Unified Communications: The Differing Needs of Large Enterprises and SMEs

| Apr 7, 2008 | Advisory report

| Enterprise Communications | Business Telecom Services - Europe |

| Analysts: Rob Arnold, Dustin Kehoe

Issue

The term ‘unified communications’ (UC) means a lot of things to a lot of potential business customers depending on whether they look at deploying UC as a solution extending communications from the desktop (Microsoft and IBM), a solution that should integrate communications applications with business processes (e.g., SAP and Oracle) or an extension of IP telephony. While there are a lot of politics around which type of investment to make and the scale of deployment, there are distinctive trends emerging between large enterprises and SMEs. This advisory examines the differences emerging between large enterprises and SMEs and their views, dilemmas and challenges with regard to UC.

Current Analysis Perspective

Level of Awareness

According to EVUA, an independent, non-profit, global ICT network user group for multinational companies, large enterprises have a high level of awareness of unified communications. A 2007 EVUA survey, for example, found that nearly all enterprises had ambitious plans for significant UC deployments. Over 65% surveyed were deploying Web and collaborative applications, and 90% expected to have IM in place by the end of 2008. Similarly, 70% planned to have mobile PBX extensions in place by the end of 2008. Single-number calling for fixed and mobile and telephony presence scored high, with 60% and 70% of respondents planning to have such products deployed within the enterprise by the end of this year.

In contrast, SMEs across Europe are much more divided on the subject, which is somewhat expected from such a diverse customer base. While nearly 30% of SMEs are deploying UC in some form, another 30% have no plans at all (or have not even heard of the term UC before). They are often confused between unified messaging (UM) and UC and tend to take them to mean similar things. While SMEs have knowledge of the top vendors there is no consensus on which provider – from either the software or the CPE side – will get which pieces. The scale of deployment for SMEs also tends to be more limited and focused around how one particular element of UC (e.g., IM, presence) can be tied in with a process improvement.

Buying Decision

While large enterprises tend to see UC as a ‘strategic’ move towards developing new workflow patterns, improving business processes, increasing collaboration through virtual teams and reducing human latency times through applications such as IM and presence, SMEs are more tactical in their approach. SMEs tend to focus less on the long-term roadmap than they do on bottom line price and cost-savings. The SME approach to UC is driven by short-term gains in how they can improve a business process (e.g., be more responsive to customers). They are looking for less complex solutions that are ‘plug and play’ and easy to manage, and there is a much closer link between their business verticals and the types of point products they will deploy. For example, a medical or legal practice might be more interested in UM elements, while SMEs with large field forces may be more interested in presence, IM and tighter mobile integration.

Deployment Types

Most UC deployments within large enterprises (and even more within international companies) tend to focus around IP PBX investments. Whether the service is managed by a service provider or implemented in-house the choice of approach is heavily influenced by existing equipment. According to Synergy Research, the top five providers (i.e., Cisco, Alcatel-Lucent, Avaya, Siemens and Nortel) represent nearly 90% market share for IP PBX deployments in Western Europe. The firm also reports that Cisco is the leader in Western Europe with a nearly 70% share of the enterprise LAN infrastructure market. While there are philosophical differences in how UC should be deployed (e.g., from the desktop or integrated within business applications, etc.), most deployments are centred on the IP PBX equipment. This is still the predominant choice for large enterprises.

SMEs, however, tend to be very diverse in their deployments. A typical company could deploy voice over broadband (e.g., cable or DSL), managed/unmanaged IP PBX, hosted IP Centrex or SIP trunking. Calendaring and e-mail capabilities could be provided by Microsoft, IBM or others; IM and presence could be provided by free services such as Skype, Yahoo! or Google. Also appealing for smaller businesses is PC-based VoIP. While Microsoft has no plans to target SMEs in Europe for UC actively (at least for another year), Skype is making its software more enterprise-friendly and Google is laying the foundation for software as a service (SaaS). The SME market is very fragmented, but there is still ample opportunity for a market leader to emerge in this space.

Vendor Selection: Single Vendor or Best-of-Breed

Since large enterprises tend to have sizeable IT budgets, as well as ample internal resources and expertise around a number of areas, there is a tendency to go for a best-of-breed approach for unified communications. Rather than looking at one vendor as the panacea to their business challenges, they will attempt to deploy solutions from multiple vendors and trade off between managing them in-house or via a third party.

When the question arises whether to take a desktop software or hardware/PBX-centric approach to UC, the answer is often to choose both in order to meet a customer’s unique requirements. Some large enterprises, for example, are already on the path of supporting and integrating Cisco Unified Communications Manager and Microsoft OCS products. The enterprises’ provider preferences vary as well. In cases where the UC solution is heavily focused on the desktop or with integrating key features with business applications, the choice of provider tends to favour traditional systems integrators. However, when customers want to deploy UC services based on existing communications infrastructure, the choice of provider tends to favour telcos.

Since SMEs typically have much less in-house IT resources and expertise than do large enterprises, they tend to select a single vendor that can deliver a ‘plug and play’ UC solution. With comparatively limited time and money, they will need simpler solutions in order to get back to concentrating on their business – not the IT infrastructure. Many SMEs tend to prefer VARs and also make procurement decisions with local suppliers. While many of the UC offers will come from the large incumbent operators, mobile operators (especially those with few fixed assets) will begin targeting SMEs with their own UC products. Mobile operators may also be leveraging UC as a way to advance a mobile substitution strategy.

Unified Communications is Still in Infancy

While the differences between large enterprises and SMEs abound, the market for UC is at an early stage in Europe. Most companies – regardless of their size – do not have a coherent company-wide strategy for UC. While large organizations may be trialling UC services through a silo approach (within groups and departments), SMEs tend to focus on areas that can have an immediate benefit on their business (e.g., improving customer response times). The jury is also out on whether UC will or should be software-based driven from the desktop, or be a solution from the network. Regardless of the long-term views, it is clear that businesses, especially large enterprises, are taking a ‘wait and see’ approach to what Cisco and Microsoft do next. On the SME side, there is also a considerable threat emerging from over-the-top companies such as Google and Skype that are disrupting the UC market with price-competitive SaaS business models.

Table 1: Unified Communications Snapshot: Large Enterprises vs. SME

Recommended User Actions

• Enterprise customers are correct to take a ‘wait and see’ approach on UC. While there are many layers and complexities to UC, it is far from clear that the different equipment vendors and software providers are willing to work together. Large enterprises with significant IP PBX deployments should consider piloting UC along existing infrastructure investments.

• SMEs should continue to focus on UC point products that add immediate benefit or value to their businesses. It will be easier to shop for and prove the business case for UC products that solve a specific business need, such as increasing first call resolution in the contact centre, reducing latency in internal decision making processes, and improving reachability of mobile staff.

• Enterprises and SMEs should consider solutions from carriers that have a good mix of strategic partners from the hardware and software side, as well as mobile network operators that are looking to enter into the UC space. They should also keep an eye on providers such as Google.

• Large enterprises and SMEs should continue to pressure their existing suppliers for tighter mobile integration with UC services. Both groups appear to place a high value on this area, especially for increasing productivity, and large enterprises value controlling costs through better telecom expense and mobile device management solutions in the longer-term.

CLIENTS ONLY

Recommended Vendor Actions

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