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Frost & Sullivan Releases UC Solutions Market Engineering Report

My colleague Rob Arnold just published Frost & Sullivan's 2010 premises-based enterprise UC solutions market engineering report. The study looks at development and adoption trends for fully integrated UC solutions, as well as partial, or "stepped" UC offerings that incorporate certain foundational elements of the UC applications stack. The report is available to clients at Here is a very brief overview of some of the findings.

The unified communications solutions market is highly correlated with IP telephony equipment shipments, which suffered substantial declines in 2008 and 2009 due to the economic downturn but began to recover in 2010. We estimate that in 2010, global shipments of advanced UC soft clients declined by about 12 percent year over year. In addition to conservative spending on new enterprise technologies, the decline is due in part to the end of aggressive promotional efforts by leading IP telephony vendors.

In 2010, vendors shipped about 13.5 million UC-capable clients, the vast majority of which are in support of partial UC solutions. By 2016, we expect vendors to ship approximately 30 million UC clients. Fully integrated UC solutions are extremely difficult to quantify, but we estimate that these solutions account for less than 15% of all installed UC implementations.

Historically, UC has been marketed as an end-to-end solution comprised of integrated point products, which required selling separate SKUs. That lengthened the sales cycle, and combined with the necessary professional services, made UC prohibitively complex and expensive. The approach also led buyers to purchase licenses in large volumes to help decrease cost--but that meant many users got the software when they didn't need it, or when they didn't need all of the included capabilities. That in turn has led to a lower perception of UC's overall ROI.

As vendors and companies continue to take a stepped approach to UC deployments--starting with the capabilities they need, and with small, discrete groups of users--growth will be aided by compelling price discounts and the bundling of application components, which helps reduce the complexity of the sales process and facilitate the adoption of advanced applications such as mobility, multimedia conferencing and collaboration.

Furthermore, UC solutions are less likely to be marketed with broad horizontal value propositions in the months and years to come. Instead, vendors are offering solutions designed for specific job roles, lines of business and vertical industries. Licensing schemes now also let businesses implement UC more selectively, choosing the appropriate features for specific users. This granular approach encourages customers to migrate to UC at their own pace, and focuses on value over volume.

We expect companies will spend to replace TDM communications infrastructure with IP throughout 2011, and the need for UC-related professional services skills will expand as the breadth of possible solutions grows. Assessment, consultation, integration and post deployment support will create sticky relationships that encourage more customized and value-added UC solutions, which will in turn encourage more widespread deployments.