Enterprise Communications

The Death of Enterprise Hardware Vendors

by Rufus Connell 13 Dec 2011
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Is Google's rumored announcement of "very, very large" Google Apps customers the first death knell for Enterprise Hardware vendors like Avaya, Siemens, Alcaltel Lucent, even Cisco?

The rumors are reported here http://www.mercurynews.com/top-stories/ci_19531412

Imagine a world where a typical desk worker uses Google Apps for productivity, Google Talk for chat, UM and video conferencing, and they access those services through an Android phone, an Apple tablet, and either an inexpensive laptop or a MacBook. For voice calls, they use their smartphone’s native calling, or maybe even Skype or a Google talk application. That world may not be that far away. Companies that have relied on comfortable revenue streams from expensive desktop phone products and core systems seem to have missed the boat. Tight integration with super capable employee owned devices, like iPhones or Android phones, may deliver better UM integration than the incumbents can deliver. Low, predictable costs will give employees devices that they want to own and carry everywhere.

Apple's model of native applications frees enterprise of many of the security risks that have plagued Wintel machines for decades, and Google's cloud model, layered on top of these applications allows enterprises to deploy tightly integrated productivity apps easily, quickly and inexpensively.

To me, the missing piece of the puzzle is SalesForce. The various SalesForce tools along with the ability to buy prebuilt force.com applications or build your own enterprise applications is a critical piece that is missing from Google Apps. Were Google to partner up with SalesForce (or even buy them....) companies could run their entire enterprise on a reliable, predictable cost, platform with real delivery of the CEBP that current enterprise vendors tout.  Will Google partner here, or try to develop a platform to compete with force.com?

Although a key watchword of the 1990s was CTI (Computer Telephony Integration) it never really worked right and never recognized its potential. When you next see an ad for a mobile phone, listen for the specs. Dual Core 1Ghz Processors, 64 Gigabytes of Storage, 4G mobile networking, 802.11 b/g/n, it’s not a phone, it is not a limited handheld computer. It is a powerful mobile computer. It makes no sense to think about integrating the laptop to an expensive desktop phone system, the integration is already done and it’s not integration between a laptop and a desktop phone, it is integration of the smartphone with itself by way of the native applications.

We live in a time of economic uncertainty, if you listen to the bears, this will be the case for some time. Enterprises are being forced by young people entering the workforce to provide mobile work solutions so they have to deploy smartphones. Those same enterprises are looking for places to save money, and spending to deploy desktop IP phones, spending to deploy an IP PBX, and then spending on people to maintain those superfluous products will all look like attractive costs to cut.

Is my vision upon us or a pipe dream? My colleague Alaa Sayeed is still quite optimistic about phone shipment growth in his World Enterprise Telephony Platform and Endpoint Markets which can be found here. http://www.frost.com/prod/servlet/report-toc.pag?repid=N942-01-00-00-00 . That said, these deals could be game changers.

All that said, the role of the "land line phone" will never go away completely. Professionals in carpeted environments will demand mobility, but many environments will benefit from fixed devices. Retail, manufacturing, warehouses, hospitality, hospitals all look for tools for mobility, but even ruggedized devices get lost and broken. Many employees and customers in these spaces need a communications device that they can always find and use in a specific spot. The big question is, can our traditional enterprise hardware vendors evolve quickly enough to keep up with the dynamic nature of companies like Google and SalesForce that have embraced tight integration with mobility and deliver it through cloud based services or can they survive on the increasingly niche markets that will still want fixed telephony? 

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Comments (1)

By  Alaa Saayed
ICT Principal Analyst, Frost & Sullivan

15 Dec 2011 07:50

Hi Rufus,

I like your thoughts and agree with, but have some comments. Enterprises will not massively move their core enterprise communications into the cloud soon.

Here is why: the higher education vertical is one of the early adopters of cloud communications, if not the first one. Higher education is going with SaaS or Software as a Service as tha application delivery of choice, pushing aside many traditional packaged or downloadable software. Some prominent names of SaaS in education include Google (Google Apps for Education) Microsoft (Live@edu service and Micorosft Office 365 or ex BPOS), and IBM (LotusLive Suite). Since Both Google Apps anf Microsoft Office 365 have various types of communications and collaboration elements embedded into them (including click-to call capabilities, messaging, video sharing, and IM), these solutions could also be considered CaaS services. However, lets not confuse ourselves that having certain elements of communications does not main to have your core voice and call control capabilities in here.

Migration is mostly happening in email to the cloud and the deployment of  utility software applications such as Google Docs and Google Spreadsheets. According to the latest Frost & Sullivan hosted email study, education is the largest vertical deploying hosted email with 21 percent of market share in terms of revenue contribution. Many of the vendors I spoke with in the education vertical told me that migration has been mostly focused on email collaboration. Aside from SaaS, PaaS is also successfully deployed in higher education institutions, specially in the fields of application consolidation and new application development.

Now what about the fields of hosted IP telephony and unified communications as a service (UCaaS)? Although we see future success of these solutions in both the education vertical as well as other enterprise environments, this, again, is not likely to happen soon. Not only problems such as security, control, reliability, performance, refederation (if you move your email to the cloud, you need to find out how you integrate voicemail) and management have to be solved, but simply many enterprises either do not have the mind set or do not want to have their core voice infrastructure sitting in the cloud.

Furthermore, cloud-based hosted service providers are charging somewhere between $35-50/user/month for there services. If you add up this monthly fee, multiplied by the number of users, after a year you end up having enough capital to purchase a PBX. Cloud might seem like a good strategy in the short-term, however, in the long-term buying a PBX might give you better ROI. CIO know that if they spend a bit more today they will end up saving in the long run.

To sum up, although there is a significant opportunity for cloud communications, there is still a long road for massive shifts of core voice infrastructure (not communication-related components) to the cloud.

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