Industry Research : Hosted and Cloud Based UC to Become Future Growth Engine
The Australian UC services market, encompassing managed services, cloud based UC and hosted UC services, grew by 8.3% despite a cautious market. Conferencing, collaboration and contact centre solutions were the main applications, generating more than 70% of revenues in the UC services market.
Uncertainty over economic conditions and the impact of Federal elections on businesses saw overall market growth rates decline from previous years. However, the market is expected to grow at a Compound Annual Growth Rate (CAGR) of 9.2% from 2013 to 2020, by when the market value is projected to double from its 2013 value.
Frost & Sullivan's latest report, Australian Unified Communications (UC) Services Market 2014, cites that as organisations look for greater flexibility from their UC infrastructures, demand for hosted and cloud based UC solutions as well as managed services for UC will increase. This shift in demand from on-premise based solutions towards third party hosted UC solutions will be one of the key drivers for growth in the overall UC services market in Australia.
Enterprise mobility and cloud based solutions are becoming key focus areas for UC vendors and their channel partners as these two factors are significantly changing the way Australian organisations view and deploy Unified Communications (UC) solutions. With the prevalence of trends such as Bring Your Own Device (BYOD) and Activity Based Working (ABW), the ability to collaborate and access applications from any location and any device is becoming imperative.
Audrey William, Head of Research, ICT Practice, Frost & Sullivan ANZ says, "As the use of mobile devices within organisations grows, employees need the ability to collaborate from any device and from any connected location. With cloud based applications emerging as an attractive option for addressing this requisite, demand for cloud based conferencing and collaboration applications will increase."
William says the on-premise UC market has been experiencing only moderate growth as organisations begin to closely evaluate hosted and cloud based alternatives. Although on-premise solutions still account for the majority of UC revenues, most new deployments will use a hosted model, further limiting growth in the on premise segment. "Many organisations are reluctant to continue investing in on-premise solutions, which often have multi-year contract agreements. There is a significant shift toward third-party hosted and managed models and service providers are playing an important role in the overall UC market," William added.
Most major UC vendors have identified hosted and cloud based solutions as key components of their future growth strategy. Channel partners are also adjusting their strategy to benefit from the shift in market demand towards hosted and cloud based solutions. In addition, UC vendors and their channel partners are finding it increasingly challenging to generate growth from on-premise UC solutions. As a result, hosted and cloud based UC solutions will become the focus area for vendors and channel partners in the next few years.
In the last few years, managed services has experienced growth rates of over 10% as it serves as an interim phase for organisations moving away from an on-premise model. This allows organisations to retain endpoints and infrastructure on premises while handing over maintenance and support functions to the service provider. The significant opportunity base for providing managed services to organisations using on-premise UC makes it an attractive segment for most channel partners. Demand for managed services will be mainly driven by large organisations looking to hand over maintenance of their complex UC infrastructures as a way to reduce the load on their internal IT departments.
Cisco and Microsoft are the two main vendors in the overall UC services market. Building capabilities based on one or both these vendor solutions is often the main challenge faced by channel partners. In 2013, Cisco's Hosted Collaboration Solution (HCS) platform and Microsoft's Office 365 and Lync platforms were the main solutions deployed by organisations. However, competition from other vendors such as Avaya and Interactive Intelligence is beginning to increase as they emerge to capture a share of the UC services market. Additionally, a number of cloud-based vendors such as Google, Blue Jeans and LiveOps are also beginning to grow their footprint in the local market.
Anand Balasubramanian, Industry Analyst, ICT Practice, Frost & Sullivan ANZ, says "Cloud based vendors such as Google and Blue Jeans are growing their footprint in the market. Uptake of Google's solutions was initially driven by educational institutions, but an increasing number of organisations from other industry sectors are looking for cloud based alternatives to license based on-premise solutions. Although uptake of its Gmail and Docs application is relatively low, Google continues to experience demand from small and medium companies that are looking for greater flexibility and usability."
Telstra, Dimension Data and NEC are the major players in the Australian UC services market and possess strong vendor partnerships and the necessary reach in the local market to drive growth. While these service providers will continue to be the key players in the market, a number of global telcos and local service providers are strengthening their presence. For example, BT has been experiencing strong growth based on its conferencing and contact centre solutions and is expected to pose a greater competitive threat to the established players. Verizon and Orange Business Services (OBS) are also increasing their footprint in Australia. Local telcos such as Amcom and Optus are also building their respective portfolios to address the growing demand in the UC services market. In the next few years, competition in the overall UC services market will intensify, forcing service providers to differentiate their service capabilities to gain competitive advantage.
Frost & Sullivan Australian Unified Communications Market Report 2014, forms a part of the Frost & Sullivan Enterprise Communications Research program. All research services included in this subscription provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants.
Posted by Veronica Silva Cusi, news correspondent
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