Mobile network operators (MNOs) have a sizeable revenue opportunity in the high-growth UCaaS market. They're exceptionally well positioned to emerge victorious, and profitable, in the largest of all market segments.
Eastern Management Group recently completed a multi-year study of the global hosted PBX market and published the research in a new report, "Worldwide Hosted PBX Market 2017-2022." With market data from more than 9,900 companies studied, we present some of our global small office/home office (SOHO) application research in this post (see related article, "SOHO: UCaaS Bonanza for Telcos?").
Here's the Roadmap
According to U.S. government and Eastern Management Group data, there are 29 million small businesses in the U.S. These account for 99.7% of all U.S. businesses. Fifty-two percent of them are home-based. All have cell phones, and most are one- and two-line customers of a mobile operator. This is the SOHO market -- and it's an untapped hosted PBX opportunity for mobile operators.
Eastern Management Group has identified several reasons why the SOHO market is well suited to cell phone providers offering hosted PBX. First, the smallest businesses (those with fewer than 10 employees) are willing to pay extra for UC features. In a stratified global study we conducted of 9,000 businesses, more than 25% of the SOHO subset want messaging, unified messaging, data sharing, collaboration, presence, and video. This is right up the alley of hosted PBX.
Second, traditional UCaaS vendors (e.g., 8x8 and Vonage) offer little competition in the SOHO market (i.e., self-employed, small business owner). Let's turn up the contrast here. Traditional hosted PBX vendors -- there are more than 200 -- have high marketing and operating cost structures. The traditional providers require large customers (more than 10 seats and preferably much more) to build a sustainable business. SOHO doesn't cut it for them. It is almost impossible for classic hosted PBX companies to profitably sell and support a one- or two-line customer. MNOs, on the other hand, are a natural for SOHO hosted PBX. The mobile operator already has the customer and the operations to support the UCaaS business. This includes contact centers, data centers, OSS (operations), BSS (billing), and networks. While the wireless operator would have network switches, it might not have softswitches with UCaaS features and call control. This can be remedied.
Eastern Management Group has assisted several providers acquire and roll out hosted PBX infrastructure and operations. A half dozen respected softswitch companies offer MNOs switching and UC features, and/or communications platform as a service (CPaaS).
Third, wireless providers have yet to establish credibility with CIOs. Lacking these credentials, it is easier for MNOs to begin their hosted PBX business by selling to customers without a CIO. SOHO is a good start. It's also a safe proving ground for MNOs to learn the UCaaS market. Later on, SOHO becomes the springboard from which MNOs can penetrate mid-market and enterprise customers.
Why Act Now?
MNOs operate in a pretty glutted market. There's already more than one wireless subscription for every person on the planet. Prices for cell service are dropping. MNOs can immediately expand their market by offering hosted PBX to the SOHO market.
There are numerous benefits. First-mover advantage is one. Say four MNOs service a market today, as Vodafone, Three, EE, and O2 do in the U.K., for example. An MNO could get first-mover advantage offering UCaaS while others do not yet do so, thereby inducing churn and making all customers sticky. Second, with more than 25% of SOHO users willing to pay additional for UCaaS collaboration features, MNOs have the means to increase ARPU. Third, CPaaS solutions can put an MNO into the hosted PBX market in under three months, maybe two, which is a fast track. Fourth, there are ready-made applications for the MNOs to sell with UCaaS. Some examples of vertical market applications are visual attendant, live support on the Website, document sharing, screen sharing, and multiple phone numbers for personal and business calls. Not having to carry two phones, one for business and another for personal, is a plus for customers. Fifth, MNOs can get their sea legs selling into SOHO before broadening their scope.
This article is based on research from Eastern Management Group's exhaustive "Worldwide Hosted PBX Market 2017-2022" report. For any questions about the UCaaS study ask our researchers.
