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Guide to Unified Communications as a Service: Making sense of it all

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Vendors, providers hawk cloud UC, but UCaaS market slow to develop

Unified communications (UC) vendors may be hawking cloud-ready products, but the Unified Communications as a Service (UCaaS) market is still tepid, for now.

Some large cloud providers, such as Verizon, AT&T and Microsoft, have begun to offer Unified Communications as a Service (UCaaS). While smaller providers may be tempted to follow their lead, market demand for UCaaS is limited. For now, providers will do better to focus on other Software as a Service (SaaS) opportunities and specialize in individual, cloud-based applications for telephony, video, email, instant messaging and conferencing.

If and when smaller providers do offer UCaaS, they should evaluate three problem areas before they start to build and sell unified communications in the cloud:

  1. Demand. Lively discussion should not be mistaken for market opportunity. Customers are not showing much interest in UCaaS procurement, despite the media hype around it, according to Bill Haskins, a senior unified communications analyst at Wainhouse Research.
  2. Cost. UCaaS solutions are expensive to procure, integrate and deploy. Long before they offer UCaaS, cloud providers will find themselves offering services that support hybrid cloud environments for their customers, said Cindy Whelan, a senior analyst at Current Analysis, who specializes in telecom companies and their UC offerings.
  3. Business partnerships. Unlike hosted UC providers with already established partner relationships, smaller cloud providers would have to establish, test and nourish UCaaS partnerships to deflect cost, ensure UC integrity and guarantee reliability and Quality of Service (QoS), according to Scott Gode, vice president of product management and marketing at Azaleos, a managed service provider (MSP) specializing in Microsoft products.

UCaaS solutions are emerging despite low demand

Even though there is low enterprise demand for UCaaS today, Haskins, Whelan and Gode all agree that a healthy UCaaS market may soon emerge. Early indicators of that include:

  • New product development from large providers and hardware vendors
  • Increased general interest in unified communications
  • Growing unified communications demand in Europe

Larger telecom carriers and software developers are trying to capitalize on these trends by bundling products that, at the outset, may seem attractive to customers. For example, both Verizon and AT&T enable UCaaS using Cisco Systems' Hosted Collaboration Solution (HCS) -- a group of products that let providers offer centrally-managed UC services to their clients. Ostensibly, cloud providers could package voice, video and instant messaging services and deliver them via the cloud to desktops, laptops and tablets. Products like HCS could even be easy for cloud providers to implement, but as the market stands today, "there's no money to be made, at least for the moment," according to Haskins.

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That will change, however, as demand emerges, grows and starts in the small- and -medium-sized-business (SMB) market. Haskins said there is a strong business opportunity ahead for cloud providers that decide to offer UCaaS to SMBs, which will look to cloud providers to deploy a UC technology suite for them and help them manage both the technology itself and the SMB's migration to cloud.

By contrast, large enterprises will be slower to embrace UCaaS, Haskins explained. Their migration from legacy UC deployments to UCaaS will be complex and difficult, particularly with respect to integrating cloud-based UC services  with existing corporate applications. It is likely that any procurement programs will be implemented slowly, and deployments will present interoperability issues, he said. An enterprise customer might have an IP PBX at one site and traditional TDM PBX at another, so they won't be able to benefit from a single solution like the Cisco HCS, he said.

Gradual acceptance for UCaaS and UC

Enterprises will look to their cloud providers for gradual, piecemeal communications migration. Some may need hybrid cloud support -- a complicated task for any cloud provider lacking in-house expertise in UC. With such a business model, cloud providers could struggle with custom application integration, interoperability issues and security gaps -- not to mention potentially high operating expenses.

UCaaS ecosystems are key to success

Enterprises will likely ask cloud providers to deliver UCaaS on top of their existing on-premises communications technology, said Whelan of Current Analysis. The result will be hybrid UCaaS, where some UCaaS elements integrate with the enterprise's existing on-premises technology. As a result, cloud providers that do take the leap into the UCaaS space will likely benefit from partnerships with UC-savvy integrators.

"Enterprises won't throw out their infrastructure. They'll start small and work up to possibly an outsourced solution that they will integrate into existing enterprise applications," Whelan said. Reputable enterprise systems integrators, such as IBM and HP, will heavily rely on products like Cisco's HCS to integrate applications and make them work together in the cloud, she added.

Although the shift from individual service offerings to UCaaS will be gradual, "there’s evidence that things are starting to ramp up," particularly in the SMB market, Whelan said. Cisco's recent announcement that 20 new partners are using Cisco HCS indicates that a market is springing up. Cisco has publicly stated that those 20 partners represent a demand of 1.8 million users worldwide. The company expects the market to grow to $8.4 billion over the next couple of years. Cisco also sees the growth of ecosystems in which partners, cloud providers and MSPs will collaborate to procure, manage and deploy UCaaS.

A cloud provider's UCaaS ecosystem can provide expertise, integration and managed services

Managed services provider Azaleos recognizes that companies want UC, but not necessarily UCaaS. Azaleos provides a managed UC package -- enabled by its patented AzaleosX monitoring and management software -- that incorporates Microsoft Exchange, Lync, SharePoint and Active Directory. Many Fortune 500 companies are interested in similarly integrated UC services, according to Azaleos' Gode.

One of Azaleos' clients, the U.S. Centers for Disease Control and Prevention (CDC), needed the security of a private cloud, Gode said. Given the strict requirements around cloud privacy, security and compliance, it made sense for the CDC to use Azaleos to manage its Exchange email system, he said.

The CDC "chose not to go out and hire a six-figure Lync manager," Gode said. Azaleos provided the necessary expertise, so CDC could avoid hiring a full-time employee to oversee the migration or provide ongoing management.

Most small cloud providers don't have the partnerships that can help them succeed on untested ground like UCaaS, Gode said. "The smaller cloud providers are disadvantaged," he said.

That will be the case until smaller providers can either build the necessary relationships, or work out agreements with integrators. Gode suggests that small cloud providers might consider reselling commercial UC bundles with value-added service.

Let us know what you think about the story; email: Lisa Sampson, Feature Writer.

This was first published in March 2012

Essential Guide

Guide to Unified Communications as a Service: Making sense of it all

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