Information & Communication Technologies


New Business Models Reshape the Hosted Communications & Collaboration Market

by Elka Popova 11 Jul 2012
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I have been tracking the North American hosted IP telephony and unified communications (UC) market for over a decade and have always found it tremendously exciting. Nimble, entrepreneurial companies have been quick to pursue this opportunity, continually innovating and valiantly overcoming the numerous hurdles thrown their way by shrewd competitors and demanding customers. It’s been a great pleasure to develop relationships with the amazing people who run these companies and learn from their insight and broad industry experience. I still remember my early conversations with 8x8, BroadSoft, CallTower, Covad, M5 Networks, Pingtone, Telekenex and other pioneers in the hosted space. These companies shaped the hosted IP telephony market and did all the hard work of educating customers and competitors about the benefits of hosted communications long before cloud became a trendy word and everybody flocked to be a cloud provider.

The market has grown at a steady pace over the years. According to my estimates, in 2011, the North American hosted IP telephony and UC services market grew at 42.5 % in terms of installed lines and 35% in terms of revenues. I expect the market to continue to grow at about 30% in terms of both installed lines and revenues over the next six years.

Now the market is going through a major transformation. The cloud hype and changing market conditions have resulted in a flurry of announcements by new market participants, causing positive excitement for some and serious grief for others. More specifically, the PBX vendors are bringing the heavy artillery to the hosted market. Most of their solutions are multi-instance, virtualized platforms that use shared hardware and dedicated software instances to address the needs of larger, more demanding and security-conscious business customers.

Here follows a brief summary of key PBX vendors’ cloud and hosted offerings.

Mitel was one of the first PBX vendors to launch a portfolio of hosted/cloud solutions. The Multi-Instance Communications Director (MICD is targeted at service providers looking to brand their own hosted IP communications services and provide all billing and management support. MICD is a high-density platform that competes directly with the more “traditional” hosted IP telephony platforms (such as BroadSoft’s) and appears best suited for small and medium-sized (SMBs) looking for standard PBX functionality, along with voicemail, twinning, and basic conferencing. Mitel Anywhere is an MICD-powered service provided by NetSolutions, Mitel’s carrier division. Virtual Mitel Communications Director (MCD), on the other hand, is available to service providers looking to target a slightly different customer base—typically larger businesses with hybrid (hosted and premises-based) environments.

As always, Siemens Enterprise Communications was also quick to market with an innovative technology and delivery model. Siemens’ OpenScape Cloud solution leverages Siemens’ UC suite to deliver a broad set of communications and collaboration applications to businesses looking to outsource their communications infrastructure. Siemens has chosen to use data-center partners to host the platform and to sell exclusively through its channel. Siemens also had some OpenScape Voice implementations with service providers such as Postrack and Engage prior to the launch of the new solution. Even though the OpenScape Cloud solution was launched more than a year ago, Siemens has shared little about the success of this offering.

Cisco initially forayed into the hosted market with its Hosted Unified Communications Services (HUCS), but this product saw limited success. It is now heavily marketing its Hosted Collaboration Solution (HCS) solution and claims over 20 partners globally.

Verizon was the first one to launch an HCS-based unified communications as a service (UCaaS), which is intended to complement, not replace its hosted IP Centrex (HIPC) service. AT&T followed suit with an HCS-based service, differentiating through a more sophisticated user client. Soon after, Sprint launched its own UCaaS service with a unique value proposition around advanced mobility features. EnPointe is betting on its advanced contact center capabilities, complementing the core HCS suite, and SpanLink is looking to deliver a similar value proposition, but in a partnership with Convergys. Inteliquent is positioning itself as a wholesale provider focusing on platform management and using partners to interface with customers. West IP Communications is already reporting significant traction of its HCS-based service (complementing its heritage hosted IP telephony offering), but mostly in Asia. Cypress Communications, now Broadvox, has launched an HCS-based service along with its heritage solutions based on GenBand A2 and C20 and BroadSoft . Most of Cisco’s partners are targeting large businesses, primarily those with existing Cisco infrastructure. One of the key benefits of the HCS platform is customer ability to preserve Cisco IP phones and even port Cisco licenses.

Microsoft is attacking the market from a different angle. With its Office 365 offering it is mostly targeting small businesses looking for an all-in-one package of business and communications applications. But Lync in Office 365 doesn’t support PSTN connectivity, so it’s not a true PBX-replacement offering. However, recently, Microsoft introduced a multi-tenant Lync platform for its partners to deliver hosted telephony and UC services. Interest appears to be very high among partners and I expect to see a plethora of hosted Lync offerings in the near future. In fact, an entrepreneurial company called GeniSys Global engineered a multi-tenant platform out of Microsoft Lync Enterprise and has been delivering hosted Lync services for over a year now.

Avaya, somewhat surprisingly, forayed into the hosted space with a small-business, over-the-top cloud offering dubbed AvayaLive Connect. Using its web.alive platform (now rebranded as AvayaLive Engage) for the e-commerce portal and Nortel’s SCS technology at the back end, Avaya is targeting businesses that look for on-demand usage and billing, quick and easy provisioning, and relatively simple functionality. The solution features basic PBX functionality, voice conferencing, voice/unified messaging, video, mobility, presence, and instant messaging (IM)/chat. The solution supports PC, Apple Mac, iOS and Android devices. AvayaLive Connect is part of a broader framework and portfolio—Avaya Collaborative Cloud. I expect Avaya to launch a large-business cloud solution as part of this framework in the near future.

Alcatel-Lucent has a cloud solution based on its OpenTouch architecture that can be deployed on premises or as a hosted, multi-instance platform targeting larger business. It is likely to use the OpenTouch architecture to enable partners to deliver hosted services to small businesses as well.

Earlier this year, NEC launched UNIVERGE Cloud Services/UCaaS. The initial offering is a comprehensive suite of voice, data and video services accessible through a Web-based end-user client that can be deployed on any device, including PCs, smartphones and tablets. As of Q2 2012, UNIVERGE Cloud Services UCaaS were expected to be available in three packages—basic, standard and premium – specifically designed to be offered through NEC’s broad network of authorized dealers, as well as directly from NEC’s enterprise sales group. 

Most recently, Toshiba announced its VIPedge cloud offering, hosted in Toshiba’s data centers and delivered through its vast network of dealers. As the name suggests, Toshiba’s IPedge is at the foundation of the new cloud solution, which offers all the functionality of the premises-based platform, including PBX features, voice messaging, PC-based call control, soft phone, presence, instant messaging, integrations with CRM and other business applications, and mobility.

ShoreTel chose a different route to the hosted IP telephony and UC services market. Instead of developing a hosted or cloud solution in-house, it acquired M5 Networks, a leading provider of hosted communications. M5 has leveraged BroadSoft’s platform to develop its own robust, customized SaaS  back end, which allows it to better manage the applications and network and be more agile with new features and capabilities. ShoreTel ‘s partner channel is likely to provide significant growth opportunities for the cloud offering.

This article is already too long to delve into the advantages and disadvantages of the different solutions and business models. But the key implications of these new developments are as follows:

  • End users can enjoy a continually expanding array of hosted/cloud options available to them.
  • New platforms launched by PBX vendors offer a broader set of pre-integrated capabilities than most multi-tenant solutions.
  • Multi-instance platforms are allegedly more secure as each customer receives a dedicated instance of the software.
  • With the new business models, end users can continue to do business with their trusted value-added resellers (VAR) and local interconnects even as they migrate to hosted solutions (unlike the past, when hosted solutions were only available through telecom carriers).
  • The success of each individual vendor is largely dependent upon the strength of its channel and its partners’ willingness and ability to promote hosted solutions. S
  • Special programs, incentives, and, more important, education and training will be critical to partner success.
  • The more traditional multitenant solutions (e.g., BroadSoft’s platform) will continue to offer a more economical and easier-to-manage infrastructure for service providers targeting businesses with fewer customization and security concerns.
  • Regardless of the platform used on the service provider network, businesses need to make a choice whether they wish to deploy a managed or an over-the-top solution. The quality of public broadband has greatly improved over the years, but a managed solution can provide the business with a peace of mind with regard to service availability and quality.

Check these links for additional insight on the hosted market:

• My Enterprise Connect presentation on hosted IP telephony and UC services (to access, use: Username: 12enterprise, Password: connect12)
• Avaya Collaborative Cloud Goes Live with AvayaLive Connect

 

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