UC Market in a State of Flux as Adoption Ramps Up

The North American hosted IP telephony and unified communications and collaboration (UCC) services market is undergoing major changes as it transitions from the early-adopter to mass-adoption stage.

That’s the word from Frost & Sullivan, which finds that growth rates are accelerating due to an increase in customer awareness of cloud communications benefits. So much so in fact that the market, which reached just 8 million installed users last year—will reach a whopping 41.9 million installed users by 2021.

The growth will come from across the business spectrum: Small and medium businesses (SMBs) will account for the majority of installed users and a considerable portion of new users for these flexible, economical outsourced communications solutions. Larger distributed organizations looking to consolidate communications infrastructure, optimize IT operations, and cost-efficiently manage remote and mobile worker communications will follow suit, contributing to a growing percentage of users.

“Budget and resource constraints, as well as the appeal of faster access to advanced features, and the ability to supplement limited in-house IT staff, are lending momentum to hosted services among SMBs,” said Frost & Sullivan UCC Program Director Elka Popova. “Among larger distributed organizations, concerted service provider efforts, in addition to maturing technologies and business models, will drive adoption.”

Rapid penetration of hosted services among larger businesses, which require more advanced features and typically engage for a longer term, will help propel profitability in the North American IP telephony and UCC services space. The market will receive an additional boost as vendors with a differentiated value proposition target new customer segments.

That said, control and security will remain key customer concerns, the firm said. Apprehensions surrounding reliability, customization, and integration often tip the scales in favor of premises-based deployments.

Furthermore, new business models in the premises-based solutions domain, including subscription-based pricing and fully managed solutions, entice customers to retain or upgrade existing on-premises investments rather than opt for hosted solutions.

Greater scrutiny of service quality and reliability is compelling providers to differentiate through innovative features and to scout for mergers and acquisitions in order to gain efficiencies and achieve economies of scale, Frost added.

“Going beyond features and functionality, service providers must offer strong customer onboarding, consistent support, a balanced mix of automated sales and consultation, as well as efficient service provisioning and upgrades,” said Frost & Sullivan UCC program manager Robert Arnold. “With entrants vying for market share and many participants joining forces through mergers and acquisitions, vendors must align their growth objectives with market needs, portfolio capabilities and marketing approaches to carve their place in the still-untapped North American market.”