The UCaaS Business Right Now

Peter : On Rad's Radar?
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

The UCaaS Business Right Now

I wish I knew what the UCaaS business was. The UCaaS (Unified Communication as-a-service) business is projected to be $23.34 Billion by 2019, according to MarketsandMarkets.

"MarketsandMarkets forecasts the Unified Communication as-a-service (UCaaS) market to grow from $13.10 billion in 2014 to $23.34 billion in 2019. This represents a Compound Annual Growth Rate (CAGR) of 12.2% from 2014 to 2019." Those are some pretty specific numbers. As I pointed out HERE, other research firms change their predictions year to year. It's just a GUESS!!! Based on a small amount of data from client firms that end up in the report.

I have yet to see a definition of UCaaS or how it differs from Hosted UC or how it varies from Cloud Communications. It seems to me it is all the same thing.

What started as Hosted PBX (the phone system in a cloud) has morphed to UC by adding components like conferencing, video, IM/chat and mobility. Basically, taking all the ways we can communicate and try to get them into one interface. That's the pipe dream any way.

There is a decent article about how video calls are changing collaboration and other aspects of a business (especially sales). It will take more case studies and articles like these for buyers to fully comprehend the marketing BS that we are putting out there (namely the terms UCaaS, HUC, and Cloud Comm). Does anyone even search for those terms except people inside the industry?

"New Q4 data from Synergy Research Group shows that UCaaS business suite now accounts for 8% of all managed and hosted business voice subscribers thanks to an annual growth rate of almost 30%. By comparison, managed on-premise IP PBX subscriber numbers are steadily declining while hosted business VoIP subscribers are growing, but at a rate of well below 10% per year." [SRG]

Premise based solutions are not going away - any more than copper solutions are. Some buyers still have a mindset of control that premise based solutions provide. Not much you can do about that. Some channel partners still have that same mindset too.

ShoreTel's numbers show that cloud is catching up to premise, at least for one vendor. When you look at the telcos, even they hedge their bets. Integra was recognized as MITEL's top cloud partner. Windstream's UCaaS launch included Avaya, MITEL, Allworx and Broadsoft. What I want to know is what training are they giving their sales teams in order to perform discovery in a way that allows for the sales professionals to determine which solution to present.

To one analyst, the Cloud space looks like the wild west early days of CLEC in the 1990s. There are a thousand companies in this space in North America. Many of the carriers that were selling On-Net solutions only are now chasing after OTT (over-the-top or bring your own broadband) services. Meanwhile, 8x8 and RingCentral are looking overseas for expansion, as the US market is getting too expensive in the customer acquisition costs (especially in the PPC arena).

So UCaaS is just $13B now out of the $88B VoIP market. As Coredial wrote, "Growth in 2013 feels like the beginning of rapid uptake in cloud communication services."

Peter Bernstein writes that "the benefits of hosted UC early on were identified by small and medium businesses (SMBs) as capabilities they needed to compete with in a global economy." Since the US market consists of mainly SMB, you would think that there is a HUGE opportunity in the HUC space. So why look overseas? (Well, being public makes for strange moves).

The UCaaS space is ripe for consolidation, which we already see with smaller players. For instance, "Yorktel, a provider of UC&C, cloud and video managed services, closed on the purchase of two companies: Expedite VCS and MultiSense Communications Ltd. Financial terms were not disclosed. Expedite provides voice and video managed services for customers throughout the world. Its clients include organizations in distance learning, government, corporate, telejustice and telemedicine. MultiSense, meanwhile, is a top Polycom partner specializing in the health care market in Europe."

It would suggest that many think Europe is an easier market. It would also suggest that many other of the UCaaS players are going to have to pivot or merge. They can't all survive.

BTW, the pivot can be to a niche, a vertical, or to a new segment not called something ridiculous like UCaaS.

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