Q1 15 Nemertes 2014-15 Benchmark Report Unified Communications in the Cloud Nemertes Research Benchmark Reports provide detailed assessment and analysis of adoption of key technologies and services. Data is based on direct interviews with more than 200 organizations. COMPASS DIRECTION POINTS ± Cloud adoption is increasing overall. Cloud adoption for all Unified Communications (UC) applications (i.e., IP telephony, video, and web conferencing, IM, and email/calendar) will increase between 2014 and 2015. IT leaders should evaluate whether migrating any of these applications to the cloud might benefit their organizations. ± Cost both drives and inhibits cloud UC adoption. Forty- four percent of IT executives say reducing costs drives them to adopt cloud UC applications; however, 50% say cost inhibits cloud adoption. IT leaders looking to have predictable operational costs and reduce capital costs should consider how cloud UC could lead to both of these desired results. ± Cloud IP telephony plans and evaluations are leading to deployments. IP telephony deployments have increased 35% between 2013 and 2014 while those with no plans remains flat since 2013 at 60%. IT executives should not just evaluate cloud IP telephony but taking action on plans to deploy. ± Cost savings and external conferencing drive cloud video, and it s successful. Thirty percent of organizations are already using cloud video conferencing. They rate overall video conferencing initiative success higher than those not yet using cloud video conferencing. IT leaders looking to streamline UC within their organization and increase overall UC and collaboration success should consider whether cloud video conferencing could help them achieve this goal. Nemertes Research www.nemertes.com +1 888.241.2685
T ABLE OF C ONTENTS UC in the Cloud... 3 Executive Summary... 3 Top Trends... 3 Cloud Adoption Increasing Overall... 4 Cost Both Drives and Inhibits Cloud UC Adoption... 5 Cloud IP Telephony Plans and Evaluations are Leading to Deployments... 7 Cost Savings and External Conferencing Drive Cloud Video, and it s Successful... 9 Conclusion and Recommendations... 11 Benchmark Methodology... 12 Timeframe... 12 Participants... 12 By Title... 13 By Industry... 14 By Size: Revenue... 14 By Global Operations... 16 By IT Culture... 17 Nemertes Research 2014! www.nemertes.com! 888-241- 2685! DN3603 2
UC IN THE C LOUD By Lisa Durant Research Analyst, Nemertes Research Executive Summary Cloud applications are becoming increasingly popular across many different lines of business, and unified communications (UC) is no exception. Cloud adoption of IP telephony, video and web conferencing, IM, and email/calendar is projected to increase between 2014 and 2015. Why are so many IT leaders looking to the cloud? Cloud applications provide predictable operational costs and can reduce capital costs; 44% of IT leaders say reducing costs drives them to the cloud. However, 50% say that cost actually prevents them from moving to the cloud. These organizations are typically larger and may have steep investments in on- premises solutions. IP telephony and video conferencing are two UC applications of particular interest due to their vital nature within most organizations. Those that were previously planning or evaluating cloud IP telephony are now actually deploying it across their organizations. Cloud video deployments are also increasing, mostly driven by cost savings and the desire to add external participants to video conferences. Moreover, those using cloud video conferencing tend to rate their overall video- conferencing initiative success higher than those who are not using cloud video. T OP T RENDS! Cloud adoption increasing overall. As was true in 2013, web conferencing remains the most- adopted cloud application with 60% of organizations already having it deployed. However, cloud adoption for all UC applications, including IP telephony, video and web conferencing, IM, and email/calendar, is projected to increase between 2014 and 2015. Cloud email/calendar use is growing fastest with a 63% increase in adoption in 2014 and a projected 36% increase in 2015. Cloud IP telephony adoption is also growing with a 35% increase in 2014 and another 69% increase in adoption projected for 2015. Cloud video conferencing is also expected to increase 69% by the end of 2015.! Cost both drives and inhibits cloud UC adoption. Many IT leaders look at cloud for potential cost predictability and savings. However, larger organizations that have already made steep investments into on- premises solutions may feel that migrating to the cloud is cost- inhibitive. Forty- four percent of IT leaders say reducing costs drives them to adopt cloud while 50% of IT executives at organizations not using cloud applications say cost inhibits cloud adoption. Those using cloud say that they like that cloud applications have predictable operational costs and can reduce capital costs. Nemertes Research 2014! www.nemertes.com! 888-241- 2685! DN3603 3
! Cloud IP telephony plans and evaluations are leading to deployments. IT leaders aren t just looking at cloud IP telephony: they re deploying it. The 18% of organizations currently using cloud IP telephony represents a 35% increase in deployment since 2013. Those with no plans to evaluate cloud IP telephony remain flat since 2013 at 60%; still, this represents a 21% decrease since 2012.! Cost savings and external conferencing drive cloud video, and it s successful. Thirty percent of companies are already using cloud video. Cost savings is the primary driver for moving video conferencing to the cloud with 43% of IT leaders stating this was their primary driver; 29% say that they migrated to the cloud to allow for external participants. Those using cloud video conferencing also their overall video conferencing initiative success higher than those not using cloud video. Cloud Adoption Increasing Overall As was true in 2013, web conferencing remains the most- deployed cloud application with 60% already using it. Figure 1 shows the percentage of organizations using cloud web conferencing, email/calendar, IM/presence, video conferencing, office applications, and IP telephony in order of most- to least- deployed. Figure 1: Cloud UC Deployment Cloud email/calendaring, IM, and IP telephony deployments have all increased since 2013, as portrayed in Figure 2. Cloud web and video conferencing deployments remain relatively flat since 2013; however, all cloud applications will see deployment growth in 2015. Nemertes Research 2014! www.nemertes.com! 888-241- 2685! DN3603 4
Figure 2: Cloud UC Adoption Trends Cloud email/calendar deployment experienced the greatest increase since 2013, increasing 63%; cloud email/calendar use will increase by an additional 36% by the end of 2015. Many IT leaders stated that they were looking at or deploying Microsoft Office 365, which provides cloud email and calendar functionality. We are keeping an eye on Office 365, says one engineer at a software and hi- tech company. If it had voice and video, we d consider it. It would need to integrate with our voice over IP network. Other IT leaders state that they are at least partially using Google for email and calendars. Cloud IM use also experienced a sharp increase (55%) since 2013, again typically as part of Office 365 or Google Apps migrations. Deployments will continue increasing in 2015 by another 33%. Cloud IP telephony deployments have increased 35% since 2013 and will increase another 69% in 2015. Cloud video conferencing deployment has also continued to grow, having increased 10% from 19% to 21% deployment; it is projected to increase another 44% by the end of 2015. Use of cloud web conferencing, the most widely deployed cloud UC application, also remains flat since 2013 at 60% adoption; cloud web conferencing deployment will increase by 5% in 2015. Cost Both Drives and Inhibits Cloud UC Adoption It may seem contradictory for the same factor to both drive and inhibit adoption of cloud UC applications. However, every organization has different current Nemertes Research 2014! www.nemertes.com! 888-241- 2685! DN3603 5
investments and business needs. Often, smaller organizations lead the way in cloud adoption; cloud UC is no exception to this rule. Reducing costs and improving agility are the top drivers for adopting cloud UC applications. Forty- four percent of IT leaders cited cost reduction as their primary driver for deploying cloud solutions. Cloud often provides predictable operational costs. Application maintenance remains under the vendor s control. Cloud UC applications are also usually sold with a subscription- based pricing model. As cloud deployment generally requires less effort on the vendor s end, cloud UC applications often come with lower capital costs Figure 3: Cloud UC Driver than on- premises solutions. Reducing capital expenditures (capex) is not important to us now, says one director at a large retail company that has launched cloud applications to reduce costs. But, having predictable operational expenditures (opex) will be important to us in the future. The biggest driver for us is the lack of capital costs to implement, says another director at a very large manufacturing organization that is planning to launch multiple cloud UC applications in 2014. It converts us to an expense- based system priced based on our capacity needs. It will also help us adopt new features more quickly. Improving agility, as this describes, is the second leading driver for cloud adoption with 29% of IT leaders stating this is their primary driver. Of course, cost is also the greatest inhibitor of cloud adoption. We just don t see the return on investment, and the cost would be too high Figure 4: Cloud UC Inhibitors to move back and forth with security, says one engineer at a large financial services organization. Nemertes Research 2014! www.nemertes.com! 888-241- 2685! DN3603 6
We need to maintain a capex- centric cost model, says another director at a very large utilities company. Cloud UC applications operate under an opex- centric cost model. Security and privacy are also major concerns; as one director from a midsized professional services business put it, the business side doesn t believe that it can be secure if it s outside our four walls. Still, overall trust in cloud security is increasing as these applications are more widely adopted across all verticals and company sizes, and as vendors focus on ensuring compliance with important regulations. Cloud IP Telephony Plans and Evaluations are Leading to Deployments In 2013, 13% of organizations were using cloud IP telephony, 10% had plans to deploy, and 17% were evaluating the technology. By the end 2014, IP telephony deployments have increased by 88% with 25% of organizations planning to have deployed cloud IP telephony by the end of 2014. Another 16% are evaluating the technology. While the percentage of companies that have no plans to evaluate deploying cloud IP telephony remains flat at around 60%, those who started evaluating and creating plans to deploy these solutions are moving forward with their implementations. Figure 5: Cloud IPT Plans Telephony s vital role within any organization causes most IT leaders to proceed with caution when it comes to cloud deployments; people have little patience for any voice downtime, viewing it as a system that should always be on. We ve done some cloud IPT testing, but we have not rolled anything out yet, says a director at a very large hospitality organization. This testing has led to confidence in their cloud system: we are proceeding with deploying. Figure 5 illustrates cloud IP telephony deployment trends since 2012. Nemertes Research 2014! www.nemertes.com! 888-241- 2685! DN3603 7
Figure 6: Cloud IPT Deployment Trends As with many cloud solutions, small companies are proving to be the first to deploy cloud IP telephony. One- third of small organizations (250 employees or less) have already deployed IPT in the cloud. Midsize companies (251 2,500 employees) aren t far behind with 13% currently using, 13% planning to deploy in 2014, and another 20% evaluating cloud IPT. Figure 7: Cloud IPT Adoption by Company Size Nemertes Research 2014! www.nemertes.com! 888-241- 2685! DN3603 8
IT leaders at some larger organizations feel they are unable to migrate to cloud IPT due to vendor limitations. Cloud IPT is on the table for the next refresh, says a director at a very large financial services organization. It s not looking likely, though. We re not finding many providers running infrastructure for organizations over 1,000 phones. Companies operating internationally also often find limited options for globally available Cloud IPT services. Cost Savings and External Conferencing Drive Cloud Video, and it s Successful Video conferencing, another widely used UC technology, is also slowly moving to the cloud with 30% of organizations either already using or planning to use this technology by the end of 2014. Another 18% either plan to deploy cloud video in 2015 or are evaluating implementing it beyond 2015. Cloud video services typically offer meet- me conferencing or MCU as fully hosted service. Examples include BlueJeans, Lifesize Cloud, and StarLeaf. There are multiple drivers for cloud video adoption, but cost savings and enabling external participation are the two leading drivers. We don t want to maintain or run anything, says a VP from a very large hospitality organization. It s much better for us to just buy a service we have no interest in spending a lot of money to Figure 8: Cloud Video Adoption buy hardware. Forty- three percent of IT leaders state that they migrated video conferencing to cloud in order to cut costs while 29% state that they did so to more easily include external parties. Those deploying cloud video conferencing are not seeing it negatively impacting their overall UC initiative. In fact, those who have deployed cloud video, on a scale of 1-10 with 10 being the best possible score, rate their overall UC initiative success higher than those who have not yet deployed the technology. Figure 9: Cloud Video Driver Nemertes Research 2014! www.nemertes.com! 888-241- 2685! DN3603 9
Figure 10: Cloud Video and Video Success That doesn t mean there s not room for improvement, though. While IT executives using cloud video tend to rate their video conferencing success high, they still have suggestions as to how it could be improved. I wish it was easier to use so that it would take people less time to learn it, says one CIO at a large financial services institution. This sentiment is not limited to cloud video conferencing; even those using on- premises video conferencing systems state that ease of use and administration is a big issue for their organizations. Still, for the most part, those using cloud video conferencing state that they have what we need, as one CIO at a small professional services organization put it. Another manager at a very large manufacturing company using cloud video goes as far as to say that they rate their video conferencing initiative success so highly because of the high quality of the experience. Nemertes Research 2014! www.nemertes.com! 888-241- 2685! DN3603 10
C ONCLUSION AND R ECOMMENDATIONS Cloud UC applications are becoming more widely adopted across all industries and company sizes. While web conferencing remains the most- deployed cloud UC application, video conferencing, IP telephony, IM, and email/calendaring cloud deployments are all expected to grow over the next year. Cost is both a driver and inhibitor for cloud adoption as cloud solutions are generally delivered in an opex- based pricing model, which might not make sense for all companies. Some organizations also hesitate to migrate to cloud because of current steep investments in on- premises solutions. While cost might inhibit cloud adoption for some organizations, cost savings is still a primary driver for cloud video conferencing adoption. Moreover, those using cloud video conferencing rate their overall video conferencing initiative success higher than those still using on- premises solutions. Cloud- based IP telephony is also experiencing a shift as those organizations that used to be planning for or evaluating the technology are now formally moving to deploy it. While the shift to cloud in the IP telephony space is slow, growth is steady and projected to continue into 2015 and beyond. IT leaders looking to remain strategic in UC, whether their organizations are currently using cloud solutions or not, should consider the following recommendations:! If one does not already exist, launch an initiative to investigate the overall cloud UC market and remain up- to- date on the solutions and trends taking place in this space.! If looking for a place to start with cloud UC, consider moving web conferencing to the cloud; it is one of the most- tested and highly deployed cloud UC applications.! Consider if an opex- based cost model provided by a cloud solution could save the organization money; take into special consideration whether or not IT would like to maintain and support each individual application or if moving that management to the vendor is preferable.! Before deciding on any cloud UC application, consider the features and functionality that the organization requires; don t forget to consider the need for integration with other cloud or on- premises solutions.! Evaluate security and data protection requirements to see if they will support a move to the cloud. Nemertes Research 2014! www.nemertes.com! 888-241- 2685! DN3603 11
B ENCHMARK M ETHODOLOGY Nemertes conducted 212 interviews with IT professionals at 201 companies or organizations to compile its 2014-2015 benchmark. Nemertes analysts conducted in- depth interviews, ranging in duration from 30 minutes to five hours (not always in a single phone call), with all of the benchmark participants. We also conducted several short follow- up calls or exchanged emails to clarify and augment data. During interviews, each analyst asked a pre- planned list of questions to ensure we asked the questions consistently. Many questions are open- ended, providing an opportunity for our participants to provide their own unbiased insight and observations. We did not provide the list of questions to participants ahead of time. To ensure the report is relevant to the largest possible group of readers, we deliberately sought to reach the broadest possible range of industries and company sizes. In particular, we asked open- ended questions about best practices, strategic goals, business drivers, company initiatives, costs, vendor successes and failures, and technical and operational challenges. We also asked participants to describe their organizational and operational structures, and to position their specific technology- related decisions and operations within the context of IT and overall business goals. As a result, individual interviews varied considerably in the number of questions answered and in the number of subject areas each addressed, as well as in the degree of insight they provided for each topic, based on the interest and expertise of the participants involved. For the interviews, Nemertes drew participants primarily from its database of IT professionals, its non- vendor client base, and to a lesser extent, from publicly available lists of IT executives. Nemertes guarantees confidentiality and anonymity for participants and their companies. These reports include quotations from real individuals, identified only by title and/or industry affiliation. Please note these quotes are verbatim, with no changes in content or wording, except to correct grammar. Timeframe We conducted interviews with benchmark participants from IT organizations between January 2014 and April 2014. We asked participants to provide us with insight into ongoing communications, computing, and security initiatives and those planned for the next two years. Participants In selecting individual participants, we asked to speak with the individual or individuals within IT (or, where they are separate, security organizations) most closely associated with decision- making, operations and overall knowledge in each technology area. For example, to discuss communications technologies we typically speak with VPs, directors, and managers in network management, telecom, Nemertes Research 2014! www.nemertes.com! 888-241- 2685! DN3603 12
enterprise architecture, systems integration, collaborative applications, and unified communications, as well as CIOs and CTOs. For computing and security topics, we typically speak with directors and managers of data- center operations, systems or enterprise architecture, directors of security operations, CIOs, CISOs, and CTOs. By Title This year, Nemertes secured interviews with a wide range of decision makers/influencers and their corresponding viewpoints. C- Level participants made up 19.8% of the total. These include CIOs, CEOs, CTOs, and presidents. VP- level participants made up an additional 11.7%. The majority of participants consisted of directors (32%) and managers (20.3%). These groups were comprised of IT executives across different groups including, but not limited to telecom, network, infrastructure, and security. The remaining 16.2% were made up of engineers, consultants, and analysts. Figure 11: IT Executive Participants by Title Nemertes Research 2014! www.nemertes.com! 888-241- 2685! DN3603 13
By Industry As noted, we sought to include the broadest possible range of industries in our research. Manufacturing, financial services, higher education, and professional services (broadly covering all professional services sub- areas, including engineering, accounting, law firms, etc.) top the list of industries represented, accounting for 17.4%, 15.4%, 13.9%, and 13.9% of participants, respectively. This is very close to our participant demographics from 2013-2014 except the top two industries are reversed. Last year, financial services accounted for 19.8%, followed by manufacturing (16.5%), professional services (14.3%), and higher education (9.9%). Figure 2: Participants by Industry By Size: Revenue We seek insight from organizations large and small. For benchmark analysis, we characterize companies as being small, midsize, large and very large by several measures, including revenue. Our size characterization cased on annual revenue is as follows: Small = $300 million or less Midsize = $300.1 million to $1 billion Large = $1.01 billion to $10 billion Very large = Greater than $10 billion Slightly more than one- quarter (27%) of the participating companies are small. The smallest group represented is midsize companies, with 16.3% of respondents. Large and very large companies make up the majority of respondents: 56.7 % in total, or 32.7% and 24%, respectively. Nemertes Research 2014! www.nemertes.com! 888-241- 2685! DN3603 14
Although this differs from the traditional business demographics, in which small businesses make up the largest percentage of total businesses, large organizations tend to have the most diverse set of IT and ET (Enterprise Technology) initiatives under development or in operations. As such, we are able to characterize and forecast enterprise adoption of technologies with a large base of large companies. That said, we certainly do talk to many innovative small and midsize organizations, so a solid coverage of all types of companies is imperative. Figure 3: Participant Company Size by Revenue By Size: Employees Similarly, we classify company size based on number of employees. In all size bands, we have stayed close to our previous year s methodology and to the Nemertes benchmark profile. We characterize size by number of employees as follows: Small = 250 employees or less Midsize = 251 to 2,500 employees Large = 2,501 to 10,000 employees Very Large = More than 10,000 employees In this year s benchmark, the very large group is the largest based on number of employees (37.5%), followed by midsize (25%), large (23.5%) and small (14%). Nemertes Research 2014! www.nemertes.com! 888-241- 2685! DN3603 15
Figure 4: Participant Company Size by Employees By Global Operations This year, we spoke with fewer companies operating with all locations in one country (48.8%) than those with global operations (51.2%). Global operations are defined as any organization that has locations in more than one country or region. Figure 5: Participant Company Global Operations Nemertes Research 2014! www.nemertes.com! 888-241- 2685! DN3603 16
By IT Culture We asked interview participants to describe their company s culture around IT, in terms of whether they look at IT as a strategic differentiator, and of how rapidly (and why) they deploy new technologies. There had been a pronounced shift toward more aggressive cultures recently, yet last year slight shift back toward amore conservative culture occurred. That trend continued into this year. More than half of organizations now claim a more conservative view towards IT. Figure 6: IT Culture Nemertes Research 2014! www.nemertes.com! 888-241- 2685! DN3603 17
For Further Information Nemertes has thousands of charts, correlation points, and data analysis for numerous topics. Though Nemertes segments data using the cut points noted in this methodology statement, we can cut and correlate data using any numbers (so, for example, we can segment or correlate data using only companies with fewer than 100 employees, or only in the financial- services industry). We provide our full research output, containing more than 800 charts and data points, to our clients. Nemertes uses this research data in hundreds of more detailed papers, presentations, strategy sessions, and Webcasts. We also rely on the findings to assist in consulting projects, as well as conversations with our clients about various technology and business initiatives. If you have further questions about our methodology, please contact research@nemertes.com. Clients, please contact client- services@nemertes.com for any assistance. Those interested in engaging with Nemertes, please contact sales@nemertes.com. About Nemertes Research: Nemertes Research is a research- advisory and strategic- consulting firm that specializes in analyzing and quantifying the business value of emerging technologies. You can learn more about Nemertes Research at our Website: http://www.nemertes.com Nemertes Research 2014! www.nemertes.com! 888-241- 2685! DN3603 18