Beth Schultz
Beth Schultz is editor of No Jitter and program co-chair for Enterprise Connect. Beth has more than two decades of...
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Beth Schultz | August 25, 2016 |


UCaaS Going Strong

UCaaS Going Strong As cloud communications providers expand their reach and enhance their offerings, enterprises increasingly see UC as a viable cloud service option.

As cloud communications providers expand their reach and enhance their offerings, enterprises increasingly see UC as a viable cloud service option.

Ask a UC&C watcher what's hot in enterprise communications these days, and chances are pretty good "UCaaS" will be among the first things out of his or her mouth.

As enterprises grapple with next steps to take for improving their communications and collaboration capabilities, cloud solutions are increasingly factoring into their decision making. We hear this on a regular basis, whether in conversations with UC&C analysts, consultants, and enterprise IT professionals, or in formal earnings statements each quarter.

Much of the focus is on UC as a service, with pure-play cloud communications companies like 8x8, RingCentral, and Fuze (formerly ThinkingPhones) garnering much of the attention. UCaaS players are seeing steady revenue growth in the 25%-to-30% range, one industry watcher recently told us. Recent company highlights bear that out:

  • 8x8 reported $60 million in revenue, a 25% year-over-year (YOY) increase, for its first-quarter fiscal 2017, ended June 30 (service revenue from midmarket and enterprise customers grew 44% in the same period, accounting for 52% of 8x8's total service revenue)
  • RingCentral tallied $92 million in total revenue for its second-quarter 2016, also ended June 30 (revenue from software subscriptions grew 34% YOY to $86 million)
  • Privately held Fuze doesn't disclose financials, but the company has reported that it's added more than 200 customers in the first half of the year

I point out these particular UCaaS providers, as not only do they come up often in our general UCaaS conversations, but also are among the five companies, along with BT and West, positioned in the "Leaders" quadrant of the "Magic Quadrant for Unified Communications as a Service, Worldwide" report Gartner published earlier this week.

"Magic Quadrant for Unified Communications as a Service, Worldwide (Source: Gartner, August 2016)

As Gartner analysts Daniel O'Connell and Bern Elliot noted in the report, "UCaaS is now a viable alternative for many (not all) enterprise deployments." As such, it is seeing a transition from "early adopter phase" to "early mainstream phase," they said.

In a recent catch-up conversation, Fuze CEO Steve Kokonis shared a similar assessment. "We've consistently seen the market move up and to the right over the past couple of years, but we're starting to see, more emphatically now, name brands signing up, and with pretty large deals."

On average, companies are putting contracts in place for more than 1,000 of users -- with deals for tens of thousands with "some regularity," he said.

"There's definitely a shift in the market where people are looking at communications. They're looking at all the legacy applications they have out there, whether collaboration, PBXs, messaging, video, etc., and trying to understand how they can both move that to the cloud and deliver a better experience to their end users," Kokonis said.

In the Magic Quadrant report, the Gartner analysts advise enterprise communications decision makers to look for four fundamentals from UCaaS providers: "expanded global capacity, better customer service and project management, an expanded set of APIs, and the ability to deploy a richer set of UC functionality led by mobility and video."

Among UCaaS providers, Microsoft is the big unknown. A top "Challenger," Microsoft is heavily pushing Skype for Business Online, and the expectation is that it will work hard to create such compelling packaging that turning away from its UCaaS offering will be very difficult for enterprises already using Office 365. Does this leave some enterprises on hold as they wait for the Microsoft offering to mature? Or do they plow full-steam ahead with another provider that can deliver what they need today?

As UCaaS providers scale their operations, build out their organizations, and enhance their offerings, enterprises of all sizes can no doubt find what they need in the cloud. At No Jitter, we want to know just what these requirements are, and how enterprises are approaching the cloud decision. Please help us take the pulse of our enterprise audience on UCaaS, and cloud communications in general, by participating in our second-annual cloud communications survey.

Click here to take the survey -- and, be sure to include your email address at the end to be entered to win one of three $100 Amazon Gift Cards for your participation. Winners will be selected through random drawing.

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