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Cloud Services

UCaaS: An Increasingly Important Enterprise Tool

As more and more applications shift to the cloud and are delivered as a service, it's no surprise that unified communications (UC) is moving there as well. But how big is the unified communications-as-a-service (UCaaS) market right now? And what sort of growth potential is there in this market as additional offerings are made available to enterprise users?

Earlier this year, enterprises got a hint that the market is heating up.

During its quarterly financial call with analysts in July, Mitel announced that it would purchase long-time rival ShoreTel in an all-cash deal worth about $530 million. The deal is a boon to the UC market and shows that not only is this space increasing in importance, but that long-time rivals are finding it easier to partner and merge than to continue to work on their own any longer. (See Mitel, ShoreTel Deal Emphasizes UC in the Cloud.)

Expect to see more of these deals over the coming years.

So how big can the cloud-based UC market get?

In 2016, Synergy Research published a report suggesting that the UCaaS market would grow at an annual rate of about 16% during the next several years. Revenues from this market are holding at $4 billion annually.

That would seem to justify the merger between Mitel and ShoreTel, as well as fuel more interest in UCaaS.

A more recent report from Gartner confirms that the market is shifting from traditional on-premises UC deployments to cloud-based services.

In its Magic Quadrant report for global UCaaS market, Gartner finds that large enterprises -- those firms with 1,000 or more employees -- have been traditional buyers of on-premises UC but that is now changing.

The Gartner Magic Quadrant report separates cloud-based UC into two factions: The first is multitenant, where all customers share a common (single) software instance. The second is multi-instance, in which each customer receives its own dedicated instance.

Larger enterprises are leaning toward the multitenant model, and want to move more and more UC to the cloud.

"Larger businesses have traditionally preferred a separate software instance because of perceived security, integration and customization benefits," the Gartner report finds. "Increasingly, however, UCaaS implementations leverage the multitenant architecture, because it is easier to support, scale, manage, and enhance with new capabilities and services. In contrast, it takes more administration time to manage each user's separate software instance in the multi-instance architecture."

This approach to cloud-based UC and UCaaS is creating a lot of opportunities within the market.

"UCaaS providers are continuing to expand their capabilities to meet enterprise service requirements," Gartner notes. "Many of today's providers support global deployments spanning multiple regions (for example, 30 or more country markets). These UCaaS providers possess the requisite professional services, project management, local telephony services, customer support and import/export authority in dozens of country markets."

The shift is no surprise for anyone watching how the market for all different types of applications is changing.

What started with traditional CRM moving to software-as-a-service (SaaS) has spread to many other enterprise-grade applications, including enterprise resource planning (ERP), which has financial departments singing the praises of cloud services. (See CFOs & Finance Find Benefits in the Cloud.)

It makes sense to move UC to the cloud, or invest in UCaaS, since this frees IT from managing a number of different applications, as well as physical hardware such as handsets and phone lines. By allowing others to manage routine unified communications infrastructure, IT can get more creative and focus on other big issues.

At the same time, UCaaS is yet another security vulnerability, and by allowing others to manage these services, it helps plug a serious security hole that is easily forgotten.

It's clear from this that the market for UCaaS is only going to grow more from here, as enterprises switch more services to the cloud. While it might not draw the headlines that public, private and hybrid cloud does, cloud-based UC is a stealth market and a way for businesses to get into the cloud, with vendors offering more and more services to help get them there.

Related posts:

This column is sponsored by Huawei.

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