSS Feeds

Related UC Vendors

See all UC Vendors»