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2010 European Hosted/Managed Unified Communications Services Forecast UC Market Strategies, Solution Offerings, and 5-Year Forecast Communications Product SKU: RE-UCSF10-EU Analysts: Brent Kelly (Lead), Marc Beattie [email protected] , [email protected]
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  • 2010 European Hosted/Managed Unified Communications Services Forecast UC Market Strategies, Solution Offerings, and 5-Year Forecast

    Communications Product

    SKU: RE-UCSF10-EUAnalysts: Brent Kelly (Lead), Marc Beattie

    [email protected], [email protected]

    mailto:[email protected]:[email protected]

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    © 2010 Wainhouse Research, LLC All Rights Reserved | http://www.wainhouse.com -2-

    SKU: RE-UCSF10-EU

    COPYRIGHT NOTICE Copyright ©2010 by Wainhouse Research, LLC. All rights, including that of translation into other languages are specifically reserved. No part of this publication may be reproduced in any form, stored in a retrieval system, or transmitted by any method or means, electrical, mechanical, photographic, or otherwise, without the express written permission of Wainhouse Research, 112 Sumner Road, Brookline, MA 02445 (Tel +1-781-934-6165; Fax:+1-781-559-0790) www.wainhouse.com. NOTE: The material presented in this report is based on both primary and secondary market data coupled with our professional interpretation of the facts. We believe that the basic information and recommendations presented in this study provide a basis for sound business decisions, but no warranty as to completeness or accuracy is implied. All market estimates and forecasts are those of the authors, except as noted. We welcome your comments on this report; send them to [email protected] or [email protected]

    TRADEMARK NOTICE Material in this document references numerous companies and their products and services. All trademarks, trade names, services marks and logos referenced herein belong to the respective companies.

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  • European Hosted/Managed Unified Communications Services Forecast

    © 2010 Wainhouse Research, LLC All Rights Reserved | http://www.wainhouse.com -3-

    SKU: RE-UCSF10-EU

    Table of Contents EXECUTIVE SUMMARY ................................................................................................................. 8 

    HIGHLIGHTS ............................................................................................................................... 8 HOSTED/MANAGED UNIFIED COLLABORATION IS EMERGING ........................................... 10 UC CAPABILITIES ARE TRANSITIONING TO THE CLOUD ..................................................... 13 

    The Enterprise Cloud ................................................................................................................. 13 The Hosted Cloud ...................................................................................................................... 14 Why the Move to Clouds is Significant ...................................................................................... 15 

    UNIFIED COLLABORATION OFFERING MODELS ................................................................... 16 Hosted ........................................................................................................................................ 16 Managed .................................................................................................................................... 17 

    Managed On-Premises .......................................................................................................... 17 Managed within the Service Provider Operations Center ...................................................... 18 

    Hybrid ......................................................................................................................................... 18 FORCES DRIVING END USERS TOWARD UC SERVICES ....................................................... 19 

    Total Cost of Ownership ............................................................................................................ 19 Business Continuity ................................................................................................................... 20 No Upfront Capital Expense ...................................................................................................... 20 Reduced Complexity .................................................................................................................. 20 Small Risk of Obsolescence ...................................................................................................... 21 Buy à la Carte Capabilities with Guaranteed Service Expansion .............................................. 21 Tighter Vendor Relationships ..................................................................................................... 22 

    KEY HOSTED/MANAGED UC MARKET TRENDS GLOBALLY AND IN EUROPE .................. 23 Global Market Trends ................................................................................................................ 23 European Trends ....................................................................................................................... 24 

    COMPARING PREMISES-BASED TO HOSTED UC COSTS ..................................................... 26 The Wainhouse Research Cost Model and Assumptions ......................................................... 26 

    Comparing Three Scenarios .................................................................................................. 26 The Assumptions .................................................................................................................... 26 

    Three Year TCO Comparison Tables and Graphs .................................................................... 29 Cost Comparison Analysis ......................................................................................................... 34 

    HOSTED/MANAGED OFFERINGS BY SPECIFIC COMPANIES ............................................... 35 An Explanation of the Solution Snapshot .................................................................................. 36 AT&T .......................................................................................................................................... 37 BroadSoft ................................................................................................................................... 42 BT Global Services .................................................................................................................... 49 Cisco Systems ........................................................................................................................... 54 Dimension Data ......................................................................................................................... 63 eircom Group plc ........................................................................................................................ 68 Elisa ........................................................................................................................................... 72 Google ........................................................................................................................................ 74 Hewlett-Packard ......................................................................................................................... 78 IBM ............................................................................................................................................. 86 InterCall ...................................................................................................................................... 94 Interoute ..................................................................................................................................... 98 KPN/Getronics ......................................................................................................................... 101 Microsoft ................................................................................................................................... 103 Orange Business Services ....................................................................................................... 111 Siemens Enterprise Communications ...................................................................................... 115 Skype ....................................................................................................................................... 122 Swisscom ................................................................................................................................. 132 TDC/NTC ................................................................................................................................. 134 

  • European Hosted/Managed Unified Communications Services Forecast

    © 2010 Wainhouse Research, LLC All Rights Reserved | http://www.wainhouse.com -4-

    SKU: RE-UCSF10-EUTelecom Italia ........................................................................................................................... 136 Teléfonica ................................................................................................................................. 138 Telenor ..................................................................................................................................... 142 TeliaSonera .............................................................................................................................. 145 T-Systems ................................................................................................................................ 147 Verizon Business ..................................................................................................................... 149 Vodafone .................................................................................................................................. 154 

    EUROPEAN HOSTED AND MANAGED UC SERVICES FORECAST ..................................... 159 Defining the Forecasted Unified Communications Segments ................................................. 161 Total European Hosted and Managed UC Market Forecast ................................................... 162 UC Services Revenue Breakdown by Country in 2014 ........................................................... 164 Hosted UC with Voice .............................................................................................................. 165 Managed UC with Voice .......................................................................................................... 165 Hosted UC without Voice ......................................................................................................... 167 Managed UC without Voice ..................................................................................................... 168 

  • European Hosted/Managed Unified Communications Services Forecast

    © 2010 Wainhouse Research, LLC All Rights Reserved | http://www.wainhouse.com -5-

    SKU: RE-UCSF10-EU

    List of Figures Figure 1.  End user responses to the question: “If you are currently using or planning to use UC

    solutions from a vendor are they/will they be on-premises (CPE), managed, hosted, or hybrid? ................................................................................................................... 11 

    Figure 2.  End user responses to the True/False question, “My organization intends to integrate our existing CSP Services with our UC solution?” ..................................................... 11 

    Figure 3.  Percentage of end user respondents purchasing UC elements from a hosted services provider. ..................................................................................................................... 12 

    Figure 4.  In the Enterprise Cloud all UC infrastructure is located in the corporate data center. 14 Figure 5.  The hosted cloud places the UC infrastructure in the service provider cloud............ 15 Figure 6.  The flexibility of using different delivery options for UC services. .............................. 16 Figure 7.  Cost comparison of premises-based UC solution to hosted UC solution. ................. 31 Figure 8.  Comparison of hosted solutions with average cost of a premises-based solution. ... 32 Figure 9.  AT&T’s break up in to regional Bell operating companies and their subsequent

    recombination. ............................................................................................................ 38 Figure 10.  AT&T’s UC client illustrating the tight integration with AT&T’s UC solution portfolio. 39 Figure 11.  BroadSoft’s BroadWorks integration with Microsoft HMC 4.5. .................................. 44 Figure 12.  The BroadWorks/HMC supports dual-forking and CSTA gateway options. .............. 45 Figure 13.  BroadWorks/HMC can be hosted by a single provider or by two providers. ............. 46 Figure 14.  BT’s three fundamental UC pillars: Collaboration, Service-Oriented Communications,

    and Corporate Voice and Video ................................................................................. 50 Figure 15.  The BT UC cloud order form – BT is working to make such a cloud-based service

    and its ease of ordering a reality ................................................................................ 52 Figure 16.  The Cisco WebEx Collaboration Cloud...................................................................... 56 Figure 17.  Cisco's vision of cloud adoption phases. ................................................................... 57 Figure 18.  The WebEx Connect desktop client interface. ........................................................... 58 Figure 19.  An example of a WebEx Connect workspace with IP audio and video. .................... 59 Figure 20.  WebEx Widgets allow easy customization of WebEx Connect functionality. ............ 60 Figure 21.  WebEx Connect federates with AOL, ICQ, Jabber, ACS, and Sametime. ................ 61 Figure 23.  Dimension Data’s services continuum. ...................................................................... 64 Figure 24.  Dimension Data’s identity- and presence-centric UC lifecycle. ................................. 65 Figure 22.  eircom’s path to a fully integrated UC environment begins at the network level and

    moves up the UC stack as technologies are added. (Source: eircom) ...................... 70 Figure 23.  eircom’s approach to unified communications is tied to business processes, using

    best-of-breed technology and trusted partners. (Source: eircom) ............................. 71 Figure 26.  The Google Voice browser-based interface. ............................................................. 76 Figure 27.  HP’s consultative approach involving business benefits, processes, people,

    measurement, and transformation. (Source: HP) ...................................................... 82 Figure 28.  HP’s unified communications and collaboration point product offering. (Source: HP)

    ................................................................................................................................... 83 Figure 29.  An HP unified communications and collaboration reference architecture for up to

    1,000 users. (Source: HP) ......................................................................................... 84 Figure 26.  IBM’s LotusLive social networking and unified collaboration services offering. ........ 87 Figure 27.  LotusLive integrates with customer premises solutions and with third party offerings.

    ................................................................................................................................... 88 Figure 28.  LotusLive Chat for IM/presence is the actually the Sametime Connect client. .......... 89 Figure 29.  The LotusLive dashboard where users may launch any LotusLive capability. .......... 90 Figure 30.  A Tag Cloud chart from LotusLive charts. ................................................................. 91 Figure 35.  InterCall’s UC Services Strategy. (Source: InterCall) ................................................ 96 Figure 31.  Siemens OpenScape V3 server platform and application suite. ............................ 116 Figure 32.  Siemens’ OpenScape UC application interface. ...................................................... 117 Figure 33.  Siemens OpenScape and the Amazon EC2 Cloud. ................................................. 119 

  • European Hosted/Managed Unified Communications Services Forecast

    © 2010 Wainhouse Research, LLC All Rights Reserved | http://www.wainhouse.com -6-

    SKU: RE-UCSF10-EUFigure 34.  Skype P2P network architecture. ............................................................................. 124 Figure 35.  Skype tool bars for Outlook and Office. ................................................................... 128 Figure 36.  Teléfonica’s Corporate IP FMC solution integrated with IM and presence from

    Microsoft OCS or Teléfonica’s own Communicator client. ....................................... 139 Figure 37.  The Teléfonica Communicator UC client interface. ................................................. 140 Figure 38.  A chart from the Accenture-Verizon Business alliance showing the process of how

    the two companies approach unified communications deployments. ...................... 151 Figure 39.  Vodafone’s global footprint with wholly-owned operating companies and

    partnerships.(Source: Vodafone) ............................................................................. 155 Figure 40.  Vodafone’s mobile network integration and enablement of Microsoft’s Enterprise

    Voice capability for BPOS customers ...................................................................... 156 Figure 41.  A presence-enabled SharePoint site with Vodafone’s voice integration ................. 157 Figure 42.  Total European Hosted and Managed UC Services Forecast, 2010–2014 ............. 163 Figure 43.  Total European UC Revenue by Segment Type ..................................................... 163 Figure 44.  UC Services Revenue by Country for 2014, Millions of US$ ................................... 164 Figure 45.  European Hosted UC with Voice Services Forecast, 2010–2014 ........................... 165 Figure 46.  European Managed UC with Voice Services Forecast, 2010–2014 ........................ 167 Figure 47.  European Hosted UC without Voice Services Forecast, 2010–2014 ...................... 168 Figure 48.  European Managed UC without Voice Services Forecast, 2010–2014 ................... 169 

  • European Hosted/Managed Unified Communications Services Forecast

    © 2010 Wainhouse Research, LLC All Rights Reserved | http://www.wainhouse.com -7-

    SKU: RE-UCSF10-EU

    List of Tables Table 1:  Hosted and Managed UC Services Providers Described in this Report. ..................... 9 Table 2.  TCO reduction arguments and the reality for hosted solutions. ................................ 19 Table 3.  Business continuity arguments and reality for hosted services. ................................ 20 Table 4.  Arguments and the reality for capital expenditures with hosted solution providers. .. 20 Table 5.  Arguments and the reality reduced solution complexity. ........................................... 21 Table 6.  The argument and the reality for reduced risk of obsolescence with a hosted provider.

    ................................................................................................................................... 21 Table 7.  Arguments and reality for buying à la carte UC capabilities with hosted or managed

    services. ..................................................................................................................... 22 Table 8.  Arguments and reality for creating tighter vendor relationships using hosted or

    managed services. ..................................................................................................... 22 Table 9.  Network usage and cost assumptions. ...................................................................... 27 Table 10.  IT personnel costs. ..................................................................................................... 27 Table 11.  PBX manufacturer enterprise voice solution cost per user. ....................................... 28 Table 12.  Microsoft OCS, Exchange, and SharePoint costs. .................................................... 28 Table 13.  Cost comparison of premises-based UC solution to hosted UC solution. ................. 30 Table 14.  Hosted and Managed UC Services Providers Described in this Report. ................... 35 Table 15.  UC capabilities description in the vendor Solution Snapshot. ................................... 36 Table 16.  Comparison of BroadWorks’ two integration options with OCS. ............................... 45 Table 17.  Geographical distribution of BroadSoft BroadWorks hosted VoIP licenses. ............. 47 Table 18.  BT’s flagship UC capabilities (not all-inclusive) ......................................................... 51 Table 19.  Joint UC&C initiatives HP and Microsoft will collaborate on. ..................................... 80 Table 20.  Pricing for Microsoft Online Services bundles and individual offerings. .................. 108 Table 21.  Skype for SIP versus Skype for Asterisk comparison. ............................................. 127 Table 22.  Total European Hosted and Managed UC Services Forecast, 2010–2014 ............. 162 Table 23.  European Hosted UC with Voice Services Forecast, 2010–2014 ........................... 165 Table 24.  European Managed UC with Voice Services Forecast, 2010–2014 ........................ 166 Table 25.  European Hosted UC without Voice Services Forecast, 2010–2014 ...................... 167 Table 26.  European Managed UC without Voice Services Forecast, 2010–2014 ................... 168 

  • © 2010 Wainhouse Research, LLC All Rights Reserved | http://www.wainhouse.com -8-

    European Hosted/Managed Unified Communications Services ForecastSKU: RE-UCSF10-EU

    Executive Summary Throughout the winter of 2010, Wainhouse Research (WR) conducted an independent assessment of the hosted and managed unified communications services market in Europe. This in-depth study is intended to provide a description of the current state of the European market, assess current trends, identify risks and opportunities, and provide assistance on market approach, services and prices. Current market data and analysis and forecast information is included in this report. Data from this report should assist clients in determining and establishing marketing strategies and product offerings, and in setting budgets and sales expectations. Report data consists of both quantitative and qualitative information, providing current and forecast data on the UC services revenues the European market. Each subscriber to this report is encouraged to contact the authors for a one-hour online briefing where specific information can be discussed according to client needs. Hosted/managed unified communications services are a nascent opportunity at the cusp of becoming a big business. We estimate the 2009 European market to be less than $150 million, but growth is clearly on the way. All of the vendors with established unified communications services offerings are reporting double-digit growth and significant interest in the markets they address. We project this sector to grow by leaps and bounds over the next 5 years, becoming a billion dollar business. Wainhouse Research has prepared this report to provide decision makers and technology strategy planners with an unambiguous resource that describes the unified communications services market and the forces driving large and small companies toward a hosted or managed UC solution. In a unique analysis, we rigorously compare the total cost of ownership of a hosted UC solution to a premises-based UC solution over a three-year operating period. We have prepared a solution overview for 23 UC services providers in Europe. For each offering, we describe the value proposition behind the vendor’s solution and show how the solution works; we also provide a solution snapshot describing solution components, indicate the geographical availability for each solution, and present our analysis and opinion. Offerings include those from network service providers, conferencing services providers, mobile network operators, and new hosted services offerings such as Microsoft’s BPOS service, IBM’s LotusLive, and Cisco WebEx Connect. We also describe emerging offerings from Skype and Google, two companies with significant hosted UC capabilities. We review hybrid offerings that include hosted PBXs from Cisco, Avaya, Siemens, Alcatel-Lucent and Aastra coupled with premises-based Microsoft’s Office Communications Server deployments.

    HIGHLIGHTS Between 2010 and 2014 the

    European hosted and managed unified communications services market is forecast grow with a CAGR of 77%.

    The forecast is divided into hosted UC services and managed UC services. For each segment, voice-enabled UC services and UC services without voice are forecast.

    The European hosted and managed UC services market will grow to over 10 million licenses by 2014.

    Network service providers who also offer UC services generally do not have bundled pricing, favoring à la carte

  • European Hosted/Managed Unified Communications Services Forecast

    © 2010 Wainhouse Research, LLC All Rights Reserved | http://www.wainhouse.com -9-

    SKU: RE-UCSF10-EUTable 1: Hosted and Managed UC Services Providers Described in this Report.

    AT&T Microsoft BroadSoft Orange Business Services BT Siemens Enterprise Communications Cisco Systems Skype Dimension Data Swisscom eircom TDC Elisa Telecom Italia Google Teléfonica Hewlett Packard Telenor IBM TeliaSonera InterCall T-Systems Interoute Verizon KPN/Getronics Vodafone

    171 pages, 48 figures, 26 tables

  • European Hosted/Managed Unified Communications Services Forecast

    © 2010 Wainhouse Research, LLC All Rights Reserved | http://www.wainhouse.com -10-

    SKU: RE-UCSF10-EU

    Hosted/Managed Unified Collaboration is Emerging Based on input and activity from end users, network service providers, and system integrators, Wainhouse Research (WR) believes we are earnestly beginning a 10 year transition in which disintegrated communication, messaging, and collaboration will migrate toward unified communications. The foundation for significant growth has been laid. That foundation is the global transition to IP communications, networks with significant bandwidth, quality of service and quality of experience management solutions, and the ability to provide industrial-grade security at the network level. The foundation also includes communication, messaging, and collaboration platforms and services that are compatible and which can be integrated together even though they may be from competing vendors. Finally - and perhaps most importantly – end users are now recognizing the value of integrated communication services - based on presence – and how these services can drive personal and organizational productivity and significantly cut costs. Senior management is aggressively seeking to realign internal IT resources toward areas where they can add value to the business process. CIO’s are seeking to eliminate commodity functions from IT and push them into the cloud. This combination of a secure network with plenty of bandwidth for voice and video, compatible building blocks for integrated services, and a ready market for cloud-based services is rocket fuel for the emergence of hosted and managed unified communications. Over the last few years, we have seen an increasing number of on-premises unified communications (UC) deployments – within large global 1,000 organizations as well as small-to-medium businesses. In the last year, we have seen tremendous interest and momentum toward managed services and in augmenting on-premises UC elements with those from hosted services providers (hybrid deployments). Beginning in 2010, and growing aggressively throughout the five-year forecast period, managed and hosted services will increasingly compete with premises-based solutions for the greater share of UC deployments. Although there are well-publicized stories of companies rolling out UC to their entire global organization, our research indicates that this is the exception rather than the rule and that any large deployment will take time. Panasonic’s global deployment of IBM’s LotusLive hosted collaboration solution will begin with less than 10,000 in the first year, with most of these being in North America. In Europe, Royal Dutch Shell is in the process of deploying a hybrid solution with on-premises telephony integrated with Microsoft Office Communications Server capabilities delivered by a hosted UC services provider. The combination of cost, complexity, and the back-to-basics focus demanded by the recent economic downturn provides a perfect storm for a new breed of unified communications solutions providers to emerge, which has the skills and geographic reach required to offer unified communications and collaboration solutions as a fully hosted or as a managed service. We are clearly not alone in our supposition that UC services are a huge opportunity. Our research indicates that nearly every network service provider in the world and all of the largest conferencing service providers (CSPs) either are now offering or are planning to offer hosted or managed unified communications solutions of one type or another. Many of these offerings take best of breed solutions from telephony and software vendors, add in the network, and provide a fully managed or hosted UC service that is flexible, customizable, and compelling for companies wishing to benefit from unified communications. Given the sheer number of new entrants combining to forge a new market, we anticipate that the nascent hosted/managed UC services market will grow dramatically over the next decade.

  • European Hosted/Managed Unified Communications Services Forecast

    © 2010 Wainhouse Research, LLC All Rights Reserved | http://www.wainhouse.com -11-

    SKU: RE-UCSF10-EUFigure 1. End user responses to the question: “If you are currently using or planning to use

    UC solutions from a vendor are they/will they be on-premises (CPE), managed, hosted, or hybrid?

    Nor are the service providers alone in their optimism regarding hosted and managed UC services. End user companies are also considering these solutions. In a recent survey of 40 multinational companies from North America and Europe with 1,000 or more employees, not one company indicated that it would deploy a UC solution entirely on-premises, while half of the responding companies indicated they would deploy a hybrid UC solution. A further boost for UC services providers comes from the same survey in which 68% of respondents indicated that they intend to integrate their existed conferencing services with their UC solution.

    Figure 2. End user responses to the True/False question, “My organization intends to integrate our existing CSP Services with our UC solution?”

    Undecided, 20% Managed,

    17%

    Hosted, 13%

    Hybrid, 50%

    Source: Wainhouse Research, March 2010

    44 Respondents30 greater than 10,000 employees10 greater than 1,000 employees

    Undecided, 32%

    Integrate CSP services with UC solution,

    68%

    Source: Wainhouse Research, March 2010

    44 Respondents30 greater than 10,000 employees10 greater than 1,000 employees

  • European Hosted/Managed Unified Communications Services Forecast

    © 2010 Wainhouse Research, LLC All Rights Reserved | http://www.wainhouse.com -12-

    SKU: RE-UCSF10-EUTo put these figures in better perspective and to match them with current trends in the hosted market, consider the data from a July 2009 survey in which companies were asked what they were currently buying from service providers. As shown in the figure, there is tremendous room for growth in hosted services, particularly in telephony, shared workspaces, messaging, presence/IM, and contact centers.

    Figure 3. Percentage of end user respondents purchasing UC elements from a hosted services provider.

    Given these opportunities, it should be no surprise that several vendor companies including Cisco, Microsoft, and IBM have recently entered the hosted services market providing precisely these kinds of services including messaging, shared workspaces, presence/IM, and in some instances telephony. Nor should it be surprising that most of the network service providers and CSPs are positioning themselves toward expanding their traditional conferencing services offerings to include unified communications. In the report that follows, we lay out the driving forces that detail why end user companies may be ready to consider UC services. We discuss the trends we see in the market by providing a global perspective along with emphasis on the European UC services market where distinctions are warranted. We describe the hosted/managed unified communications and collaboration offerings from 26 service providers who are currently conducting business in Europe. We conclude with our estimate of the current market size (2009) and provide a 5-year forecast for the growth of UC services in Europe.

    4%

    8%

    10%

    11%

    17%

    49%

    50%

    72%

    77%

    78%

    74%

    74%

    42%

    40%

    20%

    13%

    10%

    12%

    6%

    6%

    7%

    4%

    2%

    2%

    3%

    2%

    3%

    2%

    0% 20% 40% 60% 80% 100%

    Contact Center

    Presence/IM System

    Messaging

    Shared Workspace

    Telephony Service

    Audio Conferencing

    Web Conferencing

    Buy Hosted Do Not Buy Hosted Not Sure No ResponseSource: Wainhouse Research, March 2010 125 respondents, 90 with more than 1,000 people

  • © 2010 Wainhouse Research, LLC All Rights Reserved | http://www.wainhouse.com -42-

    Asia Pacific Hosted/Managed Unified Communications Services ForecastSKU: RE-UCSF10-AP

    BroadSoft Address: 220 Perry Parkway

    Gaithersburg, MD 20877 Corporate Structure: Privately Held Website: www.broadsoft.com

    Solution Snapshot Unified Offering Capabilities PC Presence Phone Presence

    Calendar Presence IM Integrated Voice Mobility Audio Conferencing Web Conferencing Video Conferencing Calendar Shared Workspace Unified Messaging

    Presence/IM Engine OCS 2007 R2 Voice BroadSoft BroadWorks Mobility Mobile MOC client Audio Conferencing BroadWorks Business Conferencing Web Conferencing Microsoft Live Meeting as part of OCS Video Conferencing OCS 2007 Desktop Video

    Microsoft RoundTable Tandberg Video Unit Integration Polycom Video Solutions Integration LifeSize Video Solutions Integration

    Messaging Platform BroadWorks Unified Messaging Exchange/Outlook

    Federation Via OCS to AOL, Yahoo, Windows Live, Sametime

    Shared Workspace SharePoint Service Options Hosted UC: Cloud-based exclusively

    “Hybrid” UC: Cloud-based BroadWorks integrated with Premises-based OCS

    Offer SIP Trunking Yes Offer Network Connectivity Yes Geographic Footprint Global

    Company Overview BroadSoft develops open architecture VoIP application software, which it sells to telecommunications service providers, allowing them to offer hosted telephony and multimedia services. The company is well known in the hosted communications space with nine of the top 10 and 15 of the top 25 network service providers worldwide offering BroadSoft-enabled hosted solutions. The company’s flagship product, BroadWorks, allows service providers to offer revenue-generating voice applications including residential broadband voice, hosted PBX, fixed-mobile convergence, business trunking, and hosted UC. The company also offers hosted contact center,

    http://www.broadsoft.com/

  • © 2010 Wainhouse Research, LLC All Rights Reserved | http://www.wainhouse.com -43-

    Asia Pacific Hosted/Managed Unified Communications Services ForecastSKU: RE-UCSF10-AP

    interactive voice response, automatic call distribution, and audio/web/video conferencing. BroadWorks provides voice capabilities to a host of third-party solutions through BroadSoft’s 200-plus technology partners. In 2008, BroadSoft purchased two of its biggest competitors, Sylantro and the GENBAND M6 product line, consolidating its position as the number one provider of hosted voice services worldwide. BroadSoft became cash flow positive in 2005, but has subsequently raised capital to advance its R&D efforts.

    Offering Overview BroadSoft has developed many of its own UC capabilities including a fully featured voice platform, a desktop client that supports presence and IM, audio conferencing, video conferencing, unified messaging, etc. It has also integrated the BroadWorks hosted voice platform with Tandberg, Polycom and LifeSize video endpoints and solutions, allowing its service provider customers to offer fully-managed/hosted HD and personal and group telepresence video solutions. BroadSoft believes it is strategic to integrate with UC offerings from multiple parties, so the company is working with Microsoft, IBM, Google Apps, and others. Although Microsoft is a key partner because it brings technology, brand awareness, and marketing strength, BroadSoft intends to have a variety of UC solutions that cover different types of markets, geographies, and operators. BroadSoft has integrated with Microsoft’s UC solutions since 2005 with Live Communications Server. In November 2008, BroadSoft announced that it had integrated the BroadWorks platform with Office Communications Server 2007 R2 to provide its service providers with the option to offer hosted BroadWorks voice integrated with a hosted OCS/Exchange/SharePoint deployment. BroadSoft also allows service providers to deliver UC solutions that are not “fully hosted” UC. For example, BroadWorks service providers that offer SIP Trunking can deliver SIP Trunks to premises-based OCS. In addition, BroadSoft’s service provider customers can integrate BroadWorks systems with premises-based OCS at the enterprise, resulting in UC delivered in a hybrid model. The BroadSoft hosted offering combines BroadSoft’s BroadWorks platform with Microsoft’s HMC platform. BroadWorks provides the hosted voice, audio conferencing, and the voice messaging. HMC provides OCS 2007 R2 (with Live Meeting), Exchange/Outlook, and SharePoint. Between these two offerings, a fully loaded hosted unified communications solution emerges using a standard BroadWorks deployment with a standard Microsoft HMC deployment. For BroadSoft service provider customers, the advantage of this offering is that by delivering UC as a service, they create a bundle that is much more compelling than simple outsourced voice or outsourced mailboxes. With a UC bundle, service providers can increase their average revenue per user, differentiate themselves from their competition, and reduce churn by offering a much “stickier” solution. In addition, because BroadSoft’s size and scope, service providers can offer economies of scale on the management of UC platforms, and they can offer network-based solutions (disaster recovery, mobile integration, multi-site/multi-national solutions) that enterprises typically struggle with when they try to self-manage.

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    Asia Pacific Hosted/Managed Unified Communications Services ForecastSKU: RE-UCSF10-AP

    BroadSoft offers two different ways end user customers can integrate with OCS. In the first method, BroadSoft can use Remote Call Control (RCC) to integrate with OCS. In this scenario, the glue between OCS and BroadWorks is a BroadWorks component that connects with Office Communications Server via a SIP to CSTA gateway. Thus, the Microsoft Office Communicator client is used for presence, IM, click-to-call, and mid-call controls, but it is not used as a voice endpoint. Microsoft’s Enterprise Voice capabilities are not used in this deployment, as it is BroadSoft that provides all voice and video functionality.

    Figure 11. BroadSoft’s BroadWorks integration with Microsoft HMC 4.5.

    + CSTA GW

    MicrosoftOffice

    Communications Server 2007

    Microsoft Exchange 2007

    Windows SharePoint

    Services

    Hosted PBX/ IP Centrex Customer SIP Trunking Customer

    SIP

    CSTA over SIP

    SIP XML

    SBCOffice

    LiveMeeting

    Standard HMC 4.5 deploymentStandard BroadWorksdeployment

    Standard BroadWorks deployment

    Standard HMC 4.5 deployment

    CSTA GW with SBC

    Uses Standard Product, Existing Interfaces, Existing Releases

    In the second method, BroadSoft has implemented Microsoft’s Dual-Forking mechanism. With dual-forking, calls can be routed to either the BroadSoft phone or to the Microsoft Office Communicator Client. In this scenario, users can have both the MOC client as an endpoint as well as a BroadWorks connected phone as an endpoint. Between OCS and the BroadWorks platform is a Microsoft Mediation server that translates between Microsoft’s proprietary Enterprise Voice protocols and standard voice algorithms most PBXs use, as illustrated below.

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    Asia Pacific Hosted/Managed Unified Communications Services ForecastSKU: RE-UCSF10-AP

    Figure 12. The BroadWorks/HMC supports dual-forking and CSTA gateway options.

    HMC

    Mediation Server

    IP Phones

    Communicator Clients Exchange UMSharePoint ServerActive Directory

    EnterpriseOCS

    Deployment

    CSTA Gateway

    HMC 4.5

    PSTNNetwork

    BroadSoft

    Which method to use, RCC or Dual-Forking, is a strategy decision the service provider will make, based on product management strategy, customer needs, and support models and strategy. However, we know that Microsoft is phasing out RCC: it will still be supported in the next release of its software, but after that, RCC will no longer be an option.

    Table 16. Comparison of BroadWorks’ two integration options with OCS.

    Option 1 Option 2Office Communicator as a Phone Assistant Office Communicator as a Phone Assistant and

    SoftphoneTelephony Control: Remote Call Control Telephony Control: Dual Forking

    BroadWorks Interface: CSTA BroadWorks Interface: SIP

    Phone control using the MOC client Make calls using MOC or the phone

    Either can be an endpoint

    MOC used as a softphone when out of office

    MOC is a helper, not a softphone OCS is configured as a BroadWorks shared callappearanceMOC-to-MOC calls are dual-forked to BroadWorksto keep call state aligned

    Source: Wainhouse Research, May 2009 BroadSoft’s service provider customers can deploy both BroadWorks and Microsoft HMC if the service provider is comfortable with both the VoIP world and with Microsoft’s data world (Exchange, Active Directory, location profiles, etc.). Alternatively, two service providers – one who is very good at providing hosted voice and another who is very good a providing hosted Exchange/SharePoint – can create a combined offering. In this scenario, the VoIP service

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    Asia Pacific Hosted/Managed Unified Communications Services ForecastSKU: RE-UCSF10-AP

    provider usually “owns” the customer and the IT hosted service provider white labels the HMC capabilities and hosts them behind the scenes. BroadSoft sees this solution more frequently in the Tier 2 service provider market because it lets both service providers get to market faster. In either scenario, the technology is the same – the difference is simply in where the physical server devices are located.

    Figure 13. BroadWorks/HMC can be hosted by a single provider or by two providers.

    The ultimate target of the BroadWorks/OCS Hosted UC solution is the small to medium business space, although some of the initial deployments have been positioned for enterprise customers. Large enterprise customers can also leverage BroadWorks/OCS SIP Trunking and “Hybrid UC” solutions. The company will position the offering with its service providers customers by

    1. Emphasizing productivity, simplicity, and mobility aspects, and

    2. Comparing the benefits of UC as a Service vs. CAPEX and management of Premises-Based UC Products, and

    3. Creating simple packaging, bundling application/productivity suites, and providing free trials.

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    Asia Pacific Hosted/Managed Unified Communications Services ForecastSKU: RE-UCSF10-AP

    Table 17. Geographical distribution of BroadSoft BroadWorks hosted VoIP licenses.

    Geography % of BroadWorks LicensesAmericas 48%

    EMEA 40%

    APAC 12%

    Source: BroadSoft, May 2009 BroadSoft sees three kinds of customers for its UC solutions:

    1. The Tier 1 network service providers who have the resources to host the entire solution.

    2. Tier 2 hosted VoIP providers that will partner with a hosting partner to provide the HMC elements of the solution,

    3. Hosted HMC providers that believe VoIP is critical to the success of their offering and who will choose to begin hosting BroadWorks themselves or partner with an existing BroadWorks provider.

    A typical service provider voice and network bundle ranges in cost from $30 - $50 per user per month. BroadSoft at one time believed that the addition of HMC capabilities would support an additional $20 - $35 per user per month; however, with Microsoft BPOS services at $10/user/month, we no longer believe the ARPU will increase so dramatically. Thus, for a fully loaded UC solution that includes network connectivity, the expected price will be between $40 and $70 per user per month, depending upon which service provider offers the solution.

    Analysis & Opinion BroadSoft has a significant advantage over most other UC providers entering the market, namely its 450 service provider customers worldwide. The company has informed us that it has over 70 of these customers actively looking at its Microsoft integration with the BroadWorks solution. These customers are agressively looking for ways to increase ARPU, and providing a valuable, robust UC solution may one way to do it. This solution is a low risk option for BroadSoft as all of the risk rests with the service provider partners – BroadSoft simply hopes that it will drive additional BroadWorks licenses. What is not clear is how long term the benefit of BroadSoft’s voice/Microsoft HMC solution will be. Given that several network service providers are connecting their networks directly to Microsoft’s data centers, it seems that the advantage of the Microsoft HMC capabilities BroadSoft adds will be minimized. Notwithstanding, an advantage BroadSoft has is the sheer number of service providers in local markets. What would really be a compelling solution would be for BroadSoft to partner with Microsoft so that the BroadSoft voice platform integrates with the BPOS hosted services platform; this would allow all of the BroadSoft customers to continue selling BroadSoft’s voice solution to their customers while at the same time reselling Microsoft’s hosted UC solution. There would be little risk to either BroadSoft or the service provider customer, and Microsoft would win as well. In 2009, we indicated that we expected competitive price pressure to hit the market in 2010. This has clearly happened with Microsoft lowering the price of its BPOS suite, and it will occur again if the rumors about Microsoft BPOS “Lite” are true. At that point, BroadSoft will need to better

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    Asia Pacific Hosted/Managed Unified Communications Services ForecastSKU: RE-UCSF10-AP

    articulate its value proposition with the BroadSoft/Microsoft HMC solution, because we believe this solution will be riskier to those service providers not already offering HMC – few will want to compete with Microsoft other than those established messaging providers with some experience and an established customer base. With respect to cost, BroadSoft is very forthcoming, but we believe the offering will be no longer be competitive at $55 - $85 per user per month and that it will need to decrease to a price between $3 and $15 plus the voice/network service depending upon on the HMC functionality offered. Furthermore, Furthermore, BroadSoft will have to compete with some of its partners, like Verizon Business, who offer a competitive service to integrate hosted PBXs with OCS. Notwithstanding these competitive pressures, WR believe BroadSoft offers a very compelling solution, particularly for the SMB market segment.

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    European Hosted/Managed Unified Communications Services ForecastSKU: RE-UCSF10-EU

    About Wainhouse Research Wainhouse Research (www.wainhouse.com) provides strategic guidance and insight on products and services for collaboration and conferencing applications within Unified Communications. Our global client base includes established and new technology suppliers and service providers, as well as enterprise users of voice, video, streaming, and web collaboration solutions. The company provides market research and consulting, produces conferences on technology trends and customer experiences, publishes a free weekly newsletter, and speaks at client and industry events.

    About the Research Team E. Brent Kelly is a Senior Analyst and Partner at Wainhouse Research and Co-Manager of the Unified Collaboration Practice. Brent focuses on all aspects of unified communications and its enabling infrastructure, and he has authored numerous reports and articles on unified communications including unified communications as a service, mobile unified communications solutions, detailed reviews of Microsoft’s UC strategy as embodied by Office Communications Server, IBM Lotus Sametime and IBM Lotus’ UC2 Strategy, and Telephony-Based Unified Communications. He has also written reports about migrating to IP communications, video network service providers, and the collaborative reseller channel. Dr. Kelly has authored articles for Business Communications Review Magazine, NoJitter.com, and he has taught workshops in North and South America, Europe, and Australia as well as at major industry events such as VoiceCon. With 22 years experience in developing and marketing highly technical products, Brent has served as an executive in a manufacturing firm where he developed and implemented a manufacturing, marketing, and channel strategy that helped land national accounts at major retailers. Previously, he was part of the team that built the devices Intel used to test their Pentium microprocessors. He has also led teams developing real-time data acquisition and control systems, and adaptive intelligent design systems for Schlumberger. Brent has worked for several other multinational companies including Conoco and Monsanto. Dr. Kelly has a Ph.D. in chemical engineering from Texas A&M and a B.S. in chemical engineering from Brigham Young University. He can be reached at [email protected] Marc F. Beattie is the Managing Partner and Co-Manager of the Unified Collaboration Practice at Wainhouse Research, LLC. Marc is a member of Gerson Lehrman Group's The Councils of Advisors and Vista Research's Society of Industry Leaders through which he advises worldwide financial clients on technology companies and trends. He has authored public and private reports on product strategies, distribution structures, emerging technologies and industry applications. Marc is the principle author of CSP SpotCheck, the three-volume CSP Market Forecast & Provider Review for North America, Europe, and Asia Pacific, the three-volume Addressable CSP Markets study for North America, Europe, and Asia Pacific, and the Emerging CSP Markets study. He is a featured speaker and moderator at industry conferences and private company events - specializing on the future impact of current technology developments. Marc is the conference director for WR’s CSP Summit, an annual one day event for CSPs and their partners. He regularly consults with end users, established vendors, emerging companies, and the financial community. Prior to joining Wainhouse Research Marc was an early member of PictureTel and Polycom - holding positions in product management, business development and sales management - and spent 13 years working within the industry. He has been an independent analyst and consultant since 1998. He can be reached at [email protected]

    http://www.wainhouse.com/mailto:[email protected]:[email protected]

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    European Hosted/Managed Unified Communications Services ForecastSKU: RE-UCSF10-EU

    Kristen Priest is a Research Assistant at Wainhouse Research, LLC. Kristen has been involved with numerous qualitative and quantitative projects and regularly communicates with collaborative services providers in Europe, North America, and Asia Pacific.

    COPYRIGHT NOTICETRADEMARK NOTICEExecutive SummaryHosted/Managed Unified Collaboration is EmergingUC Capabilities are Transitioning to the CloudThe Enterprise CloudThe Hosted CloudWhy the Move to Clouds is Significant

    Unified Collaboration Offering ModelsHostedManagedManaged On-PremisesManaged within the Service Provider Operations Center

    Hybrid

    Forces Driving End Users Toward UC ServicesTotal Cost of OwnershipBusiness ContinuityNo Upfront Capital ExpenseReduced ComplexitySmall Risk of ObsolescenceBuy à la Carte Capabilities with Guaranteed Service ExpansionTighter Vendor Relationships

    Key Hosted/Managed UC Market Trends Globally and in EuropeGlobal Market TrendsEuropean Trends

    Comparing Premises-Based to Hosted UC CostsThe Wainhouse Research Cost Model and AssumptionsComparing Three ScenariosThe AssumptionsNetwork CostsPersonnel CostsPremises-based PBX CostsBroadSoft CostsMicrosoft Software License and Maintenance Costs, Physical Server CostsPower and Space Cost

    Three Year TCO Comparison Tables and GraphsCost Comparison Analysis

    Hosted/Managed Offerings by Specific CompaniesAn Explanation of the Solution SnapshotAT&T

    Solution SnapshotCompany OverviewOffering OverviewBroadSoft

    Solution SnapshotCompany OverviewOffering OverviewAnalysis & OpinionBT Global Services

    Solution SnapshotCompany OverviewOffering OverviewAnalysis & OpinionCisco Systems

    Solution SnapshotCompany OverviewCisco’s Hosted UC StrategyCisco’s Cloud Computing Strategy

    Offering OverviewAnalysis & OpinionDimension Data

    Solution SnapshotCompany OverviewOffering OverviewAnalysis & Opinioneircom Group plc

    Solution SnapshotCompany OverviewOffering OverviewAnalysis & OpinionElisa

    Solution SnapshotCompany OverviewOffering OverviewAnalysis & OpinionGoogle

    Solution SnapshotCompany OverviewOffering OverviewGoogle Voice

    Analysis & OpinionHewlett-Packard

    Solution SnapshotCompany OverviewOffering OverviewAnalysis & OpinionIBM

    Solution SnapshotCompany OverviewOffering OverviewLotusLive Engage

    Analysis & OpinionInterCall

    Solution SnapshotCompany OverviewOffering OverviewAnalysis & OpinionInteroute

    Solution SnapshotCompany OverviewOffering OverviewAnalysis & OpinionKPN/Getronics

    Solution SnapshotCompany OverviewOffering OverviewAnalysis & OpinionMicrosoft

    Solution SnapshotCompany OverviewHosted UC StrategyMicrosoft Online Services

    Offering OverviewOffice Communications ServerHosted Messaging and Collaboration Microsoft Online ServicesService CostsHMCMicrosoft Online Services

    Analysis & OpinionOrange Business Services

    Solution SnapshotCompany OverviewOffering OverviewAnalysis & OpinionSiemens Enterprise Communications

    Solution SnapshotCompany OverviewOffering OverviewDedicated Server Hosting for the LMBHosted Business Communications Services (hBCS)Siemens and the Amazon EC2 Cloud

    Service CostsAnalysis & OpinionSkype

    Solution SnapshotCompany OverviewOffering OverviewHow Skype WorksAudio and Video CaveatsCalls with the PSTN: Personal Online Number and Skype OutSecuritySkype for BusinessSkype for SIPSkype for AsteriskThird-Party Skype IntegrationLotusLiveMicrosoft Office and Microsoft Outlook ToolbarsAdditional Integrations

    Route to MarketService CostsAnalysis & OpinionSwisscom

    Solution SnapshotCompany OverviewOffering OverviewAnalysis & OpinionTDC/NTC

    Solution SnapshotCompany OverviewOffering OverviewAnalysis & OpinionTelecom Italia

    Solution SnapshotCompany OverviewOffering OverviewAnalysis & OpinionTeléfonica

    Solution SnapshotCompany OverviewOffering OverviewAnalysis & OpinionTelenor

    Solution SnapshotCompany OverviewOffering OverviewAnalysis & OpinionTeliaSonera

    Solution SnapshotCompany OverviewOffering OverviewAnalysis & OpinionT-Systems

    Solution SnapshotCompany OverviewOffering OverviewAnalysis & OpinionVerizon Business

    Solution SnapshotCompany OverviewOffering OverviewAnalysis & OpinionVodafone

    Solution SnapshotCompany OverviewOffering OverviewAnalysis & OpinionEuropean Hosted and Managed UC Services ForecastDefining the Forecasted Unified Communications SegmentsTotal European Hosted and Managed UC Market ForecastUC Services Revenue Breakdown by Country in 2014Hosted UC with VoiceManaged UC with VoiceHosted UC without VoiceManaged UC without Voice

    About the Research Team

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