The market for Communication Service Providers (CSP) offering hosted business services has changed radically over the past 2+ years. The market has become considerably more competitive, particularly with the emergence of Microsoft Teams. On the technology supplier side, the traditional vendors that have provided the technology for CSPs to capitalize on services like Hosted PBX and Unified Communication are in many cases leaving the market.
Given these changes, what options do CSPs have? The following five options begin to emerge:
- Continue with the status quo (or apply short-term fixes to maintain it);
- Move to another internally managed feature server platform;
- Move to a cloud-based, white-label UCaaS platform;
- Move to a resell model, selling a branded solution from another provider; or
- Exit the market.
Option 1: Continue with the Status Quo
For those CSPs with feature servers in their data center, maintaining their current UC offer (or adding a new softphone client) is certainly an option. After all, CSPs have made large investments in these feature servers and softswitches and, understandably, want to maximize the return on these investments.
However, this approach carries several significant risks. The largest risk is staying with a vendor that is no longer investing in the underlying platform and is only providing minimal service and support. The UCaaS market is highly competitive and providers like Intermedia and other born-in-the-cloud providers are consistently adding new, well-supported products and features (particularly around AI, analytics, and collaboration). By continuing with the status quo or slightly modifying it with a new soft client, the CSP is essentially freezing its UC product at its current state, while competitors will continue to innovate.
Option 2 – Move to a Different Feature Server Platform
For some CSPs, moving to another feature server platform may offer incremental technological improvements while keeping the fundamental operational model intact. This approach can be seen as a lower-risk option compared to a complete shift to the cloud, particularly for CSPs that are cautious about major changes.
However, over the past 5-10 years, there has been a paradigm shift in how services like UC get deployed. Cloud-based offers have supplanted the locally deployed service model. This is a primary reason why Microsoft is de-investing in Metaswitch, and why Cisco appears to be moving away from its BroadWorks product line. Continuing with a “DIY” approach may keep the CSP from achieving economies of scale that a more centralized approach would create. In addition, the traditional perpetual licensing structure used in this product creates inefficiencies in purchase timing and capital allocation.
Option 3 – Move to a Cloud-based Platform
Transitioning to a cloud provider from a legacy feature server in the CSP network is a logical progression in the evolution of UC. While there may be a perceived loss of control as the CSP no longer has direct management of the platform in their network, it has many benefits, including freeing up technical resources as well as reducing significant op-ex (e.g., colocation space, power, hypervisor licensing) and cap-ex costs (e.g., capacity, UC license inventory, hardware refreshes).
In the case of Intermedia, almost everything you need to run your UCaaS/CCaaS business is included in the monthly price, including:
- Tier 2, 3 technical support
- Service quality monitoring, analytics
- Infrastructure management, capacity planning
- All-in-one quote to cash portal
- Back-office integration for billing
- Security, regulatory compliance
- E911, RAY BAUM’S Act, Kari’s Law
- Device certification, fulfillment, provisioning, shipping
- Marketing content creation
- Sales engineering and deal support
In our recent whitepaper, a cost analysis is provided to show how many of the items listed above factor into the overall cost of delivering UC. The analysis puts the costs into a per month, per seat price, making it easy to compare against a true ‘aaS’ offering.
Option 4 – Move to a Resell Model
There are upsides and downsides to selling a branded UCaaS offer (e.g., Teams, Webex, …) as the CSP’s core strategy. On the positive side, you are selling a brand-name product that your potential customers most likely know by name. On the downside, financial returns will be less than what you’re accustomed to, and certainly lower than pursuing a white-label solution. You may also run into more channel conflict than you would when selling your own branded solution.
Option 5 – Exit the Market
Within the business communications market, only 30-50% have adopted cloud-based telephony, and many of these lack a comprehensive UCaaS solution. Based on the estimated growth/migration rates, millions and millions of businesses are expected to accelerate their move off older, premises-based solutions to UCaaS in the next several years. It may be too soon to give up on this market opportunity.
Learn More – Read Our Whitepaper
In the telecom industry, change is a constant. While change can certainly present its challenges, change also provides an opportunity to step back and evaluate options. As hosted PBX has morphed into a full-fledged unified communications platform and over-the-top providers get more sophisticated, the competitive landscape has become highly challenging. In this evolving environment, you need a technology partner who is relentlessly innovating and deeply committed to partner success, offering the tools, automated processes, branding flexibility, and unwavering support essential for your success.
Brian Gregory
Brian Gregory is the Senior Director of Product Marketing at Intermedia Communications. He has responsibility for guiding Intermedia’s service provider marketing initiatives, including product strategy, content development, business analytics, and go-to-market execution. Brian has held various roles in marketing and product management at communication service providers and technology concerns, including Ribbon, Metaswitch, and Sprint.
September 30, 2024
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