Large providers enter UCaaS market, but will enterprises trust them?

Incumbent UC vendors and service providers have begun to sell UC as a Service (UCaaS), but it's unclear if large enterprises will commit to an all-cloud UC infrastructure.

Until recently, the cloud-based unified communications (UC) market has been the realm of startups, which often don't have resources or clout to inspire confidence from large enterprises. However, market-leading UC vendors and service providers have started partnering to sell UC as a Service (UCaaS) -- enabling enterprises to deploy everything from instant messaging (IM) to video conferencing over the public Internet.

Microsoft will be launching a cloud-based version of its new UC server, Lync 2010, next year with an initial feature set of IM, presence, PC-to-PC calls, Web conferencing and video conferencing. Additional voice services and audio conferencing will be added later in the year so that Lync Online will be "on parity" with on-premise servers, according to Mark Miller, Microsoft's senior product manager for Lync.

"It shouldn't matter whether you want the product in the cloud or [on-premise] with a server," Miller said. "We're trying to make them appear one in the same."

I like the Web-based version because most of our people are remote anyway…. I think they appreciate the flexibility of being able to [use] it anywhere.

Rob Putnam
Manager of Auction Services, Insurance Auto Auctions Inc.

Lync Online will become part of Microsoft's recently rebranded Office 365 suite -- formerly Microsoft Business Productivity Online Standard Suite (BPOS).

With all the marketing hype around cloud computing, nailing down a definition of UCaaS can get murky. Most UCaaS offerings are delivered over the Internet in a Software as a Service (SaaS) business model, meaning that IT pros have nothing to do with the infrastructure and architecture underlying the application being delivered, according to Irwin Lazar, vice president at Nemertes Research.

As a result, Lazar said he makes no distinction between the terms "hosted UC" and "cloud-based UC." Cloud and hosted services are typically distinguished by their architecture -- the former using virtualization to host multiple tenants the latter typically assigning dedicated infrastructure.

Early adopters of UCaaS startups have enjoyed flexibility

Selecting a cloud-based Web and video conferencing provider has proven cheaper and easier to deploy to dispersed employees than comparable premise-based products, said to Rob Putnam, manager of auction services at Insurance Auto Auctions Inc. (IAAI), a North American salvage auto auction company based in Westchester, Ill.

Putnam has rolled out subscriptions to ViVu -- a cloud-based video conferencing startup that counts Amazon, MySpace, Hilton Hotels and Thomson Reuters among its customers. ViVu delivers its SaaS product via two cloud providers: Amazon and Australia's Academic and Research Network's (AARNet), according to ViVu CEO Sudha Valluru. No client software is required; users access ViVu through a Web interface. 

Uncertain of what adoption would be like, Putnam started out with a subscription for up to 100 of the company's 4,000 users to create events. Adoption has been slow, but Putnam said he would rather expand the subscription than purchase hardware if usage picks up.  

"I like the Web-based version because most of our people are remote anyway…. I think they appreciate the flexibility of being able to [use] it anywhere," Putnam said. "We also manage a lot of PCs here and didn't want to worry about client software … [so we liked that] we really didn't have to install anything for the end users."

Many organizations reluctant to try UCaaS

Although more organizations are asking about UCaaS, only about 10% of companies use the services and they tend to be smaller businesses, Lazar said.  Most enterprises are only comfortable with putting Web conferencing into the cloud, he said.

Enterprises are hesitant to trust small UCaaS startups to support real-time communications reliably on a large scale for a variety of reasons, Lazar said. Many UCaaS providers don't have a wide enough data center footprint to provide consistent service everywhere, he said. Other IT shops are bound by compliance rules that require them to keep communications infrastructure in the United States, while other organizations remain skeptical about integrating UCaaS applications with legacy infrastructure.

"Cloud providers struggle with how to integrate, say, thousands of TDM phones," Lazar said. "[Another problem] is performance. How does a cloud provider diagnose troubles that may be on the local area network? Where is the line of demarcation? We find that some customers of hosted UC services weren't prepared for the reality that they still need to manage their own LAN and still had to make investments in things like power over Ethernet to support desktop phones."

"UC as a Service is really something fascinating to me, [but] I honestly didn't think it would be possible to do VoIP in the cloud," said Rob Minshall, MIS administrator for Volunteers of America of Florida, a nonprofit social services organization based in Tampa. "I'd love to know the bandwidth requirements … [and] you'd still have to have hardware clients for phones, prioritizations internal to a company -- how would they manage that part?"

Minshall, who has deployed Office Communications Server (OCS) 2007 R2 and hopes to upgrade to Lync, has been disappointed before by hosted IP public branch exchange (PBX) providers that were feature-poor. He doubts he could achieve the same depth of integration between OCS, Exchange, SharePoint and Active Directory in the cloud as he has accomplished with on-premise products.

"I think on-premise is far more flexible. The only part that's nice about the cloud aspect is that you let someone else worry about patching it and making it work so that you're concentrating on [broader strategies]," Minshall said. "If you're a company that just wants to do IM or Web conferencing a la carte … [or] if it's a company with less than 40 people, that's where the cloud approach makes sense."

Familiar incumbent vendors and providers enter UCaaS market

Confidence in UCaaS may change as more large providers entering the market -- in addition to Microsoft, Verizon Business and Orange Business Services have entered the fray. UC vendors, including Siemens Enterprise Communications and most recently Mitel, have also begun to offer UCaaS.

"Global providers are rapidly emerging," Lazar said. "I think that by the end of next year, the only things that will keep people from going to hosted [and cloud-based] UC are cost concerns … and concerns over data protection." 

Let us know what you think about the story; email: Jessica Scarpati, News Writer.

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