Has UC Finally Crossed the Chasm?

After decades of availability and sales efforts, a majority of small and medium-sized businesses have not yet migrated to IP communications, a new study sponsored by Edgewater Networks and Metaswitch Networks has found.

“But the chasm has just been crossed,” the study argues. That is quite important, if true, as it means adoption will shift rapidly, as bleeding edge buyers who buy “the latest technology” are replaced by pragmatic buyers who want business results and easy-to-use solutions at a reasonable price.

If the chasm indeed has been crossed, we could be at the start of the steep part of the adoption curve--the “growth” phase--when most of the total sales occur.

Some of us would be willing to bet the big new force driving sales will be U.S. cable operators, who increasingly are relying on sales to the SMB segment for revenue growth.

Business services, in fact, now represent the highest-growth revenue source for U.S. cable TV operators. That also is true for a number of U.S. telcos, if not for AT&T and Verizon Communications.

While adoption rates are higher in larger organizations are as high as 36 percent, smaller SMBs with less than 100 employees have adoption rates less than 25 percent, the survey found.
In fact, fewer than 20 percent of the smallest SMBs have moved off of their time division multiplex legacy systems. But adoption rates are low even for the largest SMBs, one might argue.

A majority of SMBs still are using aging TDM phone systems and the average age of in-service TDM systems is six years, respondents reported.

Generally speaking, adoption rates for IP solutions are higher in larger companies with more evolved IT departments, the study suggests. There are logical reasons for such outcomes.

First, many service providers prefer to target larger SMBs with IP offers. In other words, marketing has focused on bigger accounts in the SMB market, as sales efforts tend to focus on larger potential accounts in other market segments, study authors says.

Also, many UC and IP telephony providers have a distinct “technology” focus to their messaging that obviously resonates more with the technical audience in an IT Department.

As often is the case, IP Communications services were first adopted by larger companies with the technical staffs, budgets and large enough “pain points” to drive deployment.

Solutions then typically are refined for sale to smaller entities. That is important since more than 80 percent of all businesses in the United States, for example, have fewer than 20 employees.

As you might expect, key systems dominate the low end of the market ( organizations with 50 employees or fewer) while private branch exchanges (PBX) have the majority share among larger SMBs, the study of 1,250 respondents found.

The low adoption rates mean that the market for IP services is extremely large; perhaps as large as $26 billion annual sales in the U.S. market, for example. That is substantially larger than some had forecast in the past.

In 2008, Unis Lumin estimated global unified communications revenue potential at less than $40 billion by 2010.

But others have projected U.S. UC revenues as high as $15.4 billion by about 2017.

Much depends on what who chooses to include within the definition of  “UC,” though.

The largest forecasts occur when aggregating a number of market segments including business phone systems and services with communications app segments.

Buyer interest in IP Communications is extremely high, the study suggests. In companies with more than 20 employees, over 95 percent say they are interested, for example.

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