There's been so much noise surrounding hosted UC lately, I thought I'd offer up some data from our most recent study of the North American hosted IP telephony service market. Given that the companies most likely to deploy UC on a hosted basis would also seem likely candidates for hosted voice, I think a look at where IPT is today is worthwhile-and eye-opening, especially if you're bullish on SaaS.
* The 2008 hosted IPT market experienced fairly slow growth of about 15%. The causes: the economic downturn; a lack of aggressive marketing resulting in low awareness of the value of hosted IP telephony; and significant traction of premise-based IP telephony solutions.
* Frost & Sullivan estimates about 939,000 installed hosted IP telephony lines as of the end of 2008 and expects the installed base to grow to about 3.6 million lines in 2014. Revenues, estimated based on an average bundle of features and capabilities, reached about $557 million in 2008 and are expected to exceed $2.4 billion in 2014.
* Over the past few years, equipment vendors made significant efforts to enable the integration of their premise-based platforms with other communication and business applications. These advancements (and related marketing efforts) have popularized the benefits of premise-based IP telephony. Hosted IP telephony providers, on the other hand, continue to market their services primarily as cost-effective voice communications, which has limited their value proposition for business customers.
* Hosted IP telephony penetration remains limited to small businesses of less than 50 users. The sweet spot for hosted IP telephony remains in the range of 10 to 50 users (one to two T1 lines). Most of these small businesses choose hosted services to avoid upfront capital outlay and to spare resources by outsourcing telephony maintenance and management. Hosted IP telephony customers typically have no or limited IT/telecom staff.
* The market is highly fragmented, with more than 50 providers, each offering bundles of communications applications, including local and long-distance voice, voicemail or unified messaging, auto attendant, conferencing, contact center and CRM applications, and Internet service. Feature innovation has been limited, with few service enhancements presenting any true differentiation. In the near term, the market is likely to remain fragmented, with some consolidation happening later in the forecast period.
* Growing awareness and increasing integration of voice communications with other UC applications (chat, presence, conferencing, etc.) and business applications (e.g. CRM) will represent the main growth drivers over the forecast period. Significant technology enhancements to premise-based solutions will represent the main growth restraint.
* Frost & Sullivan estimates about 939,000 installed hosted IP telephony lines as of the end of 2008 and expects the installed base to grow to about 3.6 million lines in 2014. Revenues, estimated based on an average bundle of features and capabilities, reached about $557 million in 2008 and are expected to exceed $2.4 billion in 2014.
* Over the past few years, equipment vendors made significant efforts to enable the integration of their premise-based platforms with other communication and business applications. These advancements (and related marketing efforts) have popularized the benefits of premise-based IP telephony. Hosted IP telephony providers, on the other hand, continue to market their services primarily as cost-effective voice communications, which has limited their value proposition for business customers.
* Hosted IP telephony penetration remains limited to small businesses of less than 50 users. The sweet spot for hosted IP telephony remains in the range of 10 to 50 users (one to two T1 lines). Most of these small businesses choose hosted services to avoid upfront capital outlay and to spare resources by outsourcing telephony maintenance and management. Hosted IP telephony customers typically have no or limited IT/telecom staff.
* The market is highly fragmented, with more than 50 providers, each offering bundles of communications applications, including local and long-distance voice, voicemail or unified messaging, auto attendant, conferencing, contact center and CRM applications, and Internet service. Feature innovation has been limited, with few service enhancements presenting any true differentiation. In the near term, the market is likely to remain fragmented, with some consolidation happening later in the forecast period.
* Growing awareness and increasing integration of voice communications with other UC applications (chat, presence, conferencing, etc.) and business applications (e.g. CRM) will represent the main growth drivers over the forecast period. Significant technology enhancements to premise-based solutions will represent the main growth restraint.
Now, to be fair, we do expect UC to positively impact the hosted IPT market. Within three to four years, we expect incumbent local exchange carriers (LECs) to start aggressively penetrating both their Centrex base and some new customers with more advanced hosted UC bundles. In the meantime, some value-added resellers (VARs) and systems integrators (SIs) will tap into their current premise-based solution customer base with hosted, multi-tenant UC platforms developed by the PBX vendors.
Also, average revenues per user remain stable at about $40 to $75 including the access line, Internet service, local and long-distance calling, voicemail or unified messaging, and some selected advanced features such as auto attendant, conferencing, hosted ACD, etc. That number will be useful to vendors looking to offer hosted UC, which, despite its additional features, can't add significant cost.
