New Research - SMB UC Opportunity Showing Promise

New Research - SMB UC Opportunity Showing Promise

By Jon Arnold July 30, 2013 7 Comments
Jon Arnold Image for Unified Communications Strategies
New Research - SMB UC Opportunity Showing Promise by Jon Arnold

I’m a market researcher by trade, and am always drawn to studies that help quantify the trends I write about on a regular basis. I’ve got a good one to share here, and since I’m the only analyst that has been briefed on the study so far, chances are you haven’t seen this yet. There has been some media coverage, but not as much as I think is warranted, and wanted to be sure the UCStrategies community gets the word while it’s still fresh.

This post is built around highlights from a just-published study sponsored by Metaswitch Networks, a vendor I’ve followed for many years. They commissioned research firm GrowthMark to do this work during March and April, so the data is very current. In my view, the findings have critical mass, being based on surveying 850+ SMB owners/decision-makers, along with interviewing 100 of them further by phone. To address the supply side of the market, they conducted about 20 mystery shops with both large and small service providers.

The highlights were recently published by Metaswitch Networks, and a five page summary write-up is available for download. I’m going to cite the relevant takeaways from that here, along with the implication I see for the UC space.

Table Setting

  • Most of their data segments the SMB space by number of employees - <50 and 50+

  • There are three basic themes I want to highlight: 
  1.  Adoption of IP communications (VoIP/IP PBX – on-prem or hosted)
  2. Adoption of UC
  3. Adoption of cloud services

Key Highlights – IP Communications

  • For IP communications, roughly 20 percent of the overall SMB sample has adopted. As to be expected, the incidence rises by size – 17 percent for <20 employees, 22 percent for 20-99 employees, and 29 percent for 100+.

  • The majority of this adoption – 60 percent – is for hosted services, and 40 percent is premises-based.

  • Among TDM users – roughly 80 percent of the sample – intend to adopt IP in the next two years is strong – 60 percent for <50 and 72 percent for 50+ SMBs.

Key Highlights – UC Adoption

  • Among <50 SMBs, adoption is minuscule – 1 percent (data not shown for 50+, but is available)

  • Interest in adoption UC, however, is strong – especially among 50+ SMBs – 79 percent were “extremely,” “very” or “interested.” This aggregate level drops to 61 percent for <50 SMBs, but is still fairly high.

Key Highlights – Cloud Adoption

  • Roughly 20 percent of <50 SMBs have done so for some type of cloud service, and the incidence jumps to 40 percent for 50+ SMBs.

  • Cloud adopters regularly purchase more than one service from their vendor/provider.

Key Highlights – Service Providers

The summary paper touches on some other findings that I’ll leave for you to explore, and with additional follow up, Metaswitch Networks may share additional data from the complete analysis. I’m going to cite one other aspect from the highlights now, and it has to do with the supply side. The research addressed this via mystery shopping, where they contacted service providers under the pretense of being potential customers.

This is mostly qualitative research, but it provides telling insights about the buying experience and overall state of marketing to SMBs looking to upgrade their phone systems. While the focus was on getting information and pricing for hosted or premise-based phone systems, it’s not a big stretch to say these findings would be pretty applicable to UC.

  • Price quotes were all over the map, with some being all-inclusive and others with add-ons and recurring charges. To simplify the range for all these scenarios, the price points were normalized into a metric they labeled “TCO per user per month.” Am sure you can read that many ways, and I’ll let you pick up that ball for debate. For now, I’m just reporting the facts. With that said, the TCO numbers ranged from $50 to $140 per user per month.

  • The quotation process was equally inconsistent. As the summary illustrates, some service providers were quick, clear and informed, while others were overly complicated, slow and not very responsive.

  • Generally, CLECs came out on top when compared with how ILECs responded. There’s a really nice matrix summarizing how all the mystery shops panned out along two attributes – price and sales process.

My Takeaways

There’s a lot to like in this research, and I doubt the mystery shop findings would have been much different if focused specifically on UC. While my highlights here will not likely be surprising, it’s great to see them validated, along with some dots being connected more clearly.

For me, the key takeaway for vendors is that SMBs are cool with the cloud, and they’re happy buying multiple services from the same provider. This should create some strong bundling opportunities to extend cloud to include some form of UC.

SMBs may not truly understand the UC concept, but interest is high, and given the strong intent to go IP, there’s a lot of upside to be had. The research tells me that the right value proposition lies in a hosted offering that ties UC and IP communications together. They’re already using cloud for things like email, storage and anti-virus, and given how ham-handed service providers seem to be in selling to SMBs, it’s not hard to see how the complexity of doing UC on-prem could be a deal-breaker.

 

7 Responses to "New Research - SMB UC Opportunity Showing Promise" - Add Yours

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Jack McCarthy 8/1/2013 3:15:38 PM

Really interesting Jon. UC for SMBs looks to be an exciting growth area -- in the cloud, on-premise, and, as you've written about in the past, hybrid combinations of both.
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Dave Michels 8/2/2013 6:43:10 PM

I think that sucking sound is SMB heading to the cloud, I figure hosted prices will start to really fall in the next 6-12 months and it will even accelerate.
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Holly Dowden 8/6/2013 9:35:36 AM

Thanks for sharing, Jon. Why do you think SMBs <50 have been the slowest to adopt? Lack of understanding? Lack of need? Price concerns? Or that most of today's UC clients/offers are too complex/overkill for the <50 market...

Holly Dowden
Director of Product Marketing
mPortal
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Jon Arnold 8/7/2013 8:42:19 AM

I'm with Dave on this one, Holly. For<50 market, it's mostly lack of awareness and channels not ready to serve them yet. Direct offerings from cloud providers are well positioned to serve this segment and players like Phone.com and Fonality have been doing well here for quite some time. It's a very price-driven segment, so UC players have to be careful offering the right mix of features that isn't overkill and they can still make money with.
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Michael Finneran 8/7/2013 9:59:29 AM

I question their definition of "UC" which they describe as providing:
"• A consistent feature set regardless of whether an individual uses a desk phone or their mobile device
• A single voice mailbox and (if desired) phone number for desk phones and mobile devices
• Theabilitytoaccessphonesystemfeaturesfroma computer, laptop or tablet
• The ability to make and receive calls from computers, laptops and tablets using a softphone"

What about presence, multi-modal communications, collaboration tools, ...
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Art Rosenberg 8/9/2013 8:14:20 AM

I agree with everyone!

I also would include the role of UC-enabled communications beyond just person-to-person contacts but extending to business process interactions that will be facilitated by mobile smartphones/tablets, as well as easier multi-modal connectivity via the Internet and WebRTC. Business communications are fundamentally the same at the end user level, and as the technology moves to "customer interactions" and "cloud" services, it will become practical for any size business organization.

So, it is also a matter of new technology availability as a practical hosted/managed service offering that has been the holdup for the SMB market!
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Art Rosenberg 8/10/2013 8:48:27 AM

I just took a look at the original report and totally agree with Michael on their very limited definition of UC. It is heavily focused on internal users and access to voice connections. They even neglect to include unified messaging capabilities which are becoming equally or even more important for mobile users than voice connections.

So, if that is how they defined UC to their survey respondents, I can't accept all their results at face value. If anyone will be soon be adopting new mobile applications and hosted/managed services, it will be the SMB staff and their customers!

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