Will the Cloud Change the Price of Business Communications?
Questions around cloud business models abound, as I'll be discussing with a panel of cloud communications executives at Enterprise Connect 2016.
Over the last year, the cloud has been a major trend in the IT industry. Cloud is much more than technology; it is a business model transformation, as cloud industry veteran author Timothy Chou details in his book "Cloud: Seven Clear Business Models." Through his analysis, he demonstrates that cloud deployment models generally reduce the cost for a specific software solution by up to 90%. This is due to a combination of scale, focus, specialization, standardization, and economies based on repetition.
No doubt, cloud is a hot communications topic for 2016. The leading cloud telecom providers have been growing rapidly, both in numbers of subscribers and in size of customers. And, in late 2015, leading UC&C players Cisco and Microsoft each made major cloud announcements.
So Many Questions
As we discuss cloud in the UC&C space, questions around the business model abound. For example, will emerging communications cloud services have the same pricing impacts in communications as cloud offerings have had in other spaces? CRM went from $5,000 to $7,000 per seat per year in the early 2000s to around $800 today with the advent of Salesforce in the cloud. And, in 13 months in 2013 and 2014, the average price of cloud compute resources dropped by 26%.
We are already seeing some cloud offers for telephony at $15 per month or less, and those are not bundled with a range of IT services like Skype for Business in Office 365. What will this mean for telephony pricing and the newer bundled services like UC, messaging, presence, and video? Will the price for basic telephony fall significantly over the next few years, while more companies look to buy a more complete bundle of services for their employees?
How should you plan to manage your investments and commitments in this changing environment? If the market is potentially entering a period of significant price volatility, signing into long-term agreements may not be an advantage if they lock you into significantly higher rates than you can achieve in a year or two. With more than 200 cloud communications providers, many with relatively similar services, pricing will be a major component of competition. In markets having this many competitors, price reductions are a competitive inevitability.
Of course, the alternative argument is that you get what you pay for. As cloud communications providers scale and standardize their operations, the cost of delivering services should drop and carry forward to pricing reductions. But what becomes of expected service levels? A good example of this is in the price of telephony minutes in wireless, where most of us have moved to basic unlimited plans as the pricing models now favor that.
Finding the Answers
If you're attending Enterprise Connect, running March 7 to 10 in Orlando, Fla., join me for my Wednesday 8:00 a.m. session, "The Cloud & Your Costs: Understanding the Changing Business Model," to get a deeper view of the changing landscape. I'll start by looking at cloud as a disruptive pricing force and proceed to a panel of leading cloud communications provider executives to discuss their outlooks on pricing and business models for the future. Joining me will be:
- David Sipes, Chief Revenue Officer, RingCentral
- Darren Hakeman, SVP of Product & Strategy, 8x8
- Clark Peterson, President, Business Solutions Group, Vonage
- BJ Haberkorn, Director, Product Marketing, Microsoft
- Vishy Gopalakrishnan, AVP, Product Marketing Management, Unified Communications & Collaboration, AT&T Mobile & Business Solutions
Together we will plumb the depths and heights of the cloud and see if we can arrive at a common view on how the pricing models will change.
Learn more about cloud communications trends and technologies at Enterprise Connect. View the Cloud Communications track sessions; register now using the code NJPOST to receive $200 off the current conference price.