It’s been a long time since I contributed to our blog, and I’ve made a New Year’s resolution to write more of these in 2016. I thought I would kick things off with some thoughts on how the UC space is changing and evolving, and some predictions for the year. Rather than just bulleting out a top ten list, I wanted to spend some time thinking about the underlying market forces at work. I think most people would agree that there is a disruption and a lot of change going on within the UC market. The disruption is disproportionately the result of 2 underlying forces.
Hardware -> Software
Marc Andreessen once famously stated that “software is eating the world.” What he meant by that was that the combination of commodity hardware and the internet is now sufficiently advanced and cheap enough to allow software to upend traditional non-software business models. He gave as examples Amazon (vs Borders), and Netflix (vs Blockbuster), and was bullish about the long-term prospects of software companies to continue to disrupt established markets.
I agree with Andreessen and can see these same trends playing out in the UC space. Here, the traditional players such as Cisco and Avaya are in many ways hardware-centric companies that are in the process of being disrupted by software. UC endpoints are migrating from proprietary hardware-based phones and video room systems to software running on commodity desktop or mobile hardware platforms. But just as importantly, backend platforms providing features are moving from proprietary hardware (often on-premise) to software running on commodity data center infrastructure (cloud model or UCaaS).
Why are these things happening? The shift from hardware to software has two important drivers.
The first is cost. It is simply cheaper to create a software-based solution that runs on commodity hardware vs. a hardware-centric approach. The old reason for choosing a hardware approach was performance. But as commodity hardware platforms become ever more powerful (exponential performance improvements over time due to Moore’s Law), performance is less and less of an issue. The unit economics of a software-based approach are similarly much better than a hardware approach.
The second driver is speed. It is much faster to update, iterate and evolve a platform when it is software based, and particularly when it is cloud based, as vendors then have full control over the feature deployment environment vs. on-prem scenarios where upgrades are very time and labor intensive. A company that has a significant cost and speed advantage will be able to try more things, to do more things, to evolve to changing market conditions and end user needs faster, to create much better products, and return more money to its investors in the long run.
The force pushing everything towards software is only half the story. Over the last 10 years there has been a huge shift from IT departments to end users. Consumer tech has largely led the way with the rise of the Apple and Google mobile platforms being prime examples along with the BYOD trend of those devices into the enterprise. IT resisted in the beginning thinking that they had their Blackberry solution in place since it was more secure and enterprise oriented than those consumer platforms. We all know how that conversation ended.
But it is worth asking why this happened? What is it that Apple and Google got right that helped them win so decisively? The answer is the user experience (UX). Companies like Apple and Google made a science out of making a truly engaging and delightful user experiences. They are much more sophisticated on this point than most enterprise-oriented companies. And it was by getting end users to love their software, that they were able to grassroots penetrate the enterprise.
The story I like to tell on this point comes from my previous company BladeLogic, an enterprise software company. Do you know how much time we allocated for the UX of our products? Well it wasn’t zero, but if I’m being honest, it wasn’t a lot. Almost all of the discussion centered around features and feature lists. Which features were going to make or not make a release. The consumer world is very different where some significant portion of the available engineering time is spent on design and UX. Sometimes features are even removed if that helps make the UX better.
As this consumerization of the enterprise continues, consumer tech will continue to push into the enterprise UC space. Building upon mobile and great UX, end users familiar with consumer technologies are changing the way enterprises communicate. Traditional enterprise communications has largely been about voice and email. But video and rich messaging are becoming increasingly important with users familiar with using things like FaceTime and iMessage in their personal lives. These users want these same capabilities in the enterprise.
So what do these market forces say about the future of the UC space?
I think we will continue to see endpoint shifts from physical phones and proprietary room systems to software on iOS/Android, software on Windows/Macintosh. Even for room systems.
We will continue to see shifts away from proprietary hardware in the data center to software-based approaches. AWS and other IaaS will continue to drive the cost to deliver UCaaS downwards.
There will be continued movement from on-premise UC solutions to the cloud.
UCaaS providers that don’t control their own software platforms will find it increasingly difficult to compete against software oriented vendors that do.
UC vendors that reach beyond the more traditional voice and contact center areas to video and messaging will be well aligned with end user expectations coming from the consumer world and will see traction. Vendors that can deliver this broad feature set with a best-in-class consumer grade UX will likely be winners.
UC vendors that stick with hardware-based approaches, that stay voice centric, and that do not make UX a first priority will lose traction and will continue to face substantial downward price pressure as those features are increasingly commoditized.