Melanie Turek's Blog

UC Revenues Won't Change the World

24 Feb 2010 | by Melanie Turek
Share this:

We just released Frost & Sullivan’s latest research on the unified communications market, and one thing stands out to me above all others: UC is not a new market; it’s a way for vendors in existing markets to continue making money. The biggest impetus for the players in this space to keep playing isn’t to deliver new business revenue; it’s to stop existing, or past, revenues from disappearing—not to another vendor (although that’s always a risk), but from the market altogether.

In the case of Microsoft and IBM, the goal is simply to give customers a reason to upgrade. Unless those vendors can deliver a compelling reason for companies to move to the next version of their communications and collaboration software, companies aren’t going to—sometimes for many years. Before OCS and Sametime (in its robust iteration), fewer companies were upgrading their Outlook/Exchange or Notes/Domino deployments on a routine—or even occasional—basis.

And the telephony vendors have it even worse: Hard phones and network gear should be built to last—sometimes decades or more. And except in certain specific use cases, like the contact center, businesses don’t need or want to add more features to their employees’ handsets. As a result, there are fewer opportunities for those vendors to upsell their existing customer base.

Of course, that doesn’t mean there isn’t a market for UC, or that UC revenues aren’t worth tracking. OCS and Sametime are not simply “upgrades” of Outlook and Notes, after all—they are entirely new applications. But the revenues they promise to generate may not be a profit bonanza to the vendors that sell them; they may, instead, simply serve to keep those vendors in business. They may even act as loss leaders; we are seeing certain companies in the market giving away UC clients, to encourage the purchase (or upgrade) of other applications and servers, for instance.

This has an impact on the size of the UC market. Obviously if you’re giving away the software for free, you’re not making any money off it. But even more important, when we look at the overall size of the UC market, we need to continually remind ourselves that most, if not all, of the money spent on UC clients and servers would probably have been spent on other communications applications (IM, conferencing, voice, etc.).

The question for vendors, then, is how to grab a bigger piece of the already-existing pie.