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CPaaS market growth outpaces UCaaS as organizations demand APIs

Demand for API capabilities is driving the CPaaS market. Learn why organizations want APIs in addition to UCaaS platforms and why vendor overlap won't lead to market convergence.

Demands for programmability and customization are contributing to communications platform-as-a-service market growth. As demand for CPaaS increases, vendors in the adjacent unified communications-as-a-service market are expanding portfolios to include CPaaS offerings.

In 2019, the CPaaS market grew more than 40% over the previous year, outpacing UCaaS market growth, according to a report from Synergy Research Group, based in Reno, Nev.

"It's not surprising that CPaaS is growing faster than UCaaS," said Michael Brandenburg, analyst at Frost & Sullivan, based in San Antonio. CPaaS is a nascent market, and its potential uses are still being discovered, while UCaaS is an overall larger and more mature market, he said.

Increased demand for API integrations

APIs are the main driver for CPaaS market growth. Organizations can quickly add real-time communications, such as voice, video and messaging, to platforms without making significant and expensive infrastructure changes, Brandenburg said.

APIs aren't new, but the ability to build features into applications for customer use didn't exist before CPaaS, said Fazil Balkaya, principal analyst at Synergy. Uber, for example, uses APIs to provide customers the option of pressing a button within the app to call or message drivers. Customer-accessible API integrations align with digital transformation initiatives, like increased customer-focused operations, he said.

"We're seeing a shift from CPaaS being developer-focused to becoming a go-to fix for digital transformation in the enterprise," Brandenburg said.

Low-code/no-code APIs, which enable app development using a visual drag-and-drop approach, make APIs accessible to nondevelopers and contribute to CPaaS market growth. Low-code/no-code APIs give more creative power to business leaders, enabling them to make decisions about API use cases without needing to filter ideas through a developer, Brandenburg said.

Countries with laws that limit cloud access, including China, are also contributing to CPaaS market growth. Organizations in these countries have significant infrastructure costs associated with updating or adding functions for communications systems, Balkaya said. CPaaS APIs enable these companies to add UCaaS capabilities to their systems without worrying about downtime and infrastructure expenses for updates, he said.

CPaaS strengthens UCaaS offerings

The divide between CPaaS and UCaaS is shrinking. Both markets offer similar capabilities but in different ways, Brandenburg said. UCaaS is typically focused on providing a user-friendly way to consume telecommunications with a complete platform. CPaaS is typically purchased to address a specific capability or functionality need, he said.

Because the UCaaS and CPaaS markets target different needs, it isn't uncommon for organizations to purchase both. Organizations that purchase a UCaaS platform may be missing a necessary service or integration. Instead of submitting a request for quote and overhauling an entire UCaaS platform, purchasing a CPaaS API enables decision-makers to add just the individual capability needed. Organizations can buy APIs from a stand-alone CPaaS provider or directly from their UCaaS vendor, if available, Balkaya said.

Offering CPaaS APIs has value for UCaaS vendors, Brandenburg said. If customers already have a UCaaS platform and want to add a specific function, UCaaS vendors that offer CPaaS can sell API functionality to increase business with customers.

Vonage, for example, acquired Nexmo to add CPaaS to its portfolio. The acquisition improves customer retention by giving Vonage customers quicker access to additional capabilities, like number programmability, using APIs, Brandenburg said.

Despite the increasing number of UCaaS vendors that offer CPaaS, it's unlikely the two markets will converge, Brandenburg said. The offerings are being deployed alongside one another, but their procurement processes are different, he said.

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