Is the Balance of Power Shifting from UCaaS to CCaaS?

28 Oct 2019

This is a busy time for industry events, and we analysts are getting a heavy dose of updates across the collaboration spectrum. Not so long ago, that spectrum was mostly about UC, but now the cross-over with both contact center and CPaaS has become routine. Cloud-based contact center – CCaaS – is really hitting its stride now, and I’m not alone in saying that a fundamental shift is underway.

Starting Point – Gartner’s New CCaaS MQ Report

Until recently, CCaaS was more of an add-on to the collaboration story, but in some regards, it’s become the lead, and that should matter for anyone on their collaboration buyer’s journey. My post here was triggered by the just-published Gartner Magic Quadrant report for the North American CCaaS market. While there’s plenty to talk about in that report, it also amplifies other developments I’ve been tracking that line up well with that thesis.

To set the stage, Gartner’s report is a timely touchstone on the strength of this momentum. There are two factors to consider here, and together they add up to a big growth opportunity. In terms of a forecast, Gartner is projecting a healthy 27.3% CAGR for global CCaaS licenses from 2018-2023.

Not only is this a fast-growing market – which aligns with broader trends for cloud adoption – but CCaaS is also displacing the installed base of legacy contact center deployments. During the same time period, the report projects a negative CAGR – minus 9.5% – for premises-based licenses globally. None of this is really news, but research-based validation makes the trends feel more tangible.

I’m not going to delve into the criteria used by Gartner for inclusion in their report, but the absence of two major players – Avaya and Cisco – speaks loudly to how important – and disruptive – CCaaS is becoming. Avaya is the most notable given how contact center is their crown jewel, along with how their slow move to the cloud has been a key reason for their prolonged financial difficulties.

Premises-based systems remain Avaya’s strong suit, and their true CCaaS offering – IX-CC – won’t be out till next year; hence their exclusion from Gartner’s report. Whether that’s too-little-too-late remains to be seen, but the stakes are high given how crowded this space has become.

The Dynamic CCaaS Landscape

Thinking only about contact center for Avaya, the bar for competition is getting pretty high, even if just considering pure plays. Genesys, of course, is the biggest, and they’re simply further along the path with strong offerings to support any mix of on-prem and cloud-based contact center. Coming up behind them are smaller pure plays, all of whom have strong CCaaS growth stories; namely Five9, Talkdesk, NICE/inContact, Serenova, and Aspect.

These players will drive a lot of CCaaS growth, but there’s another thread to follow, and it’s one that I think is more telling. CCaaS has a strong value proposition on its own, but there’s been a broader trend for some time to pair this with UC, and many cloud providers are leading now with this better-together approach. Vonage is a great example via their NewVoiceMedia acquisition, as is 8x8 with their recent launch of a home-grown cloud contact center offering, 8x8CC.

More recently, there have been some interesting moves that signal what looks to me like a shift in the balance of power between UC and contact center players. These moves are interesting not just because together they seem like a trend, but also because they’re not all the same types of moves. In other words, one way or another, UCaaS providers are looking for ways to add CCaaS to their mix.

Mitel and Talkdesk. Adding to an already strong contact center play via PrairieFyre, Mitel offers Connect CX for enterprise customers in partnership with Talkdesk. This strengthens their story to move upmarket, and provides more traction for Talkdesk. This has looked like a win-win from the start, and we got a better sense of that from each of their recent analyst events.

Atos and NICE/inContact. This is more recent, and is a similar example of a UC provider with a large installed base finding a partner to add CCaaS, under the moniker CXOne.

Intermedia and Telax. Also quite recent, this was a straight-out acquisition by a leading MSP of a small CCaaS provider. Again, the driver is to strengthen the UCaaS value proposition – in this case for SMBs – and the new offering was just launched.

RingCentral and Avaya. This may turn out to be the most pivotal move in our space this year, and I’ve been exploring this move in other posts elsewhere. It’s relevant here for two reasons. First, it’s more than just a strategic partnership, with RingCentral investing $500 million in Avaya, gaining a 6% stake in return. The implications for the vendor landscape are extensive, and this may represent a new business model for the collaboration space.

Second, at face value, it looks like the opposite of what I’m writing about here. In essence, Avaya concedes that RingCentral’s UCaaS offering is the best way to tap into this better-together strategy with their base of contact center customers. Being the bigger company, it’s only fair to focus on Avaya. That said, I would contend RingCentral is the stronger company, and they could come out ahead by bringing the Avaya contact center brand into their tent, especially with IX-CC. This remains to be seen, of course, since they have to work out the roadmap with their existing CCaaS offering via inContact. Messy for sure, but a sign of the times.

Conclusion

Taking all this into account, one could argue that contact center offerings bring more value right now than UC. If so, this would be a switch given how the cloud communications movement was really spearheaded by UC, with contact center following later. The above examples are evidence that UC players are courting contact center players to drive growth and provide more value to end customers. Furthermore, as Gartner’s report shows, the contact center pure plays seem to be thriving, so there’s lots of demand out there to be met, with or without UC.

Conversely, I can’t think of any examples going the other way, where contact center players are making these kinds of moves with UC players. They have enough growth on their hands with contact center, and they really don’t need UC to succeed. That certainly aligns with how the winds of business strategy are blowing, namely around CX being the new Holy Grail for competitive differentiation. UC can help businesses do that, but it’s not essential. What’s more important is having state-of-the-art CCaaS, and once that’s in place, adding UC isn’t that hard to do. This doesn’t mean UC and collaboration no longer have business value, but right now, CCaaS is where it’s at, and really should be part of your buyer’s journey.