Hundreds of communications carriers offer unified communications as a service (UCaaS). BroadSoft, the big dog systems vendor, has 600 carrier UCaaS customers spread across 80 countries -- that’s 40% of the world. BroadSoft, which is now part of Cisco, sells about 3 million hosted PBX seats yearly according to Eastern Management Group estimates. That’s an excellent start on the cloud UC opportunity for service providers, but it may take several companies the likes of BroadSoft to make carrier UCaaS widely deployed and available to businesses because the total addressable market (TAM) for UCaaS is a great deal bigger.
Here’s what I mean: 600 providers – BroadSoft’s customer base – accounts for fewer than 10% of all carriers in the world, and that’s excluding cable. For comparison, 600 is the equivalent of 30% of all carriers in the U.S., where there are 2,000 service providers; the world has 8,000 similar providers. In other words, BroadSoft’s 600 customers is a just a fraction of the carrier hosted PBX opportunity, despite BroadSoft’s excellent growth.
Looked at from a different angle, if each of the 600 carriers (BroadSoft’s reported customer base) sells 14 seats every day, that’s about 3 million seats yearly. Given that new customer sales from all hosted PBX vendors average 13 seats today, based on our research, this suggests an average communications carrier is ringing the register on just one new deal each day.
How Big Is the Opportunity?
The total addressable market for hosted PBX is 55 million seats according to data in our new report, “Worldwide Hosted PBX Market 2018-2024
”. The TAM is $25 billion. Eastern Management Group analysts say carriers have it within their reach to take 20% of the total market, amounting to $5 billion in sales.
What’s the Hold-Up?
Just one thousand telephone carriers are equipped to provide hosted PBX today, which means 7,000 have to get ready. You ask, why so far to go? The answer is more perception than reality.
Opportunity – Many communications carriers have told me there are few mid-market and no enterprise customers in their territory, which they view as a UCaaS business disqualifier. We know from experience that carriers don’t need large customers to profit from hosted PBX. We have business models showing they can do it with only one and two-phone subscribers.
Bandwidth – Communications carrier downsizing over the past two decades has thinned-out both employees and professional skills across the service provider business. Carriers lack talent they believe is required to launch a hosted PBX business. But new architectures and business models have now fixed this problem.
Cost and time – New business ventures must compete for budget dollars at every service provider. However, most don’t have a current UCaaS business plan reflecting all the latest options. So, communications service providers are missing an accurate cost and timeline formula, keeping untold UCaaS projects sidelined.
Communications carriers wanting to enter the UCaaS business have three new options to investigate: a softswitch, communications platform as a service (CPaaS), and white label. All these models have recently undergone significant change.
The Eastern Management Group has consulted to the carriers for 40 years, advising them
on services to offer, rolling them out, and managing operations. Carriers no longer have to make a capital investment to provide UCaaS; this is a welcome new development.
A communications service provider also can now avoid the cost of a platform; data center; network application servers; all tier 1, 2, and 3 support; SIP trunking; BSS; OSS; sales and marketing support; and so forth. That’s a savings of millions of dollars up front. Also, carrier UCaaS business can be launched in three months (no longer three years), maybe less. Capital and operating expenses aren’t necessary due to many available supplier programs.
It remains up to the carrier to create a UCaaS business case. This short exercise will fill in all the market opportunity, technology, sales, and financial analysis required.
Business customers, too, can play a role in getting carriers around the world to host UC. There are numerous carriers in every country, and business customers can give these carriers a shove in the right direction.
For more information about the Eastern Management Group report, “Worldwide Hosted PBX Market 2018-2024” or issues raised in this post, please ask our researchers
or contact John Malone directly [email protected]