Hosted UC Market Poised for Fast Growth

Recognizing the value of offering hosted unified communications, a handful of industry giants—Microsoft, IBM and Cisco—have taken the plunge to offer such services, and many solution providers have also pursued that path.

Even as managed service providers rate Microsoft’s cloud initiatives as the biggest threat to their businesses, plenty of solution providers are already cashing in on the trend by offering their own hosted services, viewing the efforts of Microsoft and other big vendors as promoting the benefits of such services and making a market.  Solution providers say that they can create even more value by offering services that those big vendors never will.

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And now a new report from Wainhouse Research shows that these solution providers are in the right place at the right time, saying hosted unified communications may be on the cusp of a boom. The firm estimates the current market to be less than $200 million but is forecasting the sector to become a billion-dollar business by the end of 2011 and a $5 billion business over the next five years.

But businesses aren’t just switching to UC as a service because it costs less, according to the report. Companies are taking into account the entire value proposition.

“The case for hosted UC is clearly not for lower cost alone,” says Brent Kelly, senior analyst and partner at Wainhouse Research. “Enterprises adopting hosted UC solutions are doing so for a number of reasons, many of which are less tangible. Our TCO analysis shows UCaaS may or may not save a company money versus a premises-based solution. Yet the overall value proposition, including cost, is proving compelling for many small and large companies.”

Wainhouse Research looked at 16 hosted unified communications solutions, including those from hosted messaging providers, hosted VOIP vendors, carriers and major premises-based UC providers such as Microsoft, IBM and Cisco—all of whom have recently launched their own hosted UC services offerings.

Wainhouse Research notes that while each offering has its own value proposition, the cost comparison between hosted and premises-based solutions is not always a clear differentiator.