Last week’s Cloud Comms Summit US 2021, organized by Cavell Group and the Cloud Communications Alliance, was all about the changing times in the world of communications, a theme that was core to our latest SmartCom Summit as well. An interesting combination of market trends, partly based on Cavell/CCA surveys, panel discussions and insights from leaders from (mostly US based) cloud communications service providers and some analysts.
Unfortunately the event was virtualized a few weeks ago, because travel within but especially to and from the United States is still difficult for many. Which was a shame because the networking part is usually one of the most valuable parts of Cavell and CCA events, as they cater mostly to a select group of hosted voice (UCaaS) service providers and vendors.
Here are my 5 key takeaways from this online event:
1/ Cloud comms is the new normal
Video is now an integral part of cloud communications, and post-Covid-19 (almost) nobody is investing in on-premise PBX or UC equipment any more. Market penetration is predicted to exceed 50% in the USA by the end of 2022, with Europe following suit a few years later. Also contact centers, which were predominantly on-Prem before Covid-19, are now moving to the cloud at stellar speeds. All this accelerates globalization, and the abundance of capital right is leading to record M&A activity. Europe is lagging USA M&A activity by approx 4-5 years, which means that the next few years most of the M&A will actually take place in mainland Europe, and between the USA and Europe.
2/ Differentiation is key
Approximately half the cloud comms service providers currently still use their homegrown platforms, some of the larger ones (also in Europe) reporting 1M+ seats. But hyperscalars like Microsoft and Zoom are growing quickly as the basic functionality of a typical cloud comms solution is commoditized, Zoom recently announcing 2M phone seats and Microsoft through its various calling solutions even more.
In a survey done by Cavell, 30% of interviewees indicated they are looking to switch platforms, looking for a cheaper solution, specific features or better service. In this dynamic market service providers large and small would be wise to restrategize and focus on exceptional service and/or specific verticals, possibly building around a platform from a hyperscalar like Microsoft, unless they can compete on price (which is a ‘vertical’ focus in a way as well).
3/ Huge telco opportunity
Recent research from IDC [Enterprise Communications Survey, IDC, June 2021; n=150] shows that for enterprises looking to buy a new communications solution within the next 2 years their preferred channel now is:
1/ mobile operators
3/ telecom service providers
4/ cable operators
Not surprising in a maturing market, customers are looking for the easiest way to buy and that is often from their traditional trusted provider, where they have been doing their communications business for ages. This presents a huge opportunity for more traditional carriers and MNOs, who unfortunately are not known for being very agile or delivering great customer service, so may need some help.
Fortunately, technology and wholesale providers are coming to the rescue here. This month, Microsoft officially launches Operator Connect as an addition to their calling plans and Direct Routing solutions from partners, in an effort to make it easy for enterprises to add Phone System and PSTN connectivity to their Microsoft Teams configuration. And at the Cloud Comms Summit this week iBasis, a leading international wholesale carrier, announced they have joined the Cloud Communications Alliance to build bridges between old and new telcos, as already demonstrated by successful work with China Telecom and Sippio, among others.
4/ Platforms are on the rise
With hyperscalars especially focusing on large (global) enterprises, and smaller cloud comms providers using their channel partners to reach medium sized companies, online sales are most important to reach smaller companies. For all of these markets, platforms are on the rise, growing by as much as a factor of 10 in the past 2 years according to research from the JS Group. For a long time, channel partners used to adhere to the 80/20 rule, in that 80% of the sales would be done by 20% of the partners. But this was 90/10 a year ago and a staggering 94/7 today, so 7% of a provider’s channel partners are responsible for 94% of the business! Digital marketing and new channel partners are the way forward according to JS Group, aligning with changing demographics and the majority of buyers now being millennials and Gen-Z that grew up with digital channels.
Another platform on the rise is of course CPaaS (Communications Platform as a Service), offering all sorts of cloud comms capabilities in bite sized portions that can be integrated into apps and IT platforms, contributing to the verticalisation that’s growing in importance. Leading CPaaS providers like Twilio, Infobip, MessageBird, CM.com and Sinch continue to grow through acquisitions, new CPaaS providers Toku and Trengo are raising large amounts of capital to grow (most notably Trengo’s 36M Series A last month), Mavenir acquired CPaaS enabler Telestax last month to strengthen its solution for telcos, and Microsoft is getting in the CPaaS game this year with Azure Communication Services (ACS) as the engine behind all of their communications solutions.
5/ Customer engagement is next
Verticalisation, digital marketing, platforms and CPaaS are all about the focus on the customer instead of the technology. Last year, when Covid-19 struck, we all scrambled to find a way to work from home, reorganize our office spaces and home setups, and figure out new ways of collaborating. Now it’s time again to focus on doing business, in a world where everybody has become accustomed to online shopping and video meetings. Contact centers are omni channel, digital and AI and bots are part of the new mix, the challenge is to integrate voice into that mix again without the disadvantages associated with old contact centers like waiting times and lack of context.
Finally, with everything cloud based and as a service, it would be good if we all stopped talking about UCaaS, CCaaS and CPaaS, and instead started talking about smart communications and solutions that provide value to enterprises, customers and society at large. Smart Companies, Smart Communications, Smart Communities in a time of digital acceleration where people are the most important (scarce and valuable) part and make the difference between mediocrity and success. Customer engagement will be the focus of our next SmartCom Summit, so we’ll write more about that in the coming weeks and months.