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The UC Cloud and Federation

September 10, 2012

As CEO of NextPlane, it is my job to figure out what UC systems are being deployed and/or used by the market and therefore, what groups of UC users are in need of federation services. Like everyone else, I have been watching the emergence of ‘cloud-based’ UC or UC as a Service (UCaaS), In general, UCaaS is being adopted by small and medium sized businesses (SMEs) which are naturally reluctant to deploy and manage on-premises UC systems, especially if there is a viable alternative.

In the US, an ‘SME’ is considered to be a company with 500 or fewer employees (the definitions vary elsewhere) and it turns out that around 60% of the workforce is employed by these companies. However, I have seen reports of companies of up to 15,000 employees starting trials of cloud-based UC, so this would increase the proportion of potential UCaaS ‘seats’ to around 80% of the workforce. Even taking a guess at the proportion of workers who don’t currently have access to a telephone at work, this segment could be anywhere between 75-100m ‘seats’. In other words, UCaaS will be a very attractive market over the next 10 years.

So the question for me is, what is the market adoption rate and to what extent do they need NextPlane’s services. Hard data on this is almost non-existent – the best we have found so far is here, and we subscribed to this service a while back. However differentiating cloud deployments from on-premises deployments is currently problematic. Another challenge is one of definition: it comes as no surprise that the UCaaS ‘bandwagon’ is being jumped upon by every telephony hoster that ever existed and new companies enter the market every day. So, the proportion of these service providers that support federation for inter-company communications (vs. plain old telephony) is pretty small by number. Once again, the two leading UC vendors that support federation are Cisco and Microsoft, so we know that their cloud services are federation enabled (but not from Cisco to Microsoft, just intra-vendor).

Cisco and Microsoft are taking two diametrically opposing strategies for their UCaaS service. Cisco is offering their HCS (Hosted Collaboration Solution) platform to incumbent communications service providers to host, thereby leveraging the existing relationships that those firms have with their business customers. Microsoft, on the other hand, is deploying its Office 365 in its own data centers alongside other cloud-based service offerings (however, a self-hosting pack is available for service providers).

It is still early days in UCaaS, so the ultimate winners will not emerge for quite some time. As always, the expansion phase of any market creates a lot of confusion: only in the subsequent consolidation phase do the trends start to crystallize. However the market potential is huge, even in the US, never mind on a global scale. Using a UC system to communicate via the PSTN is just a stop-gap, since we know that the PSTN is due to be shut down in the US by 2018. Absent any alternative communications technology emerging in the meantime, the usage of federation is only going to accelerate. Unless the various UC clouds spontaneously interoperate via federation (and I am not seeing that in premises-based UC….), there remains a great opportunity for NextPlane to play a role in the next generation communications network.

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