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Decoding the CPaaS market: A look at vendors, products and customers

Communications platform as a service, or CPaaS, came to life in 2016. The evolving market exudes a dual nature with two kinds of customers, products and vendors emerging.

The market for communications platform as a service has seen an interesting and dynamic year. The CPaaS market...

has been chugging along for years now, and it seems the pieces of the puzzle started fitting together in 2016.

CPaaS enables enterprises to build or integrate communications into business workflows. Need to send messages to customers? Use CPaaS. Need to receive calls from customers, play messages for them and have them select an option? Use CPaaS. Need to call customers and connect them with sales reps? Use CPaaS. The options are endless.

The poster child for the CPaaS market is Twilio Inc., a vendor that enjoyed a successful initial public offering in 2016. But many other players are also in the market. The CPaaS market seems to be built around two customer personas, two product portfolios and two vendor models.

Packaging CPaaS for the right customers

Two types of customers consume CPaaS: the long tail and the enterprise.

The long tail includes developers working in their garage, university students running pet projects or companies with savvy IT departments that have development capabilities. In this domain, vendors need to capture a large number of users and monetize a fraction of them who then run their communications at large scales.

But, in this model, vendors are challenged by two things: the time it takes to grow and the business plan, which only makes commercial sense if customers deploy a large volume of communications. 

For example, sending a million short messages in the U.S. via Twilio will cost $7,500. Volume discounts kick in at 5 million messages a month. Operating as a long-tail vendor in the CPaaS market requires economies of scale to be profitable.

The enterprise poses a different challenge. It is a high-touch market, where more interaction and support is required. Market education is needed as enterprises shift from on-premises services to the cloud and anything as a service.

In many cases, the communication volume requirements for enterprises are lower than long-tail customers, but this also makes enterprise needs more predictable.

So, how do you monetize these requirements? How do you price the product so it makes sense for an enterprise, especially when compared with long-tail customers? Working with enterprises is all about packaging the product and speaking the language of the enterprise.

Product portfolios focused and diverse

CPaaS vendors come in different shapes and sizes. Their product portfolios can be focused or diverse.

The sharply focused product portfolio solves a specific communication function. Vidyo, for example, is launching a CPaaS product that targets video communication and focuses on mobile calling and scalable multiparty conferences.

TokBox has been using this approach for years with a product portfolio entrenched in video communications. The vendor launched live, interactive broadcasting a year ago to complement its video-calling capabilities. At the same time, other vendors focus squarely on messaging services.

Meanwhile, Twilio offers a diverse product portfolio and has expanded beyond voice and messaging services in the last two years. Twilio's offering today includes push notifications, video calling, two-factor authentication and task routing, just to name a few.

But Twilio is not alone. Many other vendors offer similar portfolios, with different flavors to differentiate themselves.

In short, focused vendors have verticalized their offerings with top-of-the-line marketing. Customers use these vendors to solve a specific communication pain point. Diversified vendors offer a horizontal portfolio with best-of-suite marketing. Customers use these vendors, so they only need to interact with one vendor to solve their communication problems.

UCaaS vendors target CPaaS capabilities

A new type of vendor emerged this year in the CPaaS market. Instead of the pure CPaaS player, we now also have UC-as-a-service vendors turning to CPaaS.

The pure CPaaS vendor started with a communication API that customers could use to build services on top. Whether the vendor targeted enterprises or long-tail customers, or had a focused or diverse portfolio, the vendor's DNA is rooted in APIs.

UCaaS vendors offer the ability to run an enterprise phone and other communications as hosted services instead of installing on-premises infrastructure. These vendors include UC players that have transitioned to the cloud and are now targeting CPaaS.

With the infrastructure they already have in place, UCaaS vendors can entice existing customers to use them instead of third-party CPaaS players. Additionally, UCaaS vendors look to lure new customers that want to integrate communications and may use the vendors' UCaaS products in the future as well.

UCaaS doing CPaaS means using the same underlying infrastructure to serve two distinct markets.

Next Steps

CPaaS bundles simplify application development.

Evaluate CPaaS providers with these key criteria.

Embed communications into business apps with CPaaS.

This was last published in December 2016

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How might communications platform as a service benefit your organization?
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CPaaS is a target of opportunity for MSPs.
Choose a Vendor with a deployed service for low threshold to entry, but very thin margins.  Or...
Choose an actual Platform that enables Cloud Tools with Communications that enhance workflow...and diversify your Go To market based on customer segmentation and actual requirements.
Exciting times.
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