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The communications platform-as-a-service market is in transition as vendors expand into new markets, attract nondeveloper customers and add capabilities beyond voice and messaging. Some market trends from the previous year, like visual flow tools, are here to stay. Other trends, however, like serverless architectures, never quite took off. As the market evolves, so does the definition of CPaaS.
Looking at the CPaaS market, Twilio remains the leader as it outspends the competition and introduces new services and features. While Twilio does have gaps in its feature set, most vendors are competing by offering less expensive yet basic capabilities.
Most CPaaS vendor offerings are a mix of three service types:
- transactional or two-factor authentication text messaging and voice calling;
- omnichannel and conversational interfaces, including chatbots; and
- capabilities, like video calling, meant to attract and keep developers so they consume the more profitable voice and messaging APIs.
As the CPaaS market evolves, what's ahead in 2020? Some trends will continue through the new year, but certain nuances will change the picture a bit. Let's take a look at five trends that will drive the market.
1. Low-code/no-code development
Visual integrated development environments and flow were some of the terms used for the drag-and-drop development tools introduced by CPaaS vendors. Now, these tools are called low-code/no-code (LCNC) and are part of a larger market trend. LCNC aims to make it easier for nondevelopers to design workflows.
One example is Zapier, an integration platform that connects one service to another in a daisy chain of interactions. In the marketing automation and newsletter market, every vendor has a similar LCNC tool where decision-makers can create campaigns and workflows to define the customer journey within the service.
This approach is now part of the CPaaS market, and the question to address in 2020 is: Who owns the interaction and workflow? Will users build interactions with a CPaaS vendor's LCNC tool or with a more generic, third-party LCNC tool?
In 2020, we'll see CPaaS vendors discussing LCNC more, but it's mostly putting lipstick on a pig. The descriptors of visual tools are changing, but the offerings will stay the same.
2. Omnichannel and Rich Communication Services
CPaaS vendors are looking for a new cash cow, and omnichannel seems to be the best candidate. Text messaging and voice are becoming commodities, and it will be harder to show competitive revenue growth. At some point, the market offerings for messaging and voice will peak.
As a result, the investments in omnichannel in areas including development, market education and pure marketing will continue into 2020. Omnichannel messaging, for example, provides a single, integrated interface that enables businesses to communicate with customers across multiple apps, including Apple Business Chat and Facebook Messenger.
The cookie-cutter use case has not been found yet and may not be for a couple years. Until then, we are going to see three developments in CPaaS vendor omnichannel offerings:
- More channels. CPaaS vendors will introduce more channels to their platforms. Text messaging, WhatsApp and Facebook Messenger aren't going to be enough.
- Conversations. The focus will be on long-lived conversations versus the one-off interactions that most text messaging APIs offer. Twilio and Nexmo have introduced such products and more vendors will follow.
- Rich Communication Services (RCS). The would-be replacement for SMS messaging is showing signs of progress. Google is launching RCS across the U.S., and large U.S. carriers, including Verizon and AT&T, are launching their own variants. Many CPaaS vendors will join the RCS bandwagon to extend their messaging capabilities through omnichannel efforts.
3. Machine learning
Machine learning and AI are here to stay across all software development markets and niches. CPaaS is no different. Within CPaaS, machine learning manifests itself in different ways:
- Bots. CPaaS vendors are introducing integrations with bot platforms, such as Google's Dialogflow. Some vendors will offer their own platforms to build and handle bots, like Twilio's Autopilot platform. We will see both of these approaches continue in 2020.
- Streaming media. CPaaS vendors will enable their customers to use third-party AI vendors with their streaming media. In 2020, the focus will be on cloud machine learning and less on bringing machine learning to devices and the network edge.
- Optimization. CPaaS vendors will employ machine learning to improve their media quality and infrastructure with features such as better packet loss concealment, noise suppression algorithms, or more accurate and responsive bandwidth estimation. Not all CPaaS vendors will invest here, but those that do will show noticeable performance improvements.
4. Vendor lock-in
For Twilio to maintain its market dominance and ensure smaller competitors don't lure customers with less expensive services, the vendor needs to make its services stickier. In other words, the services should lock down customers and be difficult to copy by competitors.
Twilio, for example, introduced Twilio Pay, which offers a Payment Card Industry-compliant workflow to take credit card numbers without recording details. Similar automated data gathering capabilities, which can be considered bot initiatives, also promote stickiness.
This strategy drills down to understand customer use cases and requirements beyond sending a generic text message or answering an incoming call. Vendors are trying to add value to smaller market niches, while making sure competitors that offer the basics are kept at bay and price erosion doesn't occur.
5. Adjacent markets
The CPaaS market is growing quickly. It's somewhat of a chicken-and-egg problem. Is the market growing rapidly because of adoption or because the definition of CPaaS is expanding?
CPaaS is an open-ended definition. It started as text messaging and voice, but now video-first or video-only API platforms are also considered CPaaS. Vendors with communication capabilities and an API use the CPaaS label to be identified with this market.
Some vendors appear to be extending the CPaaS umbrella to include programmable contact centers, like Twilio Flex and email with Twilio's SendGrid acquisition and Nexmo's Sendinblue partnership. But the question is whether other segments, like IoT, machine-to-machine and streamed messaging, can be considered part of CPaaS.
With the need to find growth, vendors are looking for adjacent domains to expand their offerings. As long as those domains are still within the communication space and relevant to developers, they can be considered part of CPaaS.
In 2020, more CPaaS vendors will look at adjacencies to see if they can introduce new services that aren't directly threatened by their traditional competitors. This will lead to a broader view of what constitutes the CPaaS market.