State of Confusion Clouds UC&C
The cloud's rise and changing market landscape have created uncertainty for many UC&C vendors and their enterprise customers and channel partners.
These are confusing times, and I'm not just talking about the election season. In all my years as an industry analyst following the business communications market, I've never seen so much change and upheaval -- and that includes when we moved from TDM to IP!
Two existential factors are impacting the UC&C market today: the move to the cloud, and the changing vendor landscape. Of course, you could easily argue that the changes in vendor positioning are due to the move to the cloud and the growing customer preference for cloud services over traditional on-premises solutions.
The UC&C market is at a turning point. Depending on who you talk to, you'll hear:
- Either that the UC&C market is shrinking, and UC is dead... or, that the UC&C market and UC use is growing, but businesses are turning to cloud services rather than premises-based solutions
- Either that, with a few exceptions, all future UC&C purchases and deployments will be for cloud services... or that cloud services are growing, but not as quickly as expected, and we're not seeing the huge move to the cloud as predicted
- Either that vendors are consolidating and the only ones left will be Microsoft, Cisco, and a couple others like Mitel and NEC... or that adjacent vendors like Twilio and Slack will become UC leaders
- Either that the UC&C cloud market is too crowded and vendors will have to consolidate... or that the barriers to entry for providing cloud services and UC as a service (UCaaS) are so low that even more new players will enter the market
By now you've heard much speculation and various rumors circulating about many of the UC&C vendors (I'll leave it to the reader to discern which are true and which aren't):
- ShoreTel officials are forming a committee to explore various options, which could include everything from selling all or select parts of the business to forging joint ventures and partnerships
- Interactive Intelligence may be exploring a sale
- Avaya may be split up and sold in pieces
- Genesys is a possible suitor for either Interactive's or Avaya's contact center business
- Mitel, playing the role of "consolidator," may be looking to acquire parts of Avaya's business, along with pursuing other acquisition options
While some may perceive these industry changes as negative or detrimental, they actually demonstrate that these companies are trying to better position themselves for an uncertain future and not just sitting back while the market moves forward without them. For example, both ShoreTel and Interactive have done admirably at embracing the cloud and introducing new offerings, while Mitel has added strong mobile capabilities through its Mavenir acquisition. Avaya's introduction of Zang, a communications platform as a service (CPaaS) organization, shows that Avaya sees the writing on the wall and that the future of the UC&C market is in communications infrastructure for applications and, perhaps, the applications themselves.
While these companies are repositioning themselves and trying to figure out how to best prepare for the future, the ramifications for the market are significant. While we don't necessarily know what the future holds, we do know that all of this upheaval is having a negative impact on both customers and the channel. Many of the value-added resellers I've spoken with recently have noted that a number of their customers are putting their UC&C purchases or deployments on hold until the dust settles. Businesses want to ensure that they're going with the right vendors, ones that will be around for the long term. In this rapidly changing market, no one knows which vendors will be here in five years, and which products will still be supported.
Even Cisco and Microsoft, the two UC&C gorillas, aren't totally above the fray. While we have no doubts that Cisco and Microsoft will still be strong UC&C players in the coming years, both have been known to acquire companies without always supporting the products gained for the long term (case in point -- I may have the only Cisco Flip video camera still in existence). As my UCStrategies colleague Roberta Fox pointed out in a recent post, many businesses "are hesitant in making the wrong vendor decisions, and thus have been holding off on final approvals."
Many industry watchers expected to see a boom in the UC&C market as businesses turn to UCaaS and other cloud services. However, despite many wins and new sales for cloud services, we're a long way from the hockey stick of UCaaS market growth.
While SMBs are increasingly turning to the cloud, many midsized and large businesses are still reluctant to make that move for various reasons. Instead, they're in a holding pattern until services mature. They acknowledge that they will move to cloud services in the near future, but many are just not ready to make the leap right now. Many of the customers I've spoken with want to wait and see what happens -- which vendors will come out on top and how to best migrate to these new services while retaining their investments in premises-based solutions.
Channel at a Crossroads
All of this is having tremendous repercussions on the channel, which is currently at a crossroads. For the channel, reasonable margins and an increasingly important upside in selling adjacent products and services fueled development of a hosted VoIP market over the last decade. However, the cloud economy is now squeezing margins, and the cloud itself is enabling vendors to host more of the adjacent products, leaving fewer products for the traditional UC&C channel to sell.
The stronger UC&C channel players are aggressively pivoting, through consolidation, reinvention, and new relationships, in order to meet the economic challenges they face. As channel partners reexamine traditional vendor relationships, some are abandoning smaller business segments and taking their sales efforts upmarket. Many are shifting their alignment away from their UC&C vendor partners and toward providers of solutions such as workplace management, security, and productivity. Many other players seem to be lost (and consequently worried), waiting for insight and inspiration from their vendor partners.
Adapting for the Future
In short, the UC&C market is at a standstill. Customers need to be assured that the vendors they work with are here for the long term and that the solutions/services they deploy will be supported in the years to come. Channel partners need to figure out the right formula for selling cloud services while growing their revenues. Vendors need to figure out how best to support their channel partners' needs and to help them move to UC&C cloud services successfully and profitably.
UCStrategies will be surveying the UC&C channel over the next few months to provide fact-based insights into how UC&C channel players are adapting their business models to the new cloud economy, what the channel is doing and thinking, and where they need the most help from vendors. If you'd like more information on this sponsored survey and study, please reach out to me via email.
While we can't do anything to lessen the confusion around vendor consolidation, hopefully we can shed some light on how to make the move to the cloud a bit easier for channel partners and their customers.