On-premise solutions to give way to hosted and cloud-based UC solutions in Australia, says Frost & Sullivan
~ By 2020, revenues from hosted and cloud-based UC solutions will be close to that of on-premise solutions
SYDNEY, Nov. 3, 2014 /PRNewswire/ -- In 2013, Australia's on-premise Unified Communications (UC) market experienced a decline in revenues. This was mainly due to the improved understanding of the benefits of hosted and cloud-based UC solutions, which have now reached mainstream adoption.
Organisations are now able to deploy any UC application over a hosted model, and have a much improved understanding of the benefits of hosted and cloud-based UC solutions. In addition, the capital intensive nature of on-premise solutions limits the flexibility for organisations to adapt to the changing communication and collaboration environments. As a result, the on-premise UC market is approaching a phase where growth rates are flat or declining.
Anand Balasubramanian, Industry Analyst, ICT Practice, Australia & New Zealand, Frost & Sullivan, says that the decline in the Australian UC market revenues can be attributed to the changing business preferences for communication and collaboration solutions. He noted, "In line with a cautious spending approach, both government agencies and businesses delayed IT investments, reduced the number of large scale deployments and opted to extend the life of their existing systems, which had a major impact on the market."
"Growth rates in the UC market are expected to be flat in 2014 and will continue to be low. Vendors will find it difficult to convert opportunities for on-premise solutions as hosted and cloud-based alternatives gather momentum. This will also have the effect of tightening the profit margins for vendors and channel partners, further contributing to the low growth rates in the market," said Balasubramanian.
Frost & Sullivan's new research, Australian Unified Communications (UC) Market 2014, forecasts the UC market to grow at a Compound Annual Growth Rate (CAGR) of 1.6% from 2013 to 2020. By 2020, revenue contribution from hosted and cloud-based solutions will be close to that of on-premise solutions. However, on-premise UC solutions will continue to offer opportunities, particularly in the government and Banking, Financial Services and Insurance (BFSI) sectors, where there is greater need for infrastructure control. Many organisations have sunk significant amounts into their UC infrastructures and will not find it cost effective to switch to a hosted model.
Although the contact centre market in Australia is fairly mature, it was among the strongest performing UC segments in 2013. This segment benefited from pent-up demand from previous years, where organisations opted to defer major deployments and refreshes while assessing the impact of economic and political conditions.
Though most UC vendors experienced declines in revenues in 2013, vendors with a major dependency on a particular application segment were most severely affected. Alcatel Lucent, Unify (previously Siemens) and Avaya experienced significant decline in revenues due to their focus on enterprise telephony. Responding to challenging market conditions, vendors aggressively marked down prices of products. For example, the average selling price of a room-based video conferencing system declined by more than 30%, resulting in sales of a greater number of units for lower profits, further weakening growth in the market.
To increase profit margins, vendors and channel partners are focusing on optimising operations through consolidation of business lines and by making strategic acquisitions. Telstra, Optus, Unify and Mitel have undergone significant changes to their go-to-market strategy or company structure. Such moves and changes will become increasingly common over the next few years.
Audrey William, Head of Research, ICT Practice, Australia & New Zealand, Frost & Sullivan says that the shift towards hosted and cloud-based models is changing the dynamics between vendors and channel partners. UC vendors and channel partners are increasingly competing for the same market as UC related services become critical for driving future growth.
"The hosted and cloud-based models allow vendors and channel partners to address the market directly, by provisioning UC solutions from their own data centres. This gives the vendors greater capacity to reach customers directly, but also puts them in direct competition with their channel partners. Over the next few years, competing for the same customer base will be common as both vendors and channel partners look to secure avenues for growth. The ability to cooperate and coordinate will therefore be critical to the success of vendors and channel partners.
The UC market in Australia is two-tiered, with the top three vendors Microsoft, Cisco and Avaya accounting for over 50% of market share, and a large number of vendors competing for the remaining market. However, Cisco and Avaya experienced revenue declines in 2013 compared to 2012 as their core revenue generating segments were impacted by changing market conditions.
Cisco and Microsoft will remain the dominant vendors in the UC market, but will face greater competition from emerging and new players over the next few years. Mitel, ShoreTel and Interactive Intelligence are securing customers in the medium and large enterprise segment and steadily increasing their footprint in the market.
As the market shifts towards hosted and cloud-based solutions, traditional vendors will face competition from a new breed of cloud-based players. Cloud-based players such as Google, Vidyo, IPscape and Blue Jeans are experiencing growing demand for their solutions and are displacing many traditional vendor solutions. These players are also building industry partnerships to support their growth strategies. For example, Blue Jeans announced its partnership with Telstra, utilising the telco's market reach to offer cloud-based video solutions. In 2014, Vidyo announced its partnership with Google to launch a cloud based solution called VidyoH2O for Google Hangouts. In the next few years, such partnerships will gather momentum and will alter the competitive dynamics of the traditional on-premise UC market.
Web Real Time Collaboration (WebRTC) and app-based UC are among the emerging technologies aimed at making applications accessible over the web or through an app on mobile devices. Although, WebRTC is at a nascent stage of availability in the Australian market, it offers significant potential to change the nature of communication in the Business-2-Business (B2B) and Business-2-Consumer (B2C) environments. App-based access to UC, which is based on tailoring UC solutions to mobile devices, is quickly approaching mainstream adoption. The enhanced user experience through its ease of use and ease of access are among the main factors driving uptake. The emergence of web-based and app-based UC represents the next stage in the evolution of UC, and will have a significant impact on the way that users communicate and collaborate. Overall, the emergence of these mobile centred trends combined with the growing demand for hosted and cloud-based UC solutions will be the main focus areas for vendors and channel partners to drive revenue growth in the future.
Frost & Sullivan Australian UC Market Report 2014, forms a part of the Frost & Sullivan Enterprise Communications Research program. All research services included in this subscription provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants. The report also includes survey results and statistics of 227 IT decision makers in Australia to understand market behaviour and views towards Unified Communications (UC). Respondents were senior management level executives, IT managers and IT decision makers with control of or insight into the technology budget and strategy of their organisations. Interviews with the press are available. If you are interested in more information on this study, please send an e-mail with your contact details to Donna Jeremiah, Corporate Communications, at [email protected].
About Frost & Sullivan
Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today's market participants. For more than 50 years, we have been developing growth strategies for the global 1000, emerging businesses, the public sector and the investment community. Is your organization prepared for the next profound wave of industry convergence, disruptive technologies, increasing competitive intensity, Mega Trends, breakthrough best practices, changing customer dynamics and emerging economies? Contact us: Start the discussion
Contact:
Donna Jeremiah
Corporate Communications – Asia Pacific
P: +61 (02) 8247 8927
F: +61 (02) 9252 8066
E: [email protected]
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SOURCE Frost & Sullivan
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