2015 Hosted Unified Communications Buyers Guide Future-proofing Communications Investments January 2015
Contents Executive Summary Competitors at a Glance... 3 Introduction: The Move to Hosted/ Cloud Communications... 6 Market Definitions... 7 Market Highlights... 8 Competitive Environment... 9 Competitor Inclusion Criteria... 11 Competitor Profiles... 12 RingCentral... 12 8x8... 17 Verizon... 24 Comcast... 32 Vonage... 37 Broadview Networks... 43 West IP Communications... 49 ThinkingPhones... 55 Nextiva... 62 ShoreTel... 67 Jive Communications... 74 Mitel... 80 MegaPath... 85 icore... 90 Vantage Unified... 95 Fonality... 103 AT&T... 108 SimpleSignal... 119 Telesphere... 125 Bell Canada... 130 Conclusion... 136 Appendix... 136 Legal Disclaimer... 140 The Frost & Sullivan Story... 141 2
Executive Summary Competitors at a Glance Businesses recognize the benefits of cloud communications and are increasingly migrating to hosted IP telephony and UCC services. However, many well-established and emerging providers are vying for customers attention and investment dollars. It is therefore critical that business decision makers conduct their due diligence and thoroughly assess the available offerings in order to make wise investments that best address their specific needs. Over the years providers have made concerted efforts to expand their solutions portfolios to deliver a broad set of hosted applications including telephony, voicemail, unified messaging, instant messaging (IM) and presence, audio, web and video conferencing, mobility, contact center, analytics and more. However, businesses looking to deploy hosted communications must also assess providers ability to deliver high service quality and reliability. The competitive hosted IP telephony landscape remains highly fragmented with over 100 providers vying for market share. There has been notable merger and acquisition (M&A) activity in recent years. Service providers will continue to pursue M&A as means to accelerate growth and leverage synergies for greater profitability. They will also seek to enhance their channels in order to extend market reach and improve customer service and support. Providers will grow their channel by focusing on resellers with both voice and data expertise, IT skills that enable them to integrate communications with business applications, and a consultative sales approach. Prospective customers must assess provider long-term viability and channel strategies in order to develop sustainable partnerships as well as reduce risks and potential switching costs. Emerging solutions based on multi-instance platforms will rapidly gain traction and present a viable alternative to the more established multi-tenant platform-based solutions. Customers must weigh a number of factors when selecting between the two architectures, including cost, simplicity, security, customization, as well as the ability to re-use existing terminals or integrate with existing infrastructure based on the same vendor technology. Going forward, small businesses and large enterprises will continue to have different requirements in terms of functionality, service reliability and price. Therefore, IT decision makers must assess providers and solutions taking into account provider focus on a certain customer segment and ability to address the specific needs of that target market. Other key provider and solution characteristics impacting the customer experience include quality of service and network reliability, a consultative sales approach, efficient back-end (OSS/BSS) platforms and processes, and effective customer onboarding and on-going management. Prospective customers must consider these factors in their due diligence process. 3
Furthermore, as the market consolidates and matures, broader market reach will become a critical factor for provider success. Eventually market share, growth rates, profitability and reference customer accounts must also become key considerations in customer selection of cloud communications providers. Selecting the right solution and provider requires a complex and structured approach that goes beyond features and functionality. However, most businesses start their assessment process by comparing competitive offerings based on the specific hosted communications capabilities included in the service bundle. Exhibit 1 provides a comparison of the top U.S. and the top 1 Canadian hosted IP telephony providers, ranked according to Frost & Sullivan s quantitative research on full-year 2013 market share by installed users. The providers have been compared based on key features and functionality. Exhibit 1 show the feature and functionality comparison of hosted IP telephony and UCC providers. Exhibit 1: Hosted IP Telephony and UCC Providers at a Glance: Feature and Functionality Comparison (Note: All providers and solutions included in this buyers guide offer at least the following capabilities: core private branch exchange (PBX) and business telephony features, as well as voicemail, auto attendant, limited audio conferencing, basic mobility (simultaneous ring/ find me, follow me) and simple analytics.) 2013 Installed User Market Share Rank # Provider Advanced Mobility Chat/IM Soft phone/ UC client Web Collaboration Video Conferencing Contact Center Managed Service 1 RingCentral Y Y Y Y Y N N Y Y 2 8x8 Y Y Y Y Y Y N Y Y 3 Verizon Y! Y Y Y! Y! Y! Y Y! Y 4 Comcast Y N Y N N N Y Y Y 5 Vonage* Y N Y N N N N Y N 6 Broadview Networks Y N Y Y Y Y Y Y Y BYOB/ OTT Phone Rental 7 WEST IP Communications Y Y Y Y Y Y Y Y Y 8 ThinkingPhones Y Y Y Y Y Y Y N Y 4
Introduction: The Move to Hosted/ Cloud Communications Communications technologies have become a key factor for business success. Today s business users rely on an ever-expanding arsenal of communications and collaboration tools to complete their daily tasks. The move to converged networks and software-based communications has enabled businesses to cost-effectively deploy various applications and platforms including telephony; email; audio, web and video conferencing; IM and chat; presence; social networking; mobility; file sharing and more. In spite of the growing importance of new communications tools, telephony remains essential and mission-critical to most organizations around the world. Telephony solutions have evolved considerably over the years. Traditionally deployed and managed separately from information technologies (IT), telephony solutions are increasingly integrated with other communications and productivity applications on the Internet protocol (IP) network. While converged communications provide significant cost savings and operational efficiencies, they also increase infrastructure complexity. Technology advancements, coupled with tough macro-economic conditions, have given rise to new technology delivery and consumption models, including hosted IP telephony and cloud unified communications and collaboration (UCC) services. Hosted/cloud communications address key customer pain points such as: Reduce CAPEX and streamline OPEX costs Facilitate the integration of multiple technologies and tools in an end-to-end unified communications solution Enable distributed organizations to more flexibly support mobile workers and remote branches Free up internal resources for more strategic tasks Reduce the risk of technology obsolescence and sunk costs Provide access to superior technology expertise Allow the organization to focus on core business activities and thus improve business agility By addressing these key issues, cloud communications improve the business s ability to grow revenues and increase profits. Many business leaders are acknowledging the benefits of outsourcing communications solutions management to an expert third party and are considering a switch to hosted IP telephony and UCC services. However, this nascent and rapidly evolving market has become inundated with multiple providers and solutions offering similar capabilities at comparable prices. Limited understanding of specific product capabilities and little provider differentiation are causing confusion among business decision makers and slowing hosted services adoption. 6
This buyers guide discusses key market and technology trends in the hosted IP telephony and UCC services market and provides in-depth provider and solution analyses along with specific customer recommendations. Market Definitions Hosted IP Telephony (IP Centrex and Hosted IP PBX) Hosted IP telephony (IP Centrex or hosted IP PBX) services are defined as network-based voice services whereby all call control, voice switching, PBX functionality and network infrastructure related to service provisioning are owned, maintained and managed by a third party (i.e., a service provider). Hosted IP telephony services are typically delivered over an IP connection and terminate at an IP endpoint. Mobile hosted IP PBX users are an exception as the service can be delivered over the cellular network and terminates on a mobile device. A bundled IP Centrex/hosted IP PBX offering may include local and long-distance voice, call control and management features, a data transport line, and Internet access services. The service also provides administrators with a Web-based interface for managing moves, adds and changes (MACs), obtaining usage reports, and other tasks. Hosted IP telephony typically involves the use of shared service provider network infrastructure whereby several clients/customers are supported via the same softswitch or application server. Software instances may be shared or dedicated. There are two types of hosted IP telephony solutions from an access point of view: over-the-top (overlay) solutions utilizing the public Internet, and managed hosted solutions delivered over private lines. Unlike public cloud services delivered over the public Internet, private cloud multi-tenant services delivered over a privately managed network offer superior security, QoS, and performance management as well as carrier-grade reliability. Service providers that also manage the access network can typically offer better service level agreements (SLAs) than overlay service providers, such as Google or Skype, that have no control over the Internet connection. Hosted Unified Communications = Unified Communications-as-a-Service (UCaaS) UC or UCC is an integrated set of voice, data and video communications applications, all of which leverage common user identity, and PC- and telephony-based presence information. A hosted UCC solution involves the delivery of pre-integrated network-based applications. UCC solutions simplify communications for end users by giving them ubiquitous and seamless access to various tools. The benefits of UCC are based on the vision for ultimate flexibility in accessing communications and collaboration capabilities anywhere, anytime, on any device and any network. 7
UCaaS solutions are sometimes defined by the number of integrated applications sharing presence information and a common/unified user interface. For example, certain service providers have integrated the BroadSoft BroadWorks hosted IP telephony platform with Microsoft Lync (recently re-branded as Skype for Business) in order to enable a common/unified user interface for both messaging and calling. In such scenarios, the telephony capabilities are supported on a multi-tenant platform, whereby both the hardware and the software components are shared across customer organizations. In other instances UCaaS refers to a specific architecture, typically founded upon a virtualized UCC suite of applications hosted in a data center and leveraging a shared hardware infrastructure, yet offering dedicated software instances to individual customer organizations. Examples of this type of architecture include Alcatel-Lucent OpenTouch Cloud Solution, Cisco Hosted Collaboration Suite (HCS), Mitel MiCloud, NEC UNIVERGE Cloud Services, and Toshiba VIPedge. In such scenarios, customers may only be deploying certain elements of the solution (e.g., telephony), however vendors and service providers use the term UCaaS or cloud UC to refer to the underlying multi-instance architecture. Market Highlights According to Frost & Sullivan s 2014 North American hosted IP telephony and UCC services market study, in 2013, the North American hosted IP telephony and UCC services user base grew by percent to reach million users by year end, adding million net new users since year end 2012. Market growth will remain steady over the study period from 2013 to 2020 at compound annual growth rates of percent in terms of installed users. Even though growth rates will gradually decline year-over-year due to the larger installed base, the number of annual net new users will increase consistently throughout the forecast period. Growth will be driven by continued demand among under-served small and medium-size businesses (SMBs) and emerging demand among larger, distributed organizations with a significant number of remote and mobile employees. Growing customer confidence in voice over Internet Protocol (VoIP) and cloud technologies will also boost adoption. The large installed base of customer premises-based solutions, along with continued customer concerns over cloud security and reliability will curb growth in the near and medium terms. Other adoption restraints include customer confusion due to the fragmented competitive landscape with little differentiation among service provider offerings and lack of a strong leader to validate the value proposition of hosted IP communications. 8