The Business of Cloud Communications

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1 The Business of Cloud Communications Driving Profitability with Hosted Voice and Collaboration Services

2 Cloud has changed how communications services are delivered and at the same time changed the potential of each service provider s business. Interconnects, Managed Service Providers (MSPs) and Carriers that adopt cloud communications are not just tapping a new technology, they are transforming their businesses to compete in today s market. Cloud communications is about more than technological capability. It is about finding the right tools to meet the needs of customers and achieving business success. Communications service providers can succeed if they focus on understanding the market landscape and put themselves in a position to profit from it. Economic conditions, disruptive technologies, and savvy enterprise customers are shaping a market that moves quickly but also offers new opportunities. The challenge is to adjust, adapt and transform their businesses to maintain their position, attract new customers and succeed in creating sustainable future-proof businesses. Cloud communications is about finding the right tools to meet the needs of customers and achieving business success. Communications service providers cannot confront or fight this change in the market or their customers. It is happening and cloud communications solves many of the challenges that they face while creating new opportunities to grow. This is why cloud communications can have such a strong business impact on Interconnects, MSPs and Carriers. CLOUD COMMUNICATIONS OFFERS New revenue streams A recurring revenue model A scalable service offering Future-proof technology Cloud technology has matured and enterprises and users are experienced in adopting and using cloud services. The barriers to entry are minimal and the market is ready for a new approach. It is up to communications service providers to recognize the transformative effect cloud can have on their businesses and use it as a tool for meeting business goals and ensuring the sustainability of their operations. 2

3 DRIVERS FOR CHANGE Capex Becoming Opex Since the economic downturn beginning in 2008, enterprise customers have faced tighter budget controls. They are less willing to make upfront investments in on-premises equipment and are more inclined to spread operational costs over a longer timeframe. The capex required for on-premises equipment is in short supply and an opex-driven model is preferred. New Opportunities in Technology New cloud technologies have made it simpler, more efficient and cost-effective to deliver communications services. These innovations and their widespread adoption have expanded the scope of what Interconnects, MSPs and Carriers can offer their enterprise customers. New technological capabilities are available in the market creating new business opportunities. Increased Competition New technologies have lowered the barriers to entry in the communications market. There are more competitors pursuing enterprise spend on communications services. Traditional silos between different kinds of service providers have come down with the convergence to IP and a range of players can legitimately offer communications services in the market. Growing Demand for Unified Communications The mix of VoIP, messaging and collaboration tools, suits the needs of the modern enterprise and they are looking for efficient access to these services. Enterprises are hungry for Unified Communications and want their service providers to deliver these capabilities. The mix of VoIP, messaging and collaboration tools, suits the needs of the modern enterprise and they are looking for efficient access to these services. MarketsandMarkets forecasts the Unified Communication as a Service (UCaaS) Market to grow from $13.10 billion in 2014 to $23.34 billion in This represents a Compound Annual Growth Rate (CAGR) of 12.2% from 2014 to

4 CHANGING BUSINESS MODELS If customer demand, technologies and the competitive landscape are changing, communications service providers should be asking themselves how they are going to strengthen their position in the marketplace and drive profitability. This isn t just about selling more services or winning more customer business, it is about adopting a business model that works today and in the future. Cloud communications enables service providers to develop flexible and agile business models for delivering hosted PBX, VoIP, SIP Trunking, and Unified Communications that increase margins and drive profits. The cloud delivery model streamlines the development and deployment of new services and accelerates customer adoption. Communications service providers can layer these services on their existing infrastructure to add new revenue streams to their businesses and capture more of their customers IT and telecoms spend. Communications service providers that grow their service portfolio this way do not need to develop these services internally and can add to their bottomline almost overnight. There is no need to price based on recouping development costs or a time when the service will not be profitable because resources expended on service creation. If customer demand, technologies and the competitive landscape are changing, communications service providers should be asking themselves how they are going to strengthen their position in the marketplace and drive profitability. The SaaS provider has used its specific expertise to develop its cloud communications services and is able to pass that on to customers. Margins can remain high with cloud communications service routinely delivering up to 65% margin to service providers. Cloud communications makes it possible to deliver new services with no upfront investment with minimal cost of delivery. It accelerates ROI on infrastructure investments and offers service providers a completely integrated solution that includes OSS/BSS in addition to the basic services. This means service providers can focus on selling to customers and maintaining healthy margins. When communications services are delivered via the cloud, Interconnects benefit from a model that no longer relies on the sale of costly on-premises equipment and can adopt a recurring revenue model. Cloud communications directly addresses customer preference for opex over capex. The Interconnect can shift focus from a lumpy sale to a resilient model that relies on monthly income instead of a three to four year sales cycle. This insolates them against economic downturn and potential instability in the enterprise market. In this way, cloud communications can be a means of managing risk and ensuring the sustainability of the business. Interconnects 4

5 MSPs, that are already offering enterprises IT services and are familiar with a recurring revenue model, can expand their scope and create new stickiness with customers. When customer relationships are already in place, it becomes easy for both the MSP and their customer to expand their relation to cover more services. The advent of VoIP means that voice is just another application and the MSP can add it to their portfolio alongside new Unified Communications and collaboration capabilities. MSPs The key is to be prepared to capture more of the communications pie and do it as efficiently as possible. MSPs that take the opportunity keep their customers from going to other suppliers and continue to own the relationship with customers by offering a more complete set of solutions. Similarly, carriers have the infrastructure and the customer but have to be wary of new competition. The clear-cut world of TDM voice has disappeared and what it means to offer communications services is less well defined. That means more competitors are able to offer a similar set of services and connect customers cost-efficiently. Carriers Cloud communications can be a way for them to tap new revenue from Unified Communications or selling a suit of cloud-based services. Adopting cloud communications adds to their bottom line and at the same time helps them to maintain their market position while sweating their infrastructure assets. It is also a way to reduce the cost of customer acquisition. With the right SaaS platform provider, the service provider can use its knowledge of its customers and prospects to shape a service portfolio that meets customer needs and means they don t have to look to competitors for new services. This reduces churn and drives stickiness. It expands the revenue the service provider is able to capture with a significantly lower cost of sale. Cost of acquisition can hurt margins but with cloud communications service providers are positioned to use their inherent knowledge of the customer to win and keep business. 5

6 A GROWTH MARKET While cloud communications solves a number of business challenges, pure enterprise demand for these services shouldn t be forgotten. Enterprises want Unified Communications services and an agile approach to voice. They are not as concerned with the delivery mechanism as long as the service is simple, reliable and flexible. Infonetics Research notes sales of hosted PBX and Unified Communication (UC) services rose 13% in 2013 over 2012, and seats grew 35% due to continued demand for enterprise cloud-based services. It expects continued strong worldwide growth in VoIP services revenue through 2018, when it will reach $88 billion. It is a growth market and can be a profitable one for the business that finds the most efficient solutions for serving enterprise demand. The adoption of cloud communications will allow service providers to grow-up alongside this trend in communications services without letting it slip by and be captured by a competitor. Sales rose 13% Revenue to reach $88B A FUTURE-PROOF BUSINESS Even more important than the growth opportunity is how cloud communications can help a service provider to future-proof its business. Service providers want to profit from today s market but must also need to prepare for the market in the future. Cloud communications can help them to build profitable and sustainable businesses. It offers service providers the ability to change and evolve to manage changes in service demand, technological innovation and customer preference. When communications services are delivered via a SaaS platform, service providers are not tied to a service or equipment. They can change and adapt to market conditions while scaling their businesses to serve their customers. Cloud communications offers service providers the ability to scale up or down to deliver services for customers. They have the ability to adjust and change their business strategies to tap new markets or customer types without needing to invest in new systems or equipment. The largest players in the market can address medium-sized enterprises with the same ease that they serve global MNCs. When communications services are delivered via a SaaS platform, service providers are not tied to a service or equipment. They can change and adapt to market conditions while scaling their businesses to serve their customers. 6

7 At the same time, if enterprises are asking for a new service, the SaaS provider can develop and deliver it to their service provider customers. Technologies and services will always change but the cloud model is there to offer the agility and flexibility to stay relevant in the market. In fact, as the relationship between SaaS platform providers and communication service providers grow, a new wave of service innovation is possible. Both can proactively address customer needs and develop new services to stay ahead of competition and ensure enterprise customers are getting the latest innovations in communications delivered via the cloud. When a service providers business is future-proof, it is ready to compete and drive profitability no matter the market conditions. Cloud communications accelerates a communications service providers business while delivering a long-term solution that drives profitability. Technologies and services will always change but the cloud model is there to offer the agility and flexibility to stay relevant in the market. ENABLING SUCCESS WITH SAAS One of the critical steps in creating new profitability from cloud communications services is finding the right SaaS provider. Service providers can compare technologies and capabilities but the defining characteristic of a SaaS provider is a commitment to the success of its partners. End-to-End capabilities that allow the service provider to sell, deliver, manage and invoice cloud communications are important but it is about focus. Beyond the technology, a SaaS provider must be focused on the business success of its partners and committed to developing and evolving its services in the long-term. In cloud communications the right kind of partnership model makes all the difference. A SaaS provider must be focused on the business success of its partners and committed to developing and evolving its services in the long-term. Sell Deliver Manage Invoice 7

8 ABOUT COREDIAL Based in Blue Bell, PA, CoreDial cloud software and services enable companies to quickly and cost effectively sell, deliver, manage, and invoice for high quality, private labeled cloud communication services including hosted PBX solutions, VoIP, SIP Trunking, and Unified Communications. With no hardware or software to buy, our Service Provider partners Interconnects, Managed Service Providers, and Carriers deliver valuable end-user solutions, while creating margin rich recurring revenues and building value in their brand. For more information, visit our website: and our blog: success.coredial.com/blog CONTACT Discover how CoreDial can empower your channel to sell, deliver, manage, and invoice for cloud communications, and learn how over 200 partners have already achieved success. Jim DeBald Vice President of Channel Sales x301 8