Dec 17, 2015 – Three Trends Impacting Hosted VoIP/UC Providers

There are many ways to analyze the Unified Communications market, and most posts here focus on helping SMB decision makers evaluate their needs and vendor offerings. This post focuses on another perspective, namely what hosted providers are seeing in the market. I’ve written about this previously, and want to highlight some relevant findings from a new study. This research is the third iteration of the VoIP Service Provider Report, produced by VoIP Logic, and was just published in December 2015.

Having reviewed the results with the publisher, I can share some high level findings about what’s impacting the business today for hosted providers. This is a complex space to define, and the research can only address broad findings, but still provides valuable insight on how businesses are buying hosted services in 2015.

1. Low touch sales on the decline

SMBs have a variety of options when buying hosted VoIP or UC services. When buying premise-based solutions, the provider is usually a telephony vendor or a channel partner, and the business model is built around a hardware purchase and often a software license for the applications. The hosted scenario is different, as the business is subscribing to a service. Hardware may or may not be part of the deal, and the main relationship will be with the service provider. Given the flexibility of the cloud, there are many types of service providers to consider, such as incumbents, CLECs, OTTs, cable operators, etc.

Regardless of the type of service provider, the buying process can take a variety of forms. In most cases, the business will purchase directly from the service provider, but they can also go through channels, such as VARs or agents. Another option is to buy straight from the Internet via a service provider’s website. All of these sales methods are well established, but the research shows a shift in buying preferences. Buying direct from the service provider is the dominant mode, and compared to last year’s survey, this option is trending higher. The use of channels is somewhat less common, but is also trending higher, albeit slightly.

The third route – Website – is even less common, but still notable in the overall buying landscape. Here, the trend is slightly down, and considering the other trends, it’s reasonable to conclude that SMBs are relying more on high touch modes for these buying decisions. These options add cost for service providers, but reflect changing market conditions. Basically, as businesses move on from VoIP to UC, their needs become more complex, requiring more direct involvement from the service provider. Web-based buying may work well for basic VoIP, but UC is more demanding, not just for implementation but also for ongoing customer support.

2. Hosted communications business is growing

Service providers have many lines of business, including business VoIP, residential VoIP, SIP trunking, hosting, mobility, data services and wholesale services. The mix will vary by type of service provider, but for SMBs looking at hosted VoIP/UC, it will be important to know that this is a core offering. For example, with VoIP, some carriers only focus on the business market, while others may have started out with residential and added business later on. Another consideration is the extent to which the carrier is focused on voice services as opposed to data and IT services. Depending on their history, they may find the latter to be more profitable business, in which case, VoIP or UC will be of secondary interest.

Those differences aside, the research shows that overall the top three offerings are as follows:

• Hosted PBX/UC – offered by 68%

• SIP Trunking – offered by 53%

• Data Networking/Services – offered by 37%

Based on this, approximately two thirds of carriers will be in the running for hosted VoIP/UC, so it should not be difficult to find potential partners. Depending on how far the business wants to go down the hosted path, this field narrows somewhat if the solution involves SIP Trunking. While you don’t have to buy this from the same provider as VoIP/UC, it will be much easier this way all around.

Aside from Hosted PBX/UC and SIP Trunking being the most popular offerings, they are also growing the fastest, with respective increases of 6% and 9% from 2014. Of the 10 offerings covered in the research, these two are posting the two highest growth rates, and  reflects the broader momentum we see in the hosted UC market.

3. Declining interest in desk phones

This trend is widely reported, and while desk phones remain in widespread use, their dominance is ebbing. When asked about how important desk phones are, the 2015 data shows a clear shift downward from 2014. Fewer carriers said they were “very important” in 2015, and their sentiment is shifting more to being “important” or “a little important”. They will certainly keep selling desk phones so long as there is demand, but service providers are seeing a shift in preferences away from CPE – customer premise equipment – to soft phones.

In fact, the research shows widespread support among carriers for four types of soft phones – on mobile phones, on PCs, on tablets, and on browser-based clients. This trend is consistent with the earlier discussion about hosted solutions being sold primarily as a subscription service with minimal hardware. The ongoing licensing revenue from soft phones makes them financially attractive, so SMBs should expect that service providers will increasingly emphasize this option when selling hosted VoIP/UC.

About the Author

Jon Arnold is Principal of J Arnold & Associates, an independent telecom analyst and strategy consultancy based in Toronto, Ontario. The consultancy’s primary focus is providing thought leadership and go-to-market counsel regarding IP communications and disruptive technologies. You can follow Jon’s everyday insights on his influential Analyst 2.0 blog and on Twitter.

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