As the market turns around... a hot new communications service market emergesHow can communications as a service (CaaS) help you meet your small and medium business customers’ need for cost-effective and on-demand services?Business white paper

Table of contentsExecutive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3An excellent opportunity for service providers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4The time is ripe for CaaS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4What service providers stand to gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4How to enter the market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5The market potential of the HP CaaS program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

IP Contact Center as a Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Self-service IVR as a Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Unified Communications as a Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Video Surveillance as a Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

The HP Communications as a Service program: A single, convenient platform, proven solutions, and an established process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7For more information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

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Executive summaryCommunications as a service (CaaS) is a hot new market that promises to grow quickly. As the name implies, CaaS is similar in nature to software as a service (SaaS), which is an increasingly popular method for technology organizations to acquire software resources. In CaaS, communications technology is located in a data center of a communications service provider, and is owned and managed by the service provider as a multi-tenant infrastructure. The service provider offers this technology to customers on a pay-per-minute or pay-per-subscription basis, giving them flexibility in acquiring business services and at the same time reducing costs.

Small and medium businesses (SMBs) that need enterprise-class communications services but lack the resources that large enterprises have to acquire technology and operate it in house already do business with service providers. The HP CaaS program can help expand that business.

A 2009 Forrester Consulting study of 900 SMBs, commissioned by HP and conducted in nine countries in the Americas, Europe, and Asia-Pacific, estimates the potential market for six types of CaaS services, including self-service interactive voice response (IVR) as a service, IP contact center as a service, unified communications as a service, video surveillance as a service, PC back-up

and recovery as a service, and multimedia conferencing as a service. The study forecasts a total market of at least $12.3 billion by 2014, with a strong compound annual growth rate (CAGR) of 31%.

Findings of the study, which spanned organizational size and industry as well as geography, include these salient facts:

•Between47%and55%oftheSMBssurveyedwantthe solutions mentioned above.

•SMBsseetheseCaaSservicesasawaytosavemoney, be more agile in adopting technology, and spend flexibly on technology for fluctuating business needs.

•Nearly90%oftheSMBswhoexpressedaninterest in these CaaS services want multiple and bundled solutions.

•MostSMBsseeserviceprovidersaslogicalpartnersto deliver those solutions.

HP believes that CaaS promises to be a fast-growing market that offers an excellent opportunity for service providers to expand their business with SMBs and create stable sources of new revenue. Accordingly, HP proposes a CaaS program that brings to bear years of HP expertise in both technology and telecommunications on highly reliable and scalable solutions to help service providers enter and sustain a presence in this market.

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An excellent opportunity for service providersWhile the Forrester Consulting study indicates that most SMBs are handling the above services in house, between 48% and 58%, depending on the type of service, display an interest in as-a-service alternatives.

The SMBs surveyed cited three compelling advantages in CaaS:

•Cost savings—by limiting CAPEX outlay and matching payments to use

•Speed and flexibility in adopting technology—to help increase revenue and gain competitive advantage

•Better business agility—for adjusting levels of service (and the associated levels of spending) to fluctuating business demand by dynamically expanding and contracting technology usage on a pay-per-minute or pay-per-subscription basis

The time is ripe for CaaSHP sees several trends converging to make telecommunications service providers take a close look at CaaS offerings.

The increased pace at which new technologies are bursting on the business scene is the most significant ofthesefactors.Newtechnologiescreatenewproducts and services at a rate unimagined only a few years ago, and successful businesses must ride this wave of innovation.

As this happens, the investments businesses make in technology infrastructure and technical knowledge have a shorter lifespan. At the same time, the cost and complexity of the infrastructure increases, and the businesses run the risk of investing substantially in technology and training that will be outmoded in months or even weeks—or, alternatively, giving up competitive advantage and market share.

Beginning in 2008, investing in technology was complicated by a sharply declining economy. And businesses of all sorts became reluctant to spend capital on costly technology—especially technology with a short shelf life.

In response to these factors, the role and culture of IT organizations has begun to change. The traditional IT role of managing infrastructure to “keep the lights on” is giving way to a perception of the IT organization as a key business driver, tasked with helping the business bring in revenue and gain competitive advantage.

At the same time, IT leaders and managers have become more receptive to the concept of managed services to supplement in-house operations cost-effectively.

In the wake of the downturn, today’s economic uncertainty has been particularly rough for SMBs. In the past, technology spending in SMBs was more or less evenly distributed across hardware, software, and services expenditures, but now, as they struggle to recover from the downturn, we can expect to see a higher demand for services as SMBs catch up technically with their enterprise counterparts.

For service providers, CaaS offers a way to capitalize on a seemingly contradictory need to deliver innovative technology services and at the same time operate within tight budgets. In particular, SMBs are a potentially lucrative market for managed communications services. Currently, the demand is accelerating and as things improve, this demand will continue to grow. Vendors who catch the wave at its peak with viable offerings can lead in this market.

CaaS can be a way for service providers to monetize key network and communication assets—in a recurring and operationally efficient fashion—to serve the SMB market. It enables the service providers to offer a number of attractive advantages—on-demand delivery, pay-per-minute and pay-per-subscription pricing, flexibility, and rapid deployment of new services—and greatly reduced infrastructure, staffing, and training costs.

What service providers stand to gainService providers acknowledge the business value of CaaS. As one service provider who participated in the Forrester Consulting study put it, “Economic crisis or not, customers want to know that we can help them with productivity. Services will be our future, and CaaS offers new revenue models that are very attractive to us.”

According to HP, service providers stand to earn fees for both the services provided and the network traffic end users generate. And more importantly, CaaS offerings that leverage existing service provider strengths like network infrastructure, IP telephony, and self-service IVR are a way to increase market share in a highly competitive telecommunications market, where wireline revenues are declining. CaaS offers an extensive, stable source of revenue, but to harness the opportunity, providers need to apply their deep knowledge of SMBs to the CaaS market. According to the interviewee, “Some biases with SMBs still exist. You need to be seen as a trusted advisor with them.”

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For instance, SMBs in general like their technology bundled, and HP believes this will be no different as they approach CaaS. One way to attract and retain SMB customers is to offer technology/network service bundles, giving the SMB a one-stop shop for services.

Once a pipeline of SMB business is open, service providers can offer attractive bundles, deliver services expertise as a broker of CaaS, and offer flexible payment models such as pay-per-minute and pay-per-subscription, and in return get:

•Newandexpandingrevenuestreams

•AnincreasingshareofthecapitalSMBsexpendonnetwork and technology spending

•Richreturnsontheirowninvestmentsinplatformsand solutions

How to enter the marketHow much potential does the market have? The Forrester Consulting study estimates an “as a service” market for self-service IVR, IP contact center, unified communications, and video surveillance of at least $6.2 billion by 2014, with a strong CAGR of 29%.

Accordingto“NavigatingThroughtheVolatilityand Complexity of the Tech Industry Ecosystem,”1 “Historically, the technology industry has moved in waves of technology-driven innovation and consolidation. During the past 50 years, these waves have involved eight to 10 years of innovation and rapid technology adoption, followed by eight to 10 years of technology refinement and digestion.” If this pattern continues, we are on the cusp of the next heavy investment in technology, which HP believes will involve deep investments in technology that will span all layers of the technical stack. Amid the complexity that is bound to accompany these trends, “everything as a service” will be a key way to achieve agility, scale, and cost-efficiency.

But as one study participant pointed out, “The biggest competitor in the SMB space is complacency.” According to HP, it is the service provider’s responsibility to give the SMB clear and compelling reasons to invest. While demand exists for CaaS and more dynamic payment models, many SMBs are less familiar than their large enterprise counterparts with the terminology of “as a service.” This means service providers need to stay focused on the business benefits

of CaaS offerings and not bog marketing messages down with potentially unfamiliar terms like “cloud” or “as a service.”

Knowing who the competition is can also help service providers to position themselves competitively. The Forrester Consulting study shows that one-third to more than one half of SMBs would buy these services from telecom providers. HP agrees that SMBs will consider service providers, and the ability to bundle CaaS offerings may give service providers an advantage over dedicated as-a-service providers.

The market potential of the HP CaaS programThe HP CaaS program includes two HP solutions, HP Self-Service IVR solution and HP Video Surveillance solution, and two partner solutions, IP Contact Center and Unified Communications, all pre-integrated with the HP Aggregation Platform for SaaS. The HP Aggregation Platform for SaaS provides the foundation for additional HP and third-party SaaS solutions.

According to HP, these four services offer distinct value propositions for both service providers and their SMB customers.

These offerings help service providers to:

•AttractandretainbusinessbygivingSMBsaone-stopshop for IT/telecommunications service bundles

•Provideflexibilityinacquiringservicesbasedona SaaS model

•Offerconvergenceoffixedandmobilecommunications

For their part, SMBs get:

•Quickeraccesstostate-of-the-arttechnologyservices

•Fastertimetoproduction

•LowersetupcostsbyavoidingCAPEXinvestmentsand a more predictable OPEX

•Betterfocusoncorebusinessfunctionsinsteadoftechnology and communications management

•Theabilitytoscaleupasbusinessneedschange

•Morereliableaccesstobusinessapplicationsanddata, anytime, anywhere

1 Forrester Research Inc., January 9, 2009

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IP Contact Center as a ServiceOpportunity size in 2014: $1.4 billion USDCompound annual growth rate: 27%Interest in purchasing CaaS: 58%

IP Contact Center as a Service utilizes a virtual contact center at the service provider’s location, connected to the customer’s premises through IP. It delivers multi-channel capabilities, including telephone, email, and web chat and routes customer contacts to service agents staffed by the customer. SMBs are less likely to need premises-based and fully staffed contact centers when compared to large enterprises, and IP telephony makes it easier to use part-time and at-home agents to assign contacts to knowledge workers with other core responsibilities.

Use case: A travel agency with 250 employees dedicates more than half of them to answering service requests coming in by email, telephone, and web chat. The director of technology and two other employees coordinate communication channels. Since the small technology staff can’t manage all the necessary changes and updates, the director uses the services of a local value-added reseller (VAR). In this situation, IP Contact Center as a service is an attractive option. For a flat monthly fee, the technology director can maintain his IP contact center without tying up the management and technical attention of his staff. The finance director can trade a varying stream of ongoing capital investments and expense payments for a predictable stream of monthly expenses.

Self-service IVR as a ServiceOpportunity size in 2014: $1.4 billion USDCompound annual growth rate: 23%Interest in purchasing CaaS: 57%

Using a secure multi-tenancy IVR platform, a service provider can enable its customers’ customers to perform transactions such as information requests, account updates, or purchases via telephone. This enables SMBs to extend business hours, handle more transactions, and in general compete against larger enterprises that have more resources. Self-service IVR as a service can help SMBs gain the benefits of self-service IVR while paying for just enough service to handle small or fluctuating call volumes.

Use case: A 21-person department within a small city government handles citizens’ calls on a wide range of issues—with a shrinking budget. Many issues can be handled satisfactorily without direct contact with a staff member, so self-service IVR is a good option. Managing an IVR system in-house is out of the question for budget reasons, but self-service IVR as a service is definitely viable. Without going to the budget committee for approval of capital expenses, the department can acquire a service that releases highly paid employees from phone duty and makes it possible to quickly and easily update scripts to adjust for changing conditions like road and school closures. And the operating costs are matched to actual call volumes.

Figure 1: Cost savings, technical agility, and flexible consumption rank high as potential reasons for SMBs to adopt solutions in an as-a-service model

Base: Decision-makers in the Americas, Asia, and EMEA

Source: Forrester Consulting, custom survey for HP CaaS

IP contact center as a Service

Self-service IVR as a Service

Unified communications as a Service

Video surveillance as a Service

We believe it will save us money 55% 55% 52% 47%

We want the ability to keep up with technology changes more quickly

44% 44% 43% 45%

We want the ability to change the amount of service we use to closely match our level of business activity

36% 36% 30% 32%

We want to free up our IT staff for more strategic issues

19% 22% 27% 20%

We want to move this technology from our current configuration and like the reduced CAPEX

12% 15% 17% 22%

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The HP Communications as a Service program: A single, convenient platform, proven solutions, and an established processAs shown in Figure 2, HP Communications & Media Solutions (CMS) offers a set of HP and partner solutions for service providers. As a center piece of this program, we can deliver an aggregation platform and a suite of HP and partner solutions that enable service providers to offer the CaaS solutions SMBs want, reliably and cost-effectively.

The HP Aggregation Platform for SaaS also provides a means for service providers to extend their offerings to provide infrastructure as a service, IT management as a service, business applications as a services and custom offerings.

HP Aggregation Platform for SaaS, a key component of HP CaaS, is based on a proven methodology for enabling and delivering IT and communications SaaS services with four key phases: service ingestion, product offering, product consumption, and operations and business support. (See Figure 3.)

Unified Communications as a ServiceOpportunity size in 2014: $2.1 billion USDCompound annual growth rate: 27%Interest in purchasing CaaS: 48%

Unified communications is a relatively new offering that can help businesses save money and operate more efficiently. It enables workers to see their colleagues’ status and allows them to see and select the communications paths available for contacting them. It lets users move seamlessly between communications modes and channels, allows them to create contact lists, gives them a combined interface for voice, instant messaging, and video calls via PC or phone, and enables administrators to track the use of tools and media. Unified Communications as a Service promises to be the easiest way for SMBs with limited technical capabilities to gain the advantages.

Use case: A 250-person construction firm with dozens of projects in various stages of completion is finding the process it uses to enable new work sites inefficient and costly. The new sites need the ability to communicate in real time to coordinate material deliveries, change orders, manage work-crew availability, and schedule work inspections. Unified Communications as a Service can reduce the management headache by providing a scalable and efficient way—with a mobile interface—for all sites to exchange calls, email, and instant messages. It can also enable the company to match expenses with business needs.

Video Surveillance as a ServiceOpportunity size in 2014: $1.2 billion USDCompound annual growth rate: 47%Interest in purchasing CaaS: 41%

Many SMBs have security and business requirements that can be met by video surveillance. Uses include monitoring customers at the register, observing their movement and interaction with displays and merchandise in retail space, and monitoring employee behavior to enable customer satisfaction. In Video Surveillance as a Service, a defined set of cameras and a user interface are on the customer’s premises, but camera management and alerting capabilities are managed by the service provider for better reliability and availability than a solution managed completely in-house can supply.

Use case: A small utility company generates hydroelectric power from a series of “micro-dams” and distributes it to local homes and businesses. For years, the company has protected the dams and other facilities by employing security guards. The company is aware that this security approach is both ineffective and expensive, and decides to deploy cameras—supplemented by a staff of two to respond to events—to monitor power lines, dams, and buildings. But the cost has to be lower than the cost of the current staff and the vehicles they use, so the company turns to Video Surveillance as a Service to deploy video surveillance without capital outlay, improve the effectiveness of security, and lower monthly personnel costs.

Figure 2: HP CaaS program

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Future evolution

HP Aggregation Platform for SaaS

Service Delivery Platform

Other SaaS offerings(SPs, HP, Third Party)

Get connectedwww.hp.com/go/getconnected

Get the insider view on tech trends, alerts and HP solutions for better business outcomes

Technology for better business outcomes

To learn more, visit www.hp.com/CMS©Copyright2009Hewlett-PackardDevelopmentCompany,L.P.Theinformationcontainedhereinissubjecttochange without notice. The only warranties for HP products and services are set forth in the express warranty statementsaccompanyingsuchproductsandservices.Nothinghereinshouldbeconstruedasconstitutinganadditional warranty. HP shall not be liable for technical or editorial errors or omissions contained herein.

4AA3-0064ENW,November2009

Service ingestion: The first phase is to select services and integrate them into the HP Aggregation Platform for SaaS. This enables service provisioning, billing, management, and identity management within the service provider’s environment.

Product offering: Using an efficient web interface, marketing and product management organizations can create products and bundles from services registered in the HP Aggregation Platform for SaaS. They can define service plans and pricing models, and display product marketing information on their SaaS marketplace portal, where SMB customers can discover SaaS products and bundles, run trials, subscribe to services, and consume them. End-to-end product testing occurs at this phase, to make sure that ordering, delivery, billing, and service management function properly. And once a product is certified, marketing can approve it for placement on the marketplace portal. Because new products can be published without developing software, new services can be delivered more quickly.

Product consumption: Customers can browse the SaaS marketplace portal to explore service provider offerings. If products are of interest, customers can

conduct trials previously defined by the service provider and then subscribe to services. SMB customers can use the customer portal to manage their employees and subscriptions, generate reports, and access subscribed services seamlessly.

Operations and business support systems: The SaaS aggregation platform interfaces with all necessary operator OSS/BSS systems for SaaS service management, including fault and performance management, and business reporting. Charging events are sent to the existing billing mediation layer for customers.

Based on proven software products, documented service methodologies, and architectural frameworks, HP CMS has focused investment and expertise in solution domains to help customers address specific imperatives—including the emergence of cloud computing technologies and the inherent revenue opportunities enabled by the emerging infrastructure.

The SaaS services can be deployed in a service provider’s data center and integrated with third-party services to further enhance the potential of CaaS offerings and provide flexibility and customization to service providers.

With years of expertise in both technology and telecommunications, a highly reliable, scalable CaaS platform, and a major business unit—Communications & Media Solutions—that exclusively serves the service provider market, HP is a world-class partner for service providers moving into the CaaS for SMB market. We understand the need to be both a low-cost provider and a high-value seller, and we can act as a trusted provider as well as a vendor.

For more informationTo learn how you can tap new sources of revenue by offering services on demand to SMB customers, contact your HP representative or HP Partner today, or learn more about HP Communications as a Service at: www.hp.com/go/CaaS

Telco-enabled SaaS

Service introduction

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Definition ofproduct offers

to be proposedto customers

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a web portal

SaaS service management and integration services

Operations, billing, settlement functions

Service ingestion

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Productoffering

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Figure 3: The HP Aggregation Platform for SaaS is an integral part of the HP CaaS program.