Service Providers Move to the Cloud

March 26, 2024

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In today’s modern landscape, the convenience of cloud-based solutions has become so ingrained in our daily operations that we often overlook their transformative impact. Not too long ago, essential business tools like collaboration platforms, CRM systems, and HR softwares were painstakingly sourced and managed internally by IT departments — back to the era of premises-based PBX systems for phone services and dedicated servers for CRM platforms. However, as the advantages of cloud-based storage and processing became increasingly apparent, a significant shift occurred, with businesses swiftly migrating these critical services to the cloud.

The Changing Dynamics of Communication Service Providers

Today, our communication service provider (SP) friends are finding themselves in a similar predicament. Over the years they have invested heavily in network-based platforms, such as class five softswitches and feature servers, to allow them to offer hosted telephony services. For the last 10 or so years, this has been a pretty good business, with SPs taking a good chunk of the market – mostly from the prem-based PBX market. Of course, just when it got good, things changed.

The Influence of Key Acquisitions

Significant industry shifts were catalyzed by key acquisitions, such as Cisco’s acquisition of BroadSoft in 2017. BroadSoft was the 800-pound gorilla of the SP softswitch market, but perhaps more importantly they created a neutral vendor ecosystem built around their solution. This acquisition not only altered the competitive landscape but also disrupted the traditional vendor ecosystem.

Emergence of Cloud-Centric Solutions

Subsequent moves by industry giants like Microsoft, with the acquisition of Metaswitch, signaled a strategic shift from their traditional base of small to mid-sized SPs to a cloud-based telephony infrastructure resident in Azure, further challenging the status quo.

Navigating the Transition: Considerations for SPs

Not surprisingly, these big players want to change how unified communications gets sold. The cloud is hyper efficient in delivering solutions like UC, where a single code base can be managed centrally and new features can easily be added. Contrast that to business model selling a feature server to hundreds of SPs, who then install in their own network and sell a hodgepodge of different offers to their customers, and you can see why change is inevitable.

As SPs navigate this transformative period, several crucial considerations come to the forefront.

  1. Branding. SPs have invested heavily in creating a brand identity and want to be seen as a technology leader. In looking for a UC offer to resale, the best option is a private label product where the SP can fully brand their UC offer and be seen as the sole technology provider. Another option is a “powered by” co-brand offer. While you might be able to leverage a bigger brand name, it will most likely come at a higher price. It’s a worthy option if the SP doesn’t believe they have a strong enough brand to compete effectively. 
  2. Financial returns. The classic build vs. buy calculation. On the surface buying wholesale UC seems expensive as compared to an in-house UC feature server. However, you need to consider all the things you’ll no longer need to do by buying wholesale. Namely, platform management, patches, new release installs, capacity augmentation, and a lot of tech support all go away. In addition, other operational expenses like E911, regulatory functions, and phone provisioning might also go away depending on the wholesale provider you choose.
  3. Product Quality. As you make this transition you obviously want to offer as high a quality product as possible. In addition to a thorough demo, take a look at 3rd party rating sites like Gartner Peer Insights, PC Magazine, US News, and others to see what rating groups and end users are saying about the product. Also, as AI is all the rage, ensure your provider has products on the shelf as well as an attractive roadmap.
  4. Completeness of Offer. You’ll want to make this buying decision once, so ensure your wholesale provider has all the bells and whistles. Including a high-quality contact center product is a given, but also look to add things like data archiving and 3rd party application integrations. Additionally, since Microsoft Teams has such a large market presence, look to include a solution where Teams can be the UC layer and you can provide the PBX/telephony functions.
  5. Service and Support. This is probably an area where you’re suffering today, as the softswitch vendors are cutting support as they divest from the market. Ensure your partner has a commitment to service, with SLAs that back up that commitment. A high Net Promoter Score (NPS) is a great indicator, as well as certifications from 3rd party rating agencies.
  6. Flexibility. Maximize it! Make sure you can mix-and-match licenses at the end customer level (some providers don’t offer this). Look for a contract with as little long-term obligation as possible so you can back out if you’re not happy.
  7. A Partner Mentality. Lastly, look for an organization that’s committed to the channel partner. Some UC providers have partner programs, but their primary interest is selling direct (and in effect competing against you). A partner first mentality is key.

Embracing the Future: Adapting to Industry Dynamics

As the industry undergoes a significant transformation, SPs must embrace change and align their strategies with evolving market dynamics. SPs control an estimated 40% of the UC market, and likely all of them will be making a product transition in the next several years.

For further insights into navigating this transition, resources like Intermedia’s whitepaper offer valuable perspectives and strategies for SPs embarking on this journey.

Brian Gregory

Brian Gregory is Senior Director of Product Marketing for solutions Intermedia resells through our service provider and carrier partners.

March 26, 2024

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