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Hosted IP telephony market reaching mass adoption

More organizations are deploying hosted IP telephony and UCC services to reap the benefits of the cloud, according to a report from Frost & Sullivan.

Hosted IP telephony and unified communications and collaboration (UCC) have reached mass adoption, as organizations...

increasingly turn to cloud infrastructure, according to a recent report from technology research firm Frost & Sullivan.

"Pretty much any kind of organization could benefit from hosted services," said Elka Popova, UCC program director at Frost & Sullivan, based in Mountain View, Calif.

The North American market reached 8 million installed users in 2014 and is expected to reach 41.9 million users by 2021, according to the report. Market growth was attributed to an increased awareness of the cloud's benefits.

Traditionally, hosted IP telephony and UCC services have been deployed by small and midsize businesses that lack the budget and resources to run their infrastructure in-house. Now, organizations of all sizes are reaping the benefits of hosted services. Many organizations are deploying cloud services to gain faster and more cost-effective access to advanced capabilities, such as mobility and Web collaboration.

"Once organizations start considering a move for more advanced communication, that's when the cloud makes more sense," Popova said.

Larger organizations are turning to the cloud to consolidate and scale their UC infrastructure economically to support mobile and remote workers, as well as branch offices, according to the report.

But for an organization to move to a new infrastructure, a tipping point is needed. Three factors can cause a tipping point, Popova said.

The first is the end of life of existing services. When services become fully amortized on an organization's balance sheet, the organization is ready to move on. Second, an organization that is growing rapidly or downsizing may find the cloud offers more flexibility to scale operations up or down as needed.

Lastly, user needs are changing. An organization may find that voice alone isn't enough for its employees. For efficient collaboration, users often find they need features such as instant messaging (IM), video, screen sharing and file sharing.

Hosted IP telephony market is fragmented

Moving telephony and UCC to the cloud is no small task.

When exploring hosted IP telephony and UCC services, key features are not necessarily the crucial consideration, Popova said. Instead, organizations should consult with end users, line-of-business managers and IT to determine what features are needed.

Once organizations start considering a move for more advanced communication, that's when the cloud makes more sense.
Elka PopovaUCC program director at Frost & Sullivan

Popova said the beginning stage of moving to a hosted service involves two steps. First, an organization should assess its internal assets, such as existing systems and applications, and evaluate IT resources.

Second, an organization should conduct due diligence internally to determine user requirements. A large organization will find that many users require voice, but other users -- such as executives and sales employees -- may require mobility and conferencing capabilities, Popova said.

Choosing a service provider can be difficult for organizations since there is no clear market leader, the report found.

"The market is extremely fragmented," Popova said. There are over 120 service providers in the market and highly ranked providers, such as RingCentral and 8x8, have a market share of less than 10%, she said.

In addition to a glut of providers, many providers offer the same core telephony features that were typical with traditional PBXs. But providers are starting to differentiate with features like IM, presence, mobile and Web collaboration, Popova said.

Organizations evaluating potential cloud services should consider a provider's future and what vision the provider has for the organization. Customer references are also vital to validate the provider's claims about traction, customer churn, network performance and availability.

"I strongly recommend customers look beyond features and ensure they're in for a long-term partnership," Popova said. "It's very disruptive if you switch a provider and it doesn't turn out to be the right one."

Next Steps

The UC market picking up where the PBX leaves off

Hosted UCC services offer five major advantages

Dig Deeper on IP Telephony Systems

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