By Elka Popova, Program Director, Unified Communications

With the recession having forced business decision makers to change their investment priorities, communication vendors and service providers are re-assessing their challenges and opportunities for growth. One of the top questions on communication vendors and service providers' minds is how perceptions of unified communications (UC) have changed and how the down economy is impacting demand for the individual communication applications as well as demand for UC as an integrated set of voice, data and video applications with pervasive presence across all communication media.

We conducted an end-user survey of over 100 C-level executives at U.S.-based multi-national corporations (MNCs) that sought to accomplish the following objectives:

• Measure awareness of communication and collaboration tools
• Identify leading communication and collaboration vendors and service providers
• Identify frequency and level of communication and collaboration tool usage
• Determine importance of communication and collaboration tools
• Understand the effect of the recession on communication and collaboration tools
• Determine future intentions for deploying communication and collaboration tools within organizations

We sought to understand the degree of awareness, usage and importance of the following applications:

• VoIP
• Audio conferencing
• Web conferencing
• Video conferencing
• Telepresence
• Instant messaging
• Presence
• Unified messaging
• Unified communications

One of the most positive findings was the fact that over 30% of respondents were aware of all these applications. Most respondents (80%) were aware of VoIP and the three main types of conferencing applications, whereas about 31% were aware of UC (the lowest awareness level of all applications). Interestingly enough, over 30% of respondents also claimed to be using UC within their organizations, which may indicate that, due to varying UC definitions, users identify UC with IP telephony and/or other advanced communication applications. Another reassuring survey finding was the fact that at least 30% of the respondents found all the communication applications listed above to be "very important" and at least 73% found each one of these applications to be either "very important" or "somewhat important".

The really bright spot was the finding that 74% of the respondents expect their budget for communication and collaboration products and services to increase or stay the same with only 26% anticipating a budget reduction over the next 12 months. Some of the stated reasons for increasing spending included expansion and growth at the respondents' organizations and industries as well as technology advances and replacement of outdated systems and use of new applications. Respondents who stated that they planned to continue or increase their usage of UC explained their decisions listing a number of actual and anticipated benefits including: cost savings, productivity and the ability to better communicate both internally and externally.

Finally, one other interesting phenomenon revealed by the survey was the respondents' strong intentions to increase their usage of managed and hosted services. Only 18% planned to decrease their usage, whereas the rest intended to either "somewhat increase" or "significantly increase" their usage of such services.

We also spoke at length with several Chief Information Officers (CIOs) planning to implement UC in the near future and their perspectives varied significantly based on their individual company situations. However, there were some common factors that surfaced as the most significant influencers on CIOs' decisions to deploy advanced UC applications, as follows:

• Readiness to abandon existing infrastructure and solutions (e.g. degree of equipment amortization, current partner strategies and partner financial viability, cost of migration, etc.)
• Comfort with VoIP and next-generation technologies
• Perceived value of IM and presence
• Awareness of specific UC benefits such as cost-efficient support of mobility and remote workers
• Company prospects for growth or downsizing
• Acknowledged need for greater flexibility
• Perceptions of the various UC vendors/ service providers
• Management/owner tolerance for risk

The state and nature of the existing communication infrastructure seemed to play the most important role, by far, in C-level executives' decisions to deploy UC solutions. Typically, new investments are only considered when the existing telephony infrastructure is no longer sufficient to support evolving company communication needs. Therefore, the most common "trigger" for switching to IP telephony and/or UC is the need to replace an outdated legacy PBX. Interestingly enough, there was one notable exception where the current infrastructure in itself was fairly advanced; yet, it presented some challenges.

Here follow some brief case studies that illustrate the great variety of approaches vendors and service providers should expect to encounter in the marketplace.

A medium-size, professional services firm that has been using Nortel communication solutions for 20 years has reached a point where the existing communication infrastructure needs to be replaced to meet evolving market realities. About five years ago, the company IP-enabled its Nortel system, which helped realize cost savings, while maintaining the quality of voice communications. However, today, this architecture presents certain challenges as follows:

• New communication capabilities are required to effectively support remote office workers.
• There is no more space for adding IP cards.
• From a solution management point of view, the company cannot afford to keep adding in-house support staff; yet, availability of VAR partners capable of supporting IP-enabled platforms is limited and likely to become even more scarce going forward.

This company is trialing some hosted UC services, but a few factors are holding it back from migrating to UC at once, including:

• Conservative owners willing to bet only on tried-and-true, mainstream technologies
• Need to ensure that client interactions will be completely reliable
• Concerns about IP telephony and UC vendor viability and roadmaps
• The CIO did not find the incumbent providers' hosted IP telephony offerings compelling, but is cautious about smaller providers with limited brand-name recognition.

This case study proves that, when the time is right and the need for new communication capabilities arises, budgets may be available, but each vendor or service providers will need to engage in consultative sales with the customers to explain the benefits of their solutions and convince them that they are the right choice. Customers in similar situations seem suitable targets for more aggressive marketing campaigns and educational efforts promoting the benefits of IP telephony and unified communications. Specific case studies and compelling ROI evidence can encourage the C-level executives to make the final move.

A 500-person professional services firm is currently using a shared-tenant Nortel TDM PBX, some SMB Nortel platforms, as well as a hosted UC service. The firm is growing, opening new offices and looking for a solution that will help all employees communicate and collaborate more effectively.

The specific challenges faced by the CIO and other C-level executives include the following:

• Growth requires integration of multiple small sites; yet, growth is not rapid enough to warrant the expansion of in-house support staff.
• Voice mail integration and abbreviated dialing across sites present a challenge with the existing disparate solutions.
• Current headquarters lease expires in two years and management wishes to avoid longer-term commitments with service providers.

The firm is trialing a hosted UC service at one of its small locations. While the service seems to be working well, some of the CIO's concerns about UC include the following:

• A skeptical perspective on the value of IM and presence
• While the cost savings associated with IP telephony offer an appealing value proposition, decision makers at the firm need further proof that it can offer additional benefits in order to switch from a solution that meets most of their communication needs.
• The firm's positive experience with shared-tenant services has encouraged management to look into some hosted options, but the final decision may be delayed until service providers are able to offer some more compelling capabilities (e.g. OCS-based presence for native integration with Outlook).

This case study offers yet another proof that some budget for new communication solutions is available today but further marketing and education efforts are needed in order to present a compelling case to decision makers hesitant to switch to a next-generation architecture. Similar to the previous case, case studies and demos may be needed in order to prove that there are productivity and efficiency benefits in addition to the VoIP cost savings. Since the customer is familiar and comfortable with shared-tenant services, a hosted or SaaS UC solution may be most appropriate. Yet, flexibility in commitment terms seems critical in this particular case.

A 2,000-person services firm operating 15 offices worldwide is running an advanced, three-year old Avaya IP PBX in its headquarters. The firm has grown from four to 15 offices over a period of about 24 months and is finding it challenging to set up and integrate small offices in a timely and cost-efficient manner.

Some of the specific challenges faced by the CIO include the following:

• Cost and time required to enable PRI connections and voice circuits at new sites, especially in international locations
• Cost of deploying Avaya platforms at small locations of less than 20 people
• Cost of hiring additional in-house Avaya specialists.

The company has just signed an agreement to migrate all users to a hosted UC service that will help them eliminate PRIs altogether and also save money on maintenance and service management as well as improve service failover capabilities by deploying two redundant WAN connections sharing the load. In the CIO's opinion, the hosted UC service is similar to the Avaya platform in terms of functionality. However, the new project is expected to save the firm a lot of money going forward in the following ways:

• It will eliminate the need to upgrade the voice mail system.
• The people who used to be telecom administrators will be moved away with the hosted service and re-purposed within the company.
• The new hosted UC platform also comes with conference calling capabilities, which will help improve productivity and lower costs compared to using other conferencing services.
• The hosted UC service includes free domestic long-distance minutes up to a certain limit per month and the rate for international calls is fairly compelling.
• Another major benefit is that now the company can provide all these features and applications to everyone while saving money.
• The service provider will buy back the old endpoints and supply the new ones.
• The five-year TCO for the hosted service was most cost-effective compared to a managed service or the status quo.

This is a unique scenario where a customer is choosing a hosted UC service IN SPITE OF the fact that it has an unamortized and pretty advanced CPE platform in place. The CIO and his team had to do a lot of preliminary research in order to make a decision and convince the firm's owners that this was the right way to go. The case study proves that hosted UC, when delivered to the right customer by the right service provider with the right capabilities can be a viable option, especially at a time when cost savings are a primary concern.

Communication vendor performance in Q1 2009 was disappointing, especially given the expectation that some of the purchase decisions must have been made early in 2008, prior to the official acknowledgement that the world was going into a major recession. While vendors seem to expect a leveling out of revenue trends across product lines, many are likely to end 2009 with double-digit negative growth rates. It is too early to predict trends in 2010 with any degree of confidence, but it is likely that communication service and solution markets as whole will remain stagnant at best.

The results from our end-user survey and the case studies above indicate that opportunities exist. However, these opportunities are limited to businesses that perceive a clear need for upgrading their infrastructure to support evolving communication needs. A fairly strong trigger will be needed in today's economy for any business to initiate a major investment in advanced applications and integration services. Although the majority of survey respondents stated that their budgets are likely to remain the same over the next 12 to 24 months, fear of uncertainty is likely to result in tactical decisions which may involve adding applications in a piecemeal fashion, making small incremental upgrades or just maintaining existing solutions. Strategic investments are more likely to be postponed unless some trials or pilots have been in place for some time now.

As both the survey results and the case studies further indicate, hosted solutions seem to offer an appealing alternative to some professional services organizations (as well as others with similar communication needs). Hosted UC provides a number of benefits including cost savings, redundancy, the convenience of having all applications pre-integrated and a single party accountable for the entire communication infrastructure. Although hosted solutions are not for all types of organizations, they do offer a less risky alternative for businesses seeking to test and trial UC in spite of the down economy and tighter budgets.