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Where Is the Enterprise Communications Industry Headed?
In the weeks since Enterprise Connect, the enterprise communications industry's flagship event, I've seen detailed reviews of key vendor announcements, keynotes, presentations, and panel commentary that did justice to the event's busy agenda and excitement. I've delayed my event review as I sorted through scattered impressions to find the common thread in all the industry buzz. Two industry gurus I talked to at the event put additional pressure on me, urging me to go beyond the obvious and rationalize the deeper paradigm shifts that are emerging today and are likely to transform the industry in the future.
At first glance, there weren't any big surprises at the event -- with the exception of the Amazon Connect launch, perhaps. Most vendor announcements built on strategies and product roadmaps launched months or years earlier and served to affirm vendor commitment to evolve with market trends. Cloud was naturally a big theme. Cloud communications product launches and enhancements were even more pronounced compared to last year's event, as was the presence (booth space, panel participation, presentations) and sponsorship of UCaaS providers.
Change as the New Normal
Despite the overall sense of gradual evolution and continuity, however, certain undercurrents with potentially disruptive impact could be detected. In the rather extreme and dramatic opinion of an industry veteran I spoke with, the enterprise communications industry is "as good as dead." As dire as it sounds, I agree with his assessment, but feel immediately compelled to qualify that statement: It is likely to be a VERY slow death and, even more important, it is simply the death of the industry as we know it today.
Dire predictions are nothing new, as we've pronounced many technologies and industries dead since I became a telecom analyst 17 years ago. Fortunately for most of us concerned, those death certificates were issued prematurely.
Prediction: TDM systems and services were expected to quickly give way to IP communications. Many forecasts expected line license shipments to be 100% IP by the end of the first decade of this century and the installed base to be fully churned not long after.
- ✔ Fact check: Line license shipments are indeed almost 100% IP today, but many businesses are still using legacy PBXs and key systems and even renewing Centrex contracts.
Prediction: According to some pessimistic forecasts, desktop phones should have been decommissioned by now to be replaced by mobile devices and soft clients.
- ✔ Fact check: Many vendors continue to report growth in desktop phone shipments; most notable, independent SIP phone manufacturers report double-digit growth rates in SIP phone shipments.
Prediction: Premises-based systems were expected to quickly become extinct, replaced by cloud solutions.
- ✔ Fact check: Businesses started moving their communications to the cloud in the early 2000s, yet the vast majority of the customer base is still sweating its premises-based assets.
If history has taught us anything, it is that change takes time. Disruptive trends emerge all the time, but their full effect materializes over years or decades. It is worth noting, however, that accelerated technology development is shortening innovation cycles. Change is the new normal.
I hate to write yet another Chronicle of a Death Foretold, but I must agree with my more experienced associate mentioned above that we are finally seeing the first signs of a slowly dying industry -- that of standalone communications solutions. Whether point products or unified communications systems/services, within a few decades, the presence of siloed communications solutions within the broader IT environment will shrink considerably. This trend started years ago, but we are now seeing more pervasive evidence that enterprise communications are about to change in unprecedented ways.
The industry is undergoing profound transformation, gradually eroding the very foundation on which it built its value proposition for decades. Under pressure from both internal and external disruptive forces, the industry is reversing a long-lasting trend of making communications solutions ever-more sophisticated. New technologies and business models are now decomposing the communications experience and reducing communications capabilities to mere features that can be delivered in multiple different ways, including, and increasingly, embedded in other business software.
The API economy -- flexible APIs, integration PaaS (iPaaS), and CPaaS solutions -- marks the current phase in this evolution. Over the past few years, the innovation frontier both in the premises-based and cloud communications spaces has shifted from explosive feature development toward a rush to integrate communications with third-party software. The purpose -- more tangible business outcomes through greater impact on specific workflows. As the integrations have so far been driven by UC providers, the primary user interface is often a UC client and the business customer has typically invested in some sophisticated communications infrastructure or UCaaS solution. Increasingly, third-party API, iPaaS, and CPaaS providers are taking this trend a step further, embedding stripped-down communications features in any business software that the user "lives in," significantly reducing communications investment costs for the business and (sometimes) dramatically altering the communications experience for the end user.
As Twilio CEO Jeff Lawson clearly demonstrated in his Enterprise Connect keynote, these new solutions are flexible, intuitive, and can enable unique capabilities. For diversified UCaaS+CPaaS providers, such as Avaya/Zang, BroadSoft, Cisco/Tropo, RingCentral (with Connect Platform), ShoreTel (with Summit), Star2Star, Verizon (with ThingSpace) and Vonage/Nexmo, these new API tools enable a differentiated, more holistic approach to a business' communications needs. But more important, a service provider doesn't even need to own CPaaS capabilities. Companies such Cloudpipes, Genband (with Kandy), Mondago, Plivo, Telestax, Twilio, Zapier, Zilkr, and many others, provide a broad spectrum of CPaaS and iPaaS capabilities that open numerous new opportunities for co-opetition and value creation in the industry.
We are only seeing the tip of the iceberg in terms of how the API economy will impact the market in the long run. The Amazon Connect announcement, which stole the limelight at Enterprise Connect, as well as the earlier Amazon Chime launch, provide a glimpse into where the industry is headed. Contact center experts noted the new solution's compelling pricing structure, which, combined with Amazon's brand and market power, can cause market disruption. In my opinion, it's not Amazon launching a contact center solution that is immensely significant in the global scheme of things. It's that anyone can now become a communications/collaboration or contact center provider with the help of these new tools.
It is critical to acknowledge that the API economy is driving the disintegration of the traditional telecom and IT value chains. With the right set of telephony and messaging APIs and a reasonable investment in software development, a data center/IaaS, PaaS, or SaaS company can become a UCaaS or contact center-as-a-service (CCaaS) provider. The move to software-based solutions and cloud consumption models has already significantly lowered the barriers to entry. The availability of affordable telephony and messaging resources is likely to open the flood gates. Amazon can be followed by Google, Facebook, Oracle, Salesforce, SAP, or others looking to deliver value through communications-enabled workflows. Of course, new market entrants must possess certain differentiators and competitive advantages to ensure greater chances for success. Robust data center resources, brand equity, channel, existing customer base, and/or software development expertise combined with a strong vision represent key success factors. What market participants need less now is telephony or other communications resources and expertise.
Beyond 'True UC'
The next phase in the industry evolution will see the emergence of a lot of "productivity UC" and "IoT UC" and "vertical UC" solutions delivered by non-UC vendors that are looking to enhance their software and deliver differentiated value to businesses. Most of these new solutions won't be "true" UC (i.e., feature-rich, integrated sets of communications applications). As noted earlier, these new workflow-based tools are more likely to only use simpler communications features. In addition to improving worker productivity, business agility, and customer engagement, these integrated solutions will create opportunities to leverage data analytics on a much greater scale. By combining workflow/business app data with communications stats, advanced analytics tools will enable businesses to gain deeper insights into business issues (e.g., productivity bottlenecks, business process disruptions) and also use predictive analyses to re-design processes and improve key performance metrics. More extensive contextual information will also drive the broader use of AI and bots, which will in turn impact how communications are delivered and used.
In conclusion, it's important to note that demand for robust (cloud) PBX functionality will remain strong for many decades to come. Many businesses still need the features supported on advanced enterprise-grade communications solutions. However, change is certain. New communication paradigms will emerge over time. In the foreseeable future, the new approach to delivering communications features will start making a dent in more traditional business models, especially in certain verticals and job functions, where communications represent a mission-critical part of a key business process.
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