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Monday, 03 November 2014 18:54

On-premise UC solutions losing ground to hosted, cloud solutions Featured

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Hosted and cloud-based Unified Communications solutions are slowly but surely replacing on-premise UC deployments as organisations reportedly improve their understanding of the benefits of a hosted UC model.

According to a report from Frost & Sullivan, there’s been a decline in revenues in Australia’s on-premise UC market, with hosted and cloud-based UC solutions now reaching mainstream adoption.

With the shift away from on-premise deployments, the research company predicts that by 2020 revenues from hosted and cloud-based UC solutions in the Australian market will be close to that of on-premise solutions.

Microsoft, Cisco and Avaya still dominate the market as Australia’s top three UC vendors, according to Frost & Sullivan.

{loadpositions peter}The research company forecasts, however, that traditional vendors like Microsoft, Cisco and Avaya will face competition from a new breed of cloud-based players, such as Google, Vidyo, IPscape and Blue Jeans. And, Frost & Sullivan says these ‘new breed’ players are already experiencing growing demand for their solutions and displacing many traditional vendor solutions, while also building industry partnerships to support their growth strategies.

Anand Balasubramanian, Frost & Sullivan Industry Analyst, ICT Practice, Australia & New Zealand says the capital intensive nature of on-premise solutions limits the flexibility for organisations to adapt to the changing communication and collaboration environments. “As a result, the on-premise UC market is approaching a phase where growth rates are flat or declining.”

Balasubramanian says that the decline in the Australian UC market revenues can be attributed to the changing business preferences for communication and collaboration solutions.

“In line with a cautious spending approach, both government agencies and businesses delayed IT investments, reduced the number of large scale deployments and opted to extend the life of their existing systems, which had a major impact on the market.”

“Growth rates in the UC market are expected to be flat in 2014 and will continue to be low. Vendors will find it difficult to convert opportunities for on-premise solutions as hosted and cloud-based alternatives gather momentum. This will also have the effect of tightening the profit margins for vendors and channel partners, further contributing to the low growth rates in the market.”

Frost & Sullivan’s forecast that Australia’s UC market will grow at a Compound Annual Growth Rate (CAGR) of 1.6% from last year to 2020, with revenue contribution from hosted and cloud-based solutions close to that of on-premise solutions.

But, the research company does report that on-premise UC solutions will continue to offer opportunities, particularly in the government and banking, financial services and insurance (BFSI) sectors, where there is greater need for infrastructure control.

“Many organisations have sunk significant amounts into their UC infrastructures and will not find it cost effective to switch to a hosted model, the report says.

And, although the contact centre market in Australia is fairly mature, according to Frost & Sullivan it was among the strongest performing UC segments in 2013, benefiting from pent-up demand from previous years, where organisations opted to defer major deployments and refreshes while assessing the impact of economic and political conditions.

To increase profit margins, Frost &Sullivan says that vendors and channel partners are focusing on optimising operations through consolidation of business lines and by making strategic acquisitions.

Telstra, Optus, Unify and Mitel have undergone significant changes to their go-to-market strategy or company structure, and Frost & Sullivan forecasts that such moves and changes will become increasingly common over the next few years.

According to Audrey William, Head of Research, ICT Practice, Australia & New Zealand, the shift towards hosted and cloud-based models in the Australian market is changing the dynamics between vendors and channel partners, with UC vendors and channel partners increasingly competing for the same market “as UC related services become critical for driving future growth”.

“The hosted and cloud-based models allow vendors and channel partners to address the market directly, by provisioning UC solutions from their own data centres. This gives the vendors greater capacity to reach customers directly, but also puts them in direct competition with their channel partners.

“Over the next few years, competing for the same customer base will be common as both vendors and channel partners look to secure avenues for growth. The ability to cooperate and coordinate will therefore be critical to the success of vendors and channel partners.”

Frost & Sullivan puts the top three vendors in the two-tiered Australian UC market as Microsoft, Cisco and Avaya - accounting for over 50% of market share - and a large number of vendors competing for the remaining market.

While saying that Cisco – with declining 2013 revenues over 2012 - and Microsoft will remain the dominant vendors in the UC market, Frost & Sullivan says they will face greater competition from emerging and new players over the next few years.


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Peter Dinham

Peter Dinham - retired in 2020. He is a veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).

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