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Microsoft and Amazon take on CPaaS market share

The CPaaS landscape is evolving as Microsoft and Amazon introduce their own communications APIs. Learn how cloud computing vendors entering the market is changing the CPaaS game.

The early communications platform as a service, or CPaaS, market had two distinct attributes to it. First, Twilio was the dominant leader. Second, most vendors first entered market with public switched telephone network, or PSTN, and text messaging capabilities and later expanded to other modes.

In the last several years, the market has seen new entrants, including Sinch, Bandwidth and Vonage -- through its acquisitions of Nexmo and TokBox. Others, including Agora, Dolby.io and Daily, entered the market with a focus on IP-based communications based on Web Real-Time Communications (WebRTC). But the most recent entrants to CPaaS market share, Amazon and Microsoft, are shaking things up as they are leading cloud computing vendors.

Amazon Chime SDK

Amazon launched Chime in 2017 as a unified communications (UC) service focused on video conferencing and communications. Amazon introduced the Chime SDK in late 2019, which enables developers to build video, audio and screen sharing capabilities into applications using the Chime communications infrastructure.

Two of Chime's top SDK customers are Salesforce and Slack. Slack is integrating the Amazon Chime SDK to provide audio, video and screen sharing in Slack Calling. Salesforce is using the Amazon Chime SDK to enable video communications its new Salesforce Anywhere application.

The Amazon Chime SDK comes with all the usual features expected from an IP-based CPaaS vendor but with reduced PSTN and text messaging capabilities compared to other CPaaS vendors. For example, Amazon doesn't offer number provisioning. It isn't clear if Amazon wants to close the gap or ignore the missing capabilities.

The biggest challenge of the Amazon Chime SDK may come from the pricing front. While most CPaaS vendors charge roughly $0.004 per minute for video calling, Amazon seems to be happy with $0.0017 per minute -- less than 50% the common price point. This is bound to cause downward pressure in prices.

Microsoft Azure Communication Services

Microsoft launched its Teams UC platform in 2017. Its growth has been significantly larger than Amazon Chime's, mainly due to Microsoft's reach to enterprise accounts and the bundling of Teams in Microsoft 365 subscriptions.

In September 2020, Microsoft announced Azure Communication Services (ACS), which is in public preview. ACS is an API that offers communications capabilities, including text messaging, chat and video calling, using the Teams infrastructure.

In its announcement, Microsoft explained to its mostly nondeveloper customer base the novelty of embedding video communications into applications -- effectively ignoring the existing competition. In terms of marketing, Microsoft focused on the benefits of embedding communications rather than the features of ACS.

How cloud vendors differentiate

CPaaS is a developer-first market -- at least if you ask Twilio CEO Jeff Lawson. This makes CPaaS somewhat less popular with enterprises that haven't begun their digital transformation efforts yet.

Traditional CPaaS vendors offer communications APIs as their main dish. Cloud computing vendors are making APIs the side dish in a larger meal of online development tools.

Cloud vendors looking to gain CPaaS market share have their advantages in this respect. They offer developer tools that are wider in scope than CPaaS, including compute, storage, monitoring and machine learning tools. Virtually every CPaaS vendor has a business relationship with at least one cloud computing vendor.

The first step toward digital transformation for many enterprises is usually the replacement of on-premises servers and data centers with cloud alternatives, which cements their relationship with cloud computing vendors. Cloud vendors are deepening these relationships by expanding and enhancing the enterprise adoption of their services. As a result, CPaaS has become another feature in the cloud vendor toolbox.

Traditional CPaaS vendors offer communications APIs as their main dish. Cloud computing vendors are making APIs the side dish in a larger meal of online development tools.

Another advantage for cloud vendors is the spread of data centers. Most CPaaS vendors operate between five and 10 globally distributed data centers -- often using a cloud computing vendor's resources. Twilio, for example, uses AWS. Meanwhile, the Amazon Chime SDK uses 14 data center regions, and Microsoft ACS touts 18 data center regions.

Twilio's changing market dominance

For years, Twilio has been the leader in CPaaS market share. To understand where the CPaaS market is headed, all one needed to do was to follow Twilio's announcements and map the CPaaS landscape accordingly. But this has changed with the introduction of cloud computing vendors into the market.

Many of the announcements at this year's Twilio Signal customer and developer conference weren't related directly to CPaaS. Rather, they were focused around the Twilio Flex cloud contact center offering. Twilio's acquisition of Segment also marks an entrance to an adjacent domain of customer data.

The CPaaS market is now well defined, and while Twilio will continue to grow and thrive, it now has some serious competition. By attracting lucrative enterprise customers, Amazon and Microsoft could be the only CPaaS vendors that can slow Twilio's growth at the moment.

Google's role -- or lack thereof -- in CPaaS

Both Amazon and Microsoft started on their CPaaS path by breaking down their existing application and communications infrastructures into smaller building blocks of APIs and SDKs. So, where does that leave another major cloud computing vendor -- Google?

Google has Google Meet and Duo for video conferencing, as well as Rich Communication Services (RCS) offerings with mobile carriers, Chrome OS and Android OS. Google also owns the Chrome web browser and the main open source repository of WebRTC, the technology behind most video communications services today. WebRTC is also used by the Amazon Chime SDK and Microsoft ACS.

So, the question is: Why hasn't Google taken the step to offer its own APIs, especially considering the investment it made in the last 10 years in WebRTC technology? The reason may be related to focus. Google is currently fighting battles on multiple fronts and lacks the focus to handle CPaaS as well. These developments by Amazon and Microsoft might just push Google to prioritize CPaaS. Time will tell.

Amazon's and Microsoft's entry to this market marks a change in the landscape and a new set of decisions and criteria for enterprises evaluating CPaaS vendors. It will be interesting to see how this will unfold.

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