Without being too selective in following UC trends, it’s easy to conclude that flipping over or up to the cloud isn’t just a good idea, but also inevitable. The likes of Google and Amazon keep gaining mindshare, and if you follow the money, it’s all going to the cloud. Both carriers and vendors are jumping to this curve, and while it’s not clear yet who’s going to make money, the attractive economics are a big driver.
Long-term, of course, the cloud will hit a wall at some point when businesses realize the economics are more complicated, especially when the cost of leasing bypasses the cost of owning. I say “more complicated” because the true value proposition of cloud goes beyond Opex versus Capex, and in larger-scale environments, politics will play a key role as well.
In my last post, the defense of remaining premise-based started with an analysis about its reliable track record. After all, communications is mission-critical, and worth keeping in-house. There may be a higher price to be paid, but the benefits – both real and perceived – make for a strong business case. With that said, I’d like to explore another aspect for keeping the current deployment model when adopting UC.
Who really stands to benefit from the cloud?
I mentioned above how service providers and vendors are embracing the cloud for UC, and they have good reason for doing so. Service providers like the cloud because it reduces operating costs and simplifies their infrastructure. Cloud also enables them to serve enterprises in new ways as well enter new markets that previously required premise-based solutions. Since most carriers have a history offering hosted or managed VoIP – and even Centrex – the comfort level is already there. Furthermore, cloud-based UC offers more upside than VoIP for both new services and revenue streams.
With vendors, the rationale is a bit more complex. Incumbent or legacy-based vendors already have the installed base, and they need cloud options to protect the business. As demand grows from enterprises looking for lower cost communications platforms, their premise-based offerings are under siege. Not only are their direct competitors offering cloud UC, but there is a growing class of pure play cloud providers who can only grow by winning business away from incumbents.
In this regard, cloud is really a defensive strategy for the major vendors. Not only has the time for legacy telephony passed, but even the IP PBX business is in terminal decline. For them, UC is really the successor to telephony, and if cloud-based UC is what the market wants, they have no choice but to give it to them. As such, they need cloud to keep what they have rather than make it a growth driver. Winning new business is always great, but in this market, that’s hard for incumbents to do unless major competitors falter. On the other hand, for pure play operators, cloud is totally an offensive strategy with UC, so their objectives will be very different.
Underlying all this, of course, is the fact that the major vendors don’t have the market power they used to. Otherwise, they would hold fast to premise-based solutions. After all, they work perfectly well and the infrastructure is already in place to support UC. More importantly, though, the dollars with premise-based UC are much bigger than cloud, and with that comes better profits.
Cloud certainly does offer vendors a long-term growth strategy, since it opens up new possibilities just like it does with service providers. Today, however, UC is still finding its legs, and the most important thing is having the right offerings that drive adoption now.
So, where does that leave everyone else? In my view, that means two other communities – enterprises and channels. Enterprises can benefit from cloud-based UC for similar reasons cited above, but as per my recent posts in this series, there are fundamental trade-offs to consider. Service providers and vendors will continue going down this path as the cloud trend is simply too big to ignore.
Enterprises, on the other hand, don’t have to, unless they feel this is the only way to deploy UC. This decision would largely be determined by the state of IT, and if it’s deemed they’re fighting a losing battle and will never get the right resources to manage UC in-house, there will be no choice but to go cloud. As such, the rationale for buyers may be very different from sellers when it comes to choosing the cloud for UC. Of course, there are hybrid models that provide the best of both worlds with minimal risk, but ultimately this is a stepping stone to an all-cloud UC deployment.
Finally, there are the channels to consider. This stakeholder group is going through its own existential challenges, as the business of selling/re-selling cloud-based services is very different from what they’ve been doing until now. As with the vendors, most channels need to develop cloud expertise for defensive reasons. The main benefit for them is to protect their customer base, or risk losing it to another channel partner who has been faster off the mark with cloud. UC is new enough as it is, and adding cloud as a deployment option changes the status quo in a big way that is certain to reshape the channel landscape as UC gains mass market traction.
My main takeaway is that the drivers for adopting cloud-based UC are not uniform among these players. Tied to this are the benefits to be realized, and in many ways, the balances are tipped more towards the sellers than the buyers. The onus for a successful UC deployment falls largely to the buyer; and even more so in terms of delivering the productivity gains upon which their business case was built. As such, the benefits will take longer for enterprises to realize than for carriers and vendors, which also means that they bear most of the risk. Remaining premise-based doesn’t eliminate the risk, but it does remove some of the risk from the overall equation when it comes to making the case for UC.