Unified Communications Market 2007-2012 Executive Summary Unified Communications (UC) is all the rage. Companies of all sizes, and in all vertical markets and geographies are exploring how they can take advantage of the many benefits that UC provides. Unified Communications is defined as Communications integrated to optimize business processes. It integrates real-time and non-real time communications with business processes and requirements based on presence capabilities, presenting a consistent unified user interface and experience across multiple devices and media types. UC is not a single product; it s a solution made up of a variety of components and elements, including: messaging (email, instant messaging, voice, video), calling (audio, video), conferencing (audio, web, video), presence (online and telephony), device awareness, and information sharing (web chat, file sharing, document sharing), tied together with a common user interface. By integrating UC with business processes and applications, communications is streamlined, human latency is reduced or eliminated, and workers can be more productive, efficient, and responsive. Communication both inside and outside of the enterprise is enhanced, resulting in shorter project times, quicker time-to-market, improved worker and workgroup productivity, and organizational efficiency, which in turn improves customer service, reduces costs, and increases revenues. Under the UC Umbrella are two types of UC solutions and benefits those that focus on the user or user productivity (UC-U) and those that focus on the business or business processes (UC-B). There are significant benefits of each type, although it is more difficult to measure and quantify the benefits of UC based on user or personal productivity, because in many cases, these benefits are in soft dollars. The real ROI comes from when UC is tied to business processes, and communications becomes a part of the business, reducing human latency and time lags, thus helping companies transform their businesses and changing the way work is completed, which can save thousands, or even millions of dollars. While there are clearly many benefits to UC, there are also significant challenges that must be overcome in order for the market to reach its potential. For example, there is currently a general lack of understanding of UC, what it is, and what it can and cannot do; migration and evolution from existing platforms and infrastructures may be difficult; complex integration is needed to ensure interoperability between all of the various UC
components and elements; and it may be difficult to prove a hard return on investment. UC can have a transformational impact, but, in order to do so, enterprises need to figure out how it can be used to optimize their business processes. Despite these challenges, we expect to see UC adoption happen gradually and steadily. There is no one way or the right way to implement UC, and the way in which companies approach UC will be based on their specific needs and environments. UC adoption generally starts with the people who need it the most, and then spreads throughout the enterprise, once the benefits become more apparent. Initial adopters of UC are geographically dispersed workers who need to collaborate with team members and colleagues. Organizations must look at their specific operational justifications and requirements for UC, which should come from the business management and end-user side of the house, not from IT. No one single vendor provides all of the UC elements for a complete UC solution. Key UC players currently include all of the switch/telephony vendors, desktop application vendors such as Microsoft and IBM, mobility vendors, unified messaging vendors, and conferencing/collaboration vendors. Many of these companies are forging alliances in order to bring complete solutions to their customers. All of the switch/telephony vendors are transitioning to become software vendors, evolving their products to be more flexible and open in a UC world. These vendors are being challenged as companies like Microsoft enter the telephony world, providing partnership opportunities, but also creating new competitors in some cases. The telephony landscape in five years will be significantly different than today, as Microsoft and IBM build upon their enterprise IM/presence platforms. Vendors are facing new pricing pressures on elements such as switching, unified messaging, and speech access, impacting expected revenues in the short and long term. The switch vendors are re-evaluating their roles, as some embrace a vertical application focus, and others move toward professional services. Partnerships have already been formed, with others on the horizon. Quantifying the UC market is extremely difficult, as there are various ways of defining UC, and each definition brings with it a different way to measure the market. The UC market is still in its infancy, but it is rapidly growing. For the purposes of providing market data on the current and future UC market, COMMfusion has analyzed the enterprise UC market in several different ways. One way is by examining the individual components that make up a UC solution, and forecasting the total growth of each component in terms of revenues and seats, resulting in a Total Gross, or UC-Capable forecast. Based on this data, the Net or True UC market is determined using a formula to identify the percentage of the gross UC sales and seat shipments that are expected to be used for UC solutions (rather than as a standalone or non-integrated product). In addition,
as it is too early to determine market acceptance of UC, we have provided a High-Growth and Medium-growth scenario for seat and revenue growth. For the high-growth scenario, the worldwide Total Gross or UC-capable market for Unified Communications was $9.52 billion in 2007, based on end-user revenue, growing to $15.9 billion by 2012. The components or elements included in this forecast are Enterprise Instant Messaging/Presence (including servers, clients, and mobile UC clients), IP PBXs, Unified Messaging, Conferencing/Collaboration, UC PBX Integration or Gateways, and other (including softphone, IM federation, integration software, etc.). Revenues associated with professional services are provided in addition to the product data. The components showing the strongest growth in terms of Net or True UC during the forecast period are enterprise IM/Presence, and UC PBC Integration and Gateways, as these currently have low installed bases and are necessary elements of a UC solution. The Net or True UC market (or the portion of the Total Gross UC sales that are expected to be used for UC solutions rather than as a standalone or non-integrated product) was $200.8 million in 2007, growing to $2.433 billion by 2012. The future looks bright for vendors, customers, resellers, system integrators, and professional services organizations, as unified communications moves beyond the innovator stage and is adopted by more and more enterprise and small- and medium-sized businesses. But it is important to remember - Unified Communications is a vision or philosophy that leads to solutions. End user companies need to begin planning for UC now, as those who wait will be at a competitive disadvantage, and those who begin on the path to UC today can soon begin reaping its many benefits.
TABLE OF CONTENTS Chapter 1 Executive Summary 1 Chapter 2 Overview of Unified Communications 4 2.1 Definitions of Unified Communications 4 2.2 UC Elements and Components 4 2.3 Enabling Technologies 12 2.4 The Role of Presence 13 2.4.1 Presence Challenges 13 2.4.2 Mobility 16 2.5 Applying UC 17 2.6 UC and the Contact Center 19 2.7 UC s Value Proposition 20 2.8 Two Types of UC Solutions 21 2.8.1 UC-User 21 2.8.2 UC-Business Productivity 22 2.9 Paths to Unified Communications 24 2.9.1 Communication Enabled Business Processes 24 2.10 Vertical Applications of UC 25 2.11 UC Customer Examples 25 2.12 UC Focus 28 Chapter 3 Unified Communications Adoption 29 3.1 UC Adoption Challenges 29 3.2 What s Needed to Succeed 30 3.3 UC Adoption The UC Continuum Curve 31 3.4 UC Adoption 36 3.5 Conclusion 38 Chapter 4 UC Market Forecast 39 4.1 Difficulties in Measuring the Market 39 4.1.1 Market Data and Forecasts 40 4.2 Assumptions and Explanations 41 4.3 Professional Services 42 4.4 Assumptions Related to UC Component Analysis 43 4.5 High-Growth Scenario 47 4.5.1 UC-Capable or Total Gross Market 47 4.5.2 UC Total Gross or UC-Capable Revenues High-Growth Scenario 47 Total Seats Shipped High-Growth Scenario 52 4.5.3 Net or True UC Market Analysis 54 4.5.4 Revenue Forecasts 56 4.5.5 Net UC Seats Shipped High-Growth Scenario 65 4.5.6 Alternative Measurement - UC Licenses High-Growth Scenario 67 4.6 Mid-Growth Scenario 69 4.6.1 UC Total Gross or UC-Capable Revenues Mid-Growth Scenario 69 4.6.2 Total Seats Shipped Mid-Growth Scenario 72 4.6.3 Net or True UC Market Analysis Mid-Growth Scenario 74 4.6.4 Net or True UC Seats Shipped Mid-Growth Scenario 81 4.6.5 Alternative Measurement - UC Licenses Mid-Growth Scenario 83 4.6.6 UC as Percentage of Enterprise Email 85 4.7 Conclusion 87 Chapter 5 UC Vendors 88
5.1 UC Players 88 5.2 UC Vendor Profiles 88 5.2.1 IBM 89 5.2.2 Microsoft 93 5.2.3 Alcatel-Lucent 97 5.2.4 Strengths and Weaknesses 100 5.2.5 Genesys 101 5.2.6 Avaya 102 5.2.7 Cisco 108 5.2.8 Interactive Intelligence 114 5.2.9 Mitel 117 5.2.10 NEC 121 5.2.11 Nortel 125 5.2.12 Objectworld 131 5.2.13 Siemens Communications 132 5.2.14 Zeacom 137 5.3 Other Vendors 140 5.3.1 Aspect Software 140 5.4 Unified Messaging Overview 141 5.5 How Will UC be Delivered 143
LIST OF FIGURES Figure 2 1 UC Tying it All Together 5 Figure 2 2 UC Value 23 Figure 2 3 UC Focus 28 Figure 3 1 UC Continuum - Telephony Model 32 Figure 3 2 UC Continuum - Desktop Application Model 33 Figure 3 3 UC Continuum - Enterprise Application Model 34 Figure 3 4 UC Continuum - Messaging Model 35 Figure 3 5 UC Adoption Phases 37 Figure 4 1 Total Gross UC Revenues - High Growth 48 Figure 4 2 Total Gross UC Revenue - High Growth 49 Figure 4 3 UC Components Percentage of Total Revenue - High Growth 49 Figure 4 4 Total Gross UC Component Revenue - High Growth 51 Figure 4 5 Total Gross UC Seat Shipments - High Growth 53 Figure 4 6 Total Gross UC Seats Shipped - High Growth 54 Figure 4 7 UC Net or True UC Subsection 55 Figure 4 8 Net or True UC Revenue Forecast - High Growth 57 Figure 4 9 Net or True UC Revenue Forecast - High Growth 59 Figure 4 10 Net or True UC Total Revenues and Professional Services - High Growth 60 Figure 4 11 Net True UC Revenue by Component - High Growth 61 Figure 4 12 Total Gross Vs. True UC Market - High Growth 63 Figure 4 13 Total Gross vs. True UC Revenue High Growth 64 Figure 4 14 Net True UC Seats - High Growth 65 Figure 4 15 Net True Seats Shipped - High Growth 66 Figure 4 16 Net True UC Licenses and Revenue - High Growth 67 Figure 4 17 Net True Presence and UC PBX Integration - High Growth 68 Figure 4 18 Total Gross UC Revenue - Mid Growth 70 Figure 4 19 Total Gross UC Revenue - Mid Growth 71 Figure 4 20 UC Components Percentage of Revenue - Mid Growth 72 Figure 4 21 Total Gross UC Seats Shipped - Mid Growth 73 Figure 4 22 Total Gross UC Seats Shipped - Mid Growth 74 Figure 4 23 Net True UC Revenue - Mid Growth75 Figure 4 24 True Net UC Revenue with Professional Services - Mid Growth 76 Figure 4 25 Total True UC Revenue Forecast - Mid Growth 79 Figure 4 26 Total vs. True UC Revenue - Mid Growth 80 Figure 4 27 Net True UC Seats - Mid Growth 81 Figure 4 28 Net True UC Seats - Mid Growth 82 Figure 4 29 Net True UC Licenses and Revenue - Mid Growth 83 Figure 4 30 Net True IM/Presence and UC PBX Integration Revenue - Mid Growth 84 Figure 4 31 UC as Percentage of Email Seats 85 Figure 4 32 UC as Percentage of Email Seats 86 Figure 4 33 Scenario and Forecast Comparisons 87 Figure 5 1 IBM Lotus Sametime Chat Session 91 Figure 5 2 Microsoft Presence 94 Figure 5 3 Alcatel-Lucent User Profiles 100 Figure 5 4 Avaya UC Editions 106 Figure 5 5 Mitel Your Assistant 119 Figure 5 6 NEC UC Delivery Model 123 Figure 5 7 Siemens OpenScape UC Application 134 Figure 5 8 Zeacom 1+1+1 139
Unified Communications Market 2007-2012 COMMfusion LLC in conjunction with UCStrategies.com Prepared and Published by Blair Pleasant, President & Principal Analyst, COMMfusion LLC, and Co-Founder, UCStrategies.com About the Author Blair Pleasant is President & Principal Analyst of COMMfusion LLC, and a co-founder of UCStrategies.com, an industry resource on the growing UC arena. She provides consulting and market research analysis on voice/data convergence markets, applications, and technologies, aimed at helping end-user and vendor clients both strategically and tactically. With 20 years experience, Blair has authored many highly acclaimed multi-client market studies and white papers, as well as custom research reports, and provides market research analysis and consulting services to both end user and vendor clients. She is a frequent speaker at industry conferences and events. Blair can be reached at bpleasant@commfusion.com. To order this study, contact Blair Pleasant at bpleasant@commfusion.com or 707-538-4368. The purchase price is $3,495