Cloud Trends for UC Components and Solution Providers

Building on our recent podcast and articles discussing Hosted VoIP and UCaaS by Blair Pleasant (An Update on Hosted VoIP and UC Services) and Joseph Williams (UCaaS and the Channel: Part I - The Vendors), according to Infonetics, hosted VoIP and UC services revenue grew 17 percent in 2012 over 2011. That was the highest rate in a segment that generated $63B in revenue growing 9 percent year-over-year. [see report] Cloud-based UC services are a great place to invest your resources as a solution provider in the space as adoption increases. The telecom carriers arguably created and have been operating in the "Cloud" business model for decades so it makes it difficult to determine the adoption rate for voice services hosted or in the "cloud." I found some old slides from vendors listing as high as 20 percent hosted number for companies with fewer than 1,000 employees but no studies referenced. More specific data from the recent CompTIA "4^th Annual Trends in Cloud Computing" [report brief] would indicate broad adoption of UC components and Solution Providers developing "managed services" around UC or any IT cloud solution is one of the best ways to increase your profitability and stay relevant with your customers in their journey to the cloud.

The second portion of the CompTIA study is focused on End User adoption of Cloud. They surveyed over 500 organizations and breaks the results down by small medium and large. The results paint a picture of broad adoption of several key UC technologies in the "cloud."

The numbers are for "use" so it doesn't imply that they are exclusively using cloud-based solutions. The first thing that struck me was that the Small firms had lower adoption than large ones. I would have thought just the opposite. Unfortunately they don't break out Voice specifically but with Collaboration and Email both around 50 percent adoption, with two significant UC components rapidly moving to the cloud it would make sense that the others would follow the same trend as well.

The other alarming number from the end user portion was that 46 percent of these "cloud" purchases are made by the "line of business" with final approval and the IT department providing input. Although the number is more like 22 percent for Email and Collaboration.

The first part of the study is more geared toward the solution providers that comprise the "IT channel." It provides some great insight into the trends in solution provider adoption and integration of the cloud model into their existing business. I highly recommend reading it to anyone in the solution provider community.

Cloud Computing and Managed Services are two forces that are disrupting the business cycle that drove vendor and channel companies growth since the 80s. Technologies were developed with planned hardware replacement and regular software upgrades. Solution providers made their recurring revenue on the services, upgrades and replacements. In the cloud model you can still continue to make some money on the product sale although the margins are decreasing. There is also money to be made in migrating customers from premise to cloud just as there was with switching hardware vendors. But the upgrade revenue and in many cases the renewal contract business is evaporating. Managed Services if done right have the ability to offset those losses and create even greater valuation for your business with recurring revenue. If you want to thrive in the cloud era Managed Services should be a key component of your operation. Here are some numbers from the study to support that.

• Services revenue growth is 50 percent for cloud versus 22 percent for their established
  
  
• Profitability of 49 percent Cloud versus 30 percent for established

They conclude in the study that the cloud business model that is most strategic and important to solution providers is management and support. Many companies start out with build and migration services but they mature into Managed Services which has the ongoing sustainable profit to take your company into the next decade.