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Top UC providers widen their lead in Gartner Magic Quadrant

Unified communications vendors Avaya and Alcatel-Lucent Enterprise stumble in the latest Gartner Magic Quadrant, as Cisco, Microsoft and Mitel extend their market lead.

While Gartner's annual Magic Quadrant for Unified Communications closely examines vendors and their on-premises...

products, the report does not ignore the accumulation of cloud services. In fact, as the report pointed out, organizations investing in premises-centric technologies should vet the vendors' cloud migration strategies and have a clear path toward cloud services with providers that are commercially and operationally viable.

Some unified communications (UC) vendors are expressing their cloud migration plans better than others. As a result, leading UC providers Cisco, Microsoft and Mitel are extending their market command and separating from the rest of the pack, said Mike Fasciani, a Gartner analyst and one of the authors of the report. 

While UC providers peddle cloud products, they're still largely selling on-premises systems. According to Gartner, on-premises UC still accounts for 70% of the services sold in midsize and large enterprises. The market share for cloud-based unified communications as a service (UCaaS) is growing, however, relative to on-premises UC services.

"On premises is still the most common deployment model, especially in large enterprises," Fasciani said. "But, clearly, the growth is in the cloud."

Everybody chasing Microsoft

The on-premises UC market is mature, Gartner said, meaning services are standardized and vendors' products are quite comparable. On-premises voice communications, for instance, lacks room for further innovation. Now, UC providers are looking to innovate elsewhere, specifically in the cloud, hybrid deployments, communications platform as a service and contact centers.

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Magic Quadrant leaders Cisco and Microsoft, for example, have solid cloud migration strategies for customers, while also promoting hybrid deployment options. Cisco offers its Spark cloud service, while Microsoft offers cloud-based Office 365, as well as Skype for Business hybrid models.

Other vendors in the report are not quite keeping pace with cloud and hybrid options, Fasciani said, except for fellow Magic Quadrant leader Mitel, which is in the process of acquiring ShoreTel. Mitel has looked to grow its business through acquisitions, which could create problems as it tries to integrate a mix of UC products and partners, Gartner said. 

But Mitel ultimately needs to grow via acquisitions, since organic growth would take too long, Fasciani said. Mitel will be the main competitor to Cisco, he added, while everyone chases Microsoft.

"I think Microsoft is the threat to everybody, including Cisco, and that's because of the popularity of cloud-based Office 365," Fasciani said. "So many enterprises are interested and wondering if Office 365 and Skype for Business is the way to go."

Some UC providers stumble

Perhaps the biggest change in this year's Magic Quadrant compared to 2016 is Avaya dropped from the leaders group. In January 2017, Avaya filed for Chapter 11 bankruptcy protection to reorganize its balance sheet and restructure debt. Avaya said last week it could emerge from bankruptcy in the fall.

While Avaya could come out of bankruptcy efficiently, it still needs to grow its business, Fasciani said. The question is: Can Avaya sell beyond voice and contact-center services? So far, it has not proven to be able to do that, he added. Avaya has strong brand recognition for its telephony, and its Zang service has developed cloud communication services with the help of a developer portal, Gartner said. 

Another notable drop in the Magic Quadrant is Alcatel-Lucent Enterprise (ALE) falling from challenger to niche player. Paris-based ALE is owned by China Huaxin, an industrial investment company. Gartner questioned China Huaxin's long-term commitment to ALE, because it has invested little in the UC business since buying it three years ago.

Additionally, ALE is focusing more of its business on Western Europe, which limits the vendor's exposure in other parts of the world, Gartner said.

Where Cisco and Microsoft fall short

Unified communications juggernauts Cisco and Microsoft again topped the list of vendors in this year's Gartner Magic Quadrant. Despite the two vendors' obvious strengths, Gartner also issued some caveats.

For instance, Cisco's UC services for large enterprises -- including hardware, software licenses and maintenance costs -- are typically priced higher than its competitors. Cisco also has overlapping features in its UC portfolio, especially for customers considering on-premises services and Cisco Spark, the vendor's cloud-based UCaaS product. This overlap might challenge enterprises as they try to understand Cisco's offerings and determine long-term strategies for the user experience and pricing, Gartner said.

As for Microsoft, some enterprises have not been satisfied with the quality and capabilities of Skype for Business audio and video conferencing, Gartner said. Some customers use separate conferencing services for business-critical use cases. Microsoft's cloud UC service is Skype for Business Online, which is part of the Office 365 portfolio.

Skype for Business Online's telephony is still maturing, Gartner said. The analyst firm suggested organizations try Skype for Business Online before purchasing to make sure it works as required by users in all locations.

Deploying Skype requires organizations to select multiple technology partners for a complete UC service, Gartner said. Determining which partners to select remains a challenge for most IT organizations.

On premises and cloud merging

In the Magic Quadrant, Gartner evaluates UC providers in relation to each other and how they perform against one another. While the report focuses on premises-based services for midsize and large organizations, Gartner also acknowledges the importance of cloud offerings. The analyst firm covers cloud UC products in its UCaaS Magic Quadrant.

Fasciani said enterprises should be careful about signing a multiyear maintenance contract with an on-premises service. Organizations should also examine vendors' plans to migrate customers to more innovative offerings during the lifecycle of a contract and make sure licensing plans entitle them to new services.

So many enterprises are interested and wondering if Office 365 and Skype for Business is the way to go.
Mike FascianiUC analyst at Gartner

The line is blurring between on-premises and cloud services, Fasciani said. An organization could buy a service from Cisco, for example, and maybe not realize what elements are cloud-based and which are on premises.

"We're going to have to expand our thought process about how we cover the space and go more into the cloud-based deployment models to ensure we're capturing everything the vendors are offering," Fasciani said.

In this year's UC Magic Quadrant, Cisco, Microsoft and Mitel were named leaders. Huawei and NEC were named challengers. Avaya and Unify were named visionaries. ALE and ShoreTel were named niche players. ShoreTel is in the process of being acquired by Mitel. Interactive Intelligence was dropped from this year's report because it was acquired by Genesys, a contact-center vendor.

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