Gartner 2019 Magic Quadrant for UCaaS, Worldwide: Redefining the Industry from the Bottom Up

12 Sep 2019

The 2019 Gartner Magic Quadrant for Unified Communications as a Service (2019 UCaaS MQ) shows very clearly that the voice telephony marketplace is being almost totally redefined from the bottom up by the producers of cloud-based UCaaS platforms. Two major factors support this observation:

  1. Gartner’s Strategic Planning Assumption that, “By 2023, 40% of new enterprise telephony purchases will be based on a cloud office suite – either Microsoft Office 365 or Google G Suite.” Each of these companies has created its own UCaaS platform. 

    And:
     
  2. The market is being defined by the companies that create the UCaaS platforms, not by the channels that resell those platforms nor by those who have historically been leaders in on-premises solutions.

Let’s explore these two points.

First, the Strategic Planning Assumption quoted above is a pretty bold statement and raises many questions about what the Gartner analysts meant and the way they phrased that statement. Those key questions, as discussed in more detail in this post, include:

  • Does Gartner really mean ALL new enterprise telephony purchases, including on-premises and cloud-based implementations?
  • What does “new enterprise telephony purchases” really mean?
  • Is this really a statement about the success of Microsoft Office 365?
  • What does Gartner see that we don’t yet see?
  • What did Gartner miss?

To summarize, this Gartner Strategic Planning Assumption represents some combination of the declining demand for voice telephony licensing and of the definition of Unified Communications that we introduced here at BCStrategies (nee UCStrategies) in 2006: UC is “Communications integrated to optimize business processes.”  

Both Microsoft and Google have determined that real-time communications are part of the suite of enterprise office software tools used in modern workflows, and are bundling voice communications, including Microsoft calls Teams Phone System, into their office suites. Adoption of Office 365 and of G Suite are growing globally, so those vendors’ real-time calling and meeting communications applications will have little or no incremental cost. Thus, massive numbers of “new enterprise telephony licenses” at a very low net cost. 

Of course, Microsoft and Google will have to hurry, since the function-specific applications vendors, the vertical market application vendors, and the mobile workplace application vendors are also “integrating” communications into their suites so as “to optimize business processes.” (See this post on the applications wave).   

Meanwhile, since the denominator of traditional enterprise telephony licenses is flattening out, or even declining, a 40% share of the total in 2023 may not be such a big number. But no matter what math is used, that Strategic Planning Assumption puts a big twist into the entire enterprise telephony market, and especially the UCaaS market.

Second, the market is being driven by those companies that create the UCaaS platforms. This is reflected in several ways in this 2019 UCaaS MQ.

Gartner’s headline on this UCaaS MQ is, “Leading edge UCaaS providers build, operate and maintain the UCaaS stack in datacenters they control. Digital workplace application leaders should focus on these types of solutions because they (note: “they” = the UCaaS providers’ solutions) are expected to have the fastest pace of innovation.” 

This essentially sounds a Gartner death knell for on-premises PBX-type solutions. How can an enterprise decision maker read this statement and not put UCaaS at the top of the selection list for new enterprise telephony purchases? If UCaaS is not top-ranked, the decision maker is basically saying, “We care neither about digital workplace nor innovation.” Not likely. 

Then, Cisco’s acquisition of Broadsoft in October 2017 made it clear that the UCaaS delivery method for enterprise telephony was here to stay. Broadsoft had only a minor on-premises option sold to only the largest of enterprises, so Broadsoft is essentially “all in” on UCaaS. Many resellers, mostly in the telephony carrier category, were dropped from the 2019 UCaaS MQ since they were resellers of the Broadsoft platform. In this way, Gartner shifts the UCaaS MQ focus to the platform producers, rather than the resellers. 

In addition, the companies that have been UCaaS-only platform producers from the beginning (we can’t call them startups anymore since they are all in the 9-figure annual revenue range) are filling in the UCaaS MQ alongside Microsoft, Google, and Cisco (Broadsoft). This includes RingCentral and 8x8 who join Microsoft and Cisco in the Leaders quadrant, and Fuze and Dialpad who are the sole occupants of the Visionaries quadrant. Mitel joins Google and LogMeIn in the Challengers quadrant, since Mitel has built a robust cloud platform and revenue stream. Alcatel Lucent Enterprise (ALE) appears in the Niche Players quadrant, along with StarBlue and Windstream, based on the richness of ALE’s Rainbow UCaaS functionality. However, besides Cisco, Mitel and ALE, no other company in this year’s UCaaS MQ is a traditional on-premises IP PBX producer.   

In summary, the Gartner 2019 UCaaS MQ marks two tipping points in enterprise telephony:

  • UCaaS is declared the overwhelmingly preferred option for the future.
  • Enterprise communications will be delivered, within 4 years’ time, primarily as a feature of an application package or suite, with Microsoft and Google leading that shift.

It’s time, immediately, either to validate or to re-consider your enterprise telephony roadmap!  We wish you success and will be providing guidance for your journey here on BCStratgies.com.

Note: At this time, a copy of the 2019 UCaaS MQ is available for download from RingCentral, 8x8, or Fuze.