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Contracting unified communications industry could benefit buyers

Cloud services are both maturing and contracting the unified communications industry. But this market shift should benefit prospective buyers via aggressive product discounts.

All industries go through cycles of growth and contraction. The unified communications industry is currently in contraction, which means, generally, more mergers and consolidations. When markets contract, the effects are felt throughout the channel to vendors and suppliers.

The good news is great services still abound -- and prospective customers should benefit from aggressive discounting. But why is the unified communications industry experiencing such contraction?

Over the past 15 years, the unified communications industry has experienced several demand-stimulating transitions. For example, time-division multiplexing transitioned to Voice over IP. VoIP transitioned to UC. And now, hardware's shifting to software.

The UC premises-based market is shrinking for several reasons -- the rise of cloud services and software assurance are two big factors. Cloud adoption continues to gain momentum, particularly among businesses with smaller locations.

Many vendors are reprioritizing research and development toward cloud-delivered services. They're also building hybrid services to facilitate cloud migrations. While this makes business sense, premises-based innovations lag behind as a result -- a symptom of a maturing market.

Acquisitions aplenty

The unified communications industry has seen plenty of acquisitions and consolidation just in the past two years. This fusion of forces often combines vendors directly within the unified communications industry, while other deals involve players outside the UC space.

Here's a list of some of the recent, notable acquisitions in the unified communications industry: Cisco acquired video conferencing company Acano, cloud API provider Tropo and search technology company Synata; Microsoft acquired voice messaging company Talko and is in the process of acquiring LinkedIn.

Other notable moves include: IT services company Atos bought Unify; RingCentral acquired Glip; ThinkingPhones bought Fuze; Avaya bought Esna; Mitel bought mobile carrier Mavenir and nearly acquired Polycom, which is now being bought by Siris Capital Group.

More recently, three major UC vendors -- Avaya, Interactive Intelligence and ShoreTel -- are reportedly exploring capital options and partnerships.

Inspect channel partners, hybrid options

The effects of unified communications industry consolidation are difficult to predict. Vendors use several factors to evaluate product lifespans, including portfolio fit and migration path, which change amid acquisitions.

Market share or sales rates can be poor indicators of product life spans. Avaya, for example, surprised many industry onlookers when it discontinued Nortel's popular Business Communications Manager in 2011. After Mitel acquired Aastra in early 2014, it discontinued several Aastra platforms and kept some that had smaller installed bases.

Additionally, to confound industry consolidation matters even further, premises-based services last longer now because of decoupled hardware and software assurance. Organizations are less likely to outgrow the capacity or capabilities of their systems with software assurance.

Premises-based deployments are still the preferred model for the majority of businesses.

During times of consolidation, enterprises considering a UC purchase should evaluate two key areas:

  • Channels. Channel partners are more susceptible to fluctuations, since they don't have the geographic reach to balance demand. Dealers sometimes consolidate before any major vendor mergers. The larger dealers often gobble up the smaller ones. Since each manufacturer imposes requirements on training and sales volume, consolidations can result in dropped vendors. Prospective customers should carefully assess dealer viability and alternative support options.
  • Hybrid and cloud. Don't mistake the softness of the premises-based market as the end of premises-based deployments. It's actually still the preferred model for the majority of businesses. Customers opting for premises-based services often cite economies of scale for larger offices or concerns over security and control. Organizations favoring premises-based services should inquire about hybrid options that combine on-premises and cloud services. Also, ask about premises-to-cloud migration options, such as the flexibility to trade licenses for services.

In the unified communications industry, core features are mostly consistent across vendors. This consistency mitigates technical differences among vendors and allows buyers to focus on the user experience, customer support and other subjective differences. But enterprises should also examine each vendor's vision and roadmap.

Next Steps

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