Enterprise Communications Landscape: 2023 Report
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Bandwidth has produced this free, ungated ebook based on its own research and market analysis, plus several publicly available reports. We have also sourced exclusive commentary from leading independent analysts. The cloud comms industry has been through a number of twists and turns over the past few years. With opportunities for innovation and change in almost every area of the sector, it’s no wonder people are looking to see what we can expect at the beginning of this next decade. As communications providers, the Bandwidth team keep a close eye on the latest developments in technology, business practices, and expertise within the comms market. So we’re in a unique position to offer our thoughts on what will make big waves in 2020 and beyond. To make sure we’re not just listing off our hopes, we joined up with some amazing analysts, tech buffs and industry thought leaders to give you an extensive and informed insight into what will be an exciting year for cloud communications.
Business infrastructure is changing. As companies transform and scale, they’re moving from legacy and hybrid infrastructures to the cloud, with global Digital Transformation (DX) technology investments set to exceed $6 trillion from 2019-2022. In 2020, communications is expected to account for 36% of IT budgets, at a global cost of $3,878 billion. And as regulatory frameworks tighten around the globe, limiting complexity in the sphere of communications is becoming increasingly challenging. More than half (52.2%) of businesses are already using or planning to use SIP trunks, according to Nemertes, with 12% evaluating, 27.3% using them by the end of 2019 and 17.9% planning to deploy in 2020 after successful testing.
“Cavell is seeing rapid adoption of cloud comms across Europe and North America as enterprises embrace the move to the cloud. We’re expecting over 35m cloud comms users by 2025 in Europe, more than tripling in size from the total user base in 2019.”
The reason for this huge increase in value? The natural progression of tech-driven businesses. Organizations are now leveraging services like virtual phone numbers and messaging services to optimize their access to Unified Communications-as-a-Service (UCaaS) and Communications Platform-as-a-Service (CPaaS), reducing costs and improving operational efficiencies. A large number of organizations are already deploying at least part of their UC solution in the cloud, and this growth isn’t plateauing anytime soon, due to the substantial benefits of leveraging cloud communications, including:
Cloud communication services, including UCaaS and CCaaS, continue to grow as the adoption of these services picks up momentum. For most companies, it’s not a question of whether or not they’ll move to the cloud, but when.
But despite the huge benefits cloud communications provides for organizations and their wider business infrastructure (programmable, customizable, APIs etc…), a lot of businesses still haven’t made the jump, with less than half of businesses using a cloud platform for their communications. Obviously, the benefits of cloud comms have hit each industry differently with some areas ahead of others in terms of adoption. For example, banking and finance companies have tended to avoid the use of cloud-based services because of security worries, however, the increased competition brought on by cloud-native disruptors in the banking arena has established the financial services sector as one of the biggest for cloud communications adoption, with 60% of financial services companies surveyed reporting that implementing cloud technology will be a business priority from next year.
CPaaS will influence the roadmap for business communications and collaboration technologies, with organizations shifting their focus from one-size-fits-all to flexible solutions with programmable capabilities that enable them to customize how they interact with their customers and employees. According to 451 Research’s CPaaS Market Monitor projects, this segment will grow at a 33% CAGR in the next five years.
ISDN is being deprecated around the world with incumbent carriers already in the process of going all IP – Swisscom (2017), Deutsche Telekom (2018) and Orange (2020) among them. This year it’ll be the UK, with BT Openreach announcing businesses and individuals in the UK will no longer be able to purchase ISDN lines from 2020 onwards. The pressure to move to SIP has never been stronger. In 2020, communications are expected to account for 36% of IT budgets, at a global cost of $3,878 billion. While legacy carriers switch to SIP, cloud providers have a golden opportunity to establish themselves. [orionforms formid=1245741]
The impact on service providers is dependent on how they provide voice services to their customers. If they provide physical ISDN access they already knew the market was in decline. As an example, in 2008, the value of the Australian ISDN market was estimated by Telstra at AU$978 million. By 2018 a decade later, this had fallen to AU$467 million, and it dropped a further 20% to AU$387 million in 2019. This, however, opens up huge possibilities for market growth on the cloud and IP-based side of the market as huge chunks of the marketplace switch over from the ISDN.
With an estimated 2 million businesses still operating their telephone system over ISDN in the UK alone, it’s fair to say this change will have a major impact on businesses worldwide. Yet it’s surprising to see that still, 25% of those businesses aren’t aware of the planned ‘switch-off’, even though it was officially announced in 2014 (according to a study by Talk Talk). Particularly in mature markets where ISDN is already being decommissioned, businesses and consumers are already moving away from legacy services en masse. A recent UK ISDN market report by the country’s national regulator Ofcom indicates a crossover point has already been reached where more businesses are now moving to alternative solutions, rather than opting for traditional ISDN.
We expect to see a more rapid shift to the cloud in 2020. Already, 65% of our research participants are using either UCaaS or custom-hosted services for their UC platforms. 43.2% of those still on-premises are either evaluating or planning to move to the cloud, and 62.6% of those using custom-hosted solutions are evaluating or planning to shift to UCaaS.
Software-defined Wide Area Networks (SD-WAN) have enhanced user experience, increased business productivity and reduced IT costs for years. Its ability to leverage any combination of transport services – including Multiprotocol Label Switching (MPLS), Long-Term Evolution (LTE) and broadband internet services – has unlocked some of the biggest applications in the industry (T1/E1, ATM, Frame Relay, and DSL to name a few). But in 2020, it’s expected to be everywhere, with most businesses utilizing it in some form or another. In the next five years, the market will grow to be worth an estimated $17 billion. It’s difficult to see what kind of impact SD-WAN will have next year, but it’s looking like it’s moving faster than almost anything else in the technology space. It’s helping deploy commoditized infrastructure that isn’t just cheaper and easier to implement but connects hardware and applications that perform better than in on-prem, cloud, and hybrid environments. The most interesting aspect of SD-WAN and its uptake, however, is the digital transformation capabilities it brings to companies that are bridled with legacy systems and want to catch up quickly with minimal investment.
With organizations relying on multiple software suppliers to provide their communications (and of course many other specialized areas of their technology) it can be a challenge for IT managers to assure security and quality of service when each SaaS provider has its own unique set of security mechanisms, APIs and management tools. Especially since there has been an increased use of ‘shadow IT’ in the past few years.
For 2020, we’d like to see more extensive deployments of UCaaS platforms that filter down to all levels of the enterprise and provide better options than what happens with Shadow IT. For UCaaS adoption to be successful, IT needs a more consistent experience where everyone is using the same applications in the same way.
But by using SD-WAN, platforms can recognize traffic via their IP address and traffic type to-and-from the leading SaaS providers. This allows IT to set specific policy, security, and compliance criteria within the SD-WAN management portal for each SaaS service. Something that will no doubt become a valuable asset to SD-WAN domination in the communications market.