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UCaaS on the Rise, Telcos Getting Left Behind

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UCaaS on the Rise, Telcos Getting Left Behind

March 17, 2014

By Steve Anderson, Contributing TMCnet Writer

The idea of unified communications-as-a-service (UCaaS) is one that's making a lot of headway with businesses, and a new study from Synergy Research Group shows just how far this idea is going with companies. But the study doesn't just show the growth of UCaaS in general... it also shows that there are some parts of the communications sector that are getting left behind by this growing new sector.

The Synergy Research Group study showed that the UCaaS business suite represents fully eight percent of all managed and hosted business voice subscribers alike. It's been on a tear in terms of overall growth, with an annual growth rate around 30 percent. Hosted business voice over Internet protocol (VoIP) service is also growing, though not as fast, seeing under 10 percent growth per year, and the managed on-premise IP PBX (News - Alert) is in a steady decline.

The UCaaS market as a whole, meanwhile, is primarily occupied by a triumvirate of companies splitting a hefty 36 percent of the market by revenue among the three in question: 8x8 (News - Alert), RingCentral, and ShoreTel. The market by subscriber count, meanwhile, is a different matter as there are several different application service providers (ASPs) on hand providing different services. But when subscribers are considered, 8x8, RingCentral (News - Alert) and ShoreTel aren't alone in the top of the rankings, joined by Fonality (News - Alert), Mitel, and Vocalocity.

But the lists, whether considered by revenue or by subscriber, both lack one critical point: telecommunications firms. While firms like AT&T (News - Alert), BT and Verizon—major firms by any standard—are all seen and well-represented in terms of hosted business VoIP and managed on-premise IP PBX, said firms aren't seen much in the UCaaS market, where the growth seems to be largest. That's got some, like Synergy Research Group's founder and chief analyst Jeremy Duke, noticing the unusual discrepancy and making points accordingly. Duke elaborated, saying “A fascinating battle is playing out between traditional telcos on the one hand and much smaller specialist operators and technology vendors on the other. Clearly UCaaS is going to carve out an ever-greater share of the managed and hosted business voice market and at the moment the telcos are being very slow to respond to the changing market.”

It's interesting to note that the major growth section of this market, the UCaaS business suite, is the part that's seemingly most neglected by the major firms. It could indeed be a function of corporate response speed—larger companies are simply less agile than smaller competitors like those who seem to have UCaaS on a lock—but it could be an expression of the firms' appraisal of the market. It could be that the larger corporations really don't see a point in competing in UCaaS despite its substantial growth. After all, the percentages may mask a smaller overall field, one that the major firms may not have an interest in given the other fields in which said majors are competing.

The motives behind the larger firms' lack of presence in UCaaS are unclear, even if there are several possibilities at work here. Still, there's plenty of room for possibility, and time may well see these firms enter the market later on. But the gains in UCaaS may prove too much to resist down the line ... or to ultimately fizzle out as UCaaS' replacement — whatever that may be — comes into play sooner than expected.

Edited by Rory J. Thompson
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