On premise deployments accounts for the majority of UC revenues, but hosted and cloud based UC solutions more prevalent in future
New Zealand's Unified Communications (UC) market is emerging from a cycle of weak investments which impacted the market over the last few years. Cautious spending from both government agencies and businesses delayed IT investments and reduced the number of large scale deployments, as most organisations opted to extend the life of their existing investments. The market recovered from a period of decline to exhibit fractional growth in 2013, though growth rates will continue to be low and opportunities harder to convert for vendors.
Frost & Sullivan's new report, New Zealand Unified Communications (UC) Market Report 2014 finds that growth rates picked up in 2014, and is expected to improve to over 3% in 2015 and 2016. Instant Messaging (IM)/presence and mobility were the highest growing segments, followed by enterprise telephony. Overall, the UC market is forecast to grow at a Compound Annual Growth Rate (CAGR) of 2.6% from 2013 to 2020.
"On-premise deployments will continue to account for the majority of UC revenues in the next five years, although growth rates in the on-premise segment will be much lower compared to the hosted and cloud-based segment," said Audrey William, Head of Research, Frost & Sullivan Australia & New Zealand. On-premise solutions are particularly strong in verticals where there is a greater need for control over the infrastructure, such as government and Banking, Financial Services and Insurance (BFSI) and have sunk significant amounts into their UC infrastructures and would not find it cost effective to switch to a hosted model.
The UC market in New Zealand continues to be a two-tiered market, with the top three vendors - Microsoft, Cisco and Avaya accounting for over 50% of market share, and a large number of vendors competing for the remaining market. Spark Digital, Dimension Data and Vodafone NZ are the three major channel partners and account for the majority of large deployments in the market. Spark Digital holds a dominant share, advantaged by having telco and systems integration capabilities and will remain a major player in the on-premise and hosted UC market.
New players entering the market will pose greater competitive threat to the established vendors over the next few years. Mitel, ShoreTel and interactive Intelligence are steadily increasing their footprint; securing customers in the small and mid-market segments and building local market partnerships to grow their footprint.
"In recent years, the UC market has undergone a number of major shifts, such as the move towards integrated applications, video based collaboration, collaboration centric UC and more recently, cloud and mobility based solutions. However, the combination of mobile devices and cloud-based delivery models is having the most significant effect on shaping the future of UC solutions. The growing use of mobile devices within organisations is changing the way that employees collaborate and use applications. This has given rise to concepts such as Bring Your Own Device (BYOD) and Activity Based Working (ABW), where mobile devices play a central role," said William.
"As the market shifts towards hosted and cloud-based solutions, traditional vendors will face competition from a new breed of cloud-based players. Google, Vidyo, Acano, LiveOps and Blue Jeans are already experiencing demand for their solutions, and are displacing traditional vendor solutions in many global markets. Over the next few years, these vendors will look to enter, and grow their presence in the New Zealand market through industry partnerships," added William.
UC's evolution lies in making applications accessible over the web, or through a mobile device app and demand for this presents a huge opportunity for UC vendors to capitalise on. "App based access to UC becoming mainstream is the next realistic stage given the proliferation of mobile device usage in enterprises. Tailoring UC solutions and making them available as apps that can be downloaded from an app store, will significantly impact the way users communicate and collaborate," William continued.
WebRTC and app based UC are among the emerging technologies aimed at addressing this transformation. Although WebRTC is at a nascent stage of availability in the New Zealand market, it offers significant potential to change communication in the Business-2-Business (B2B) and Business-2-Consumer (B2C) environments.
The New Zealand UC client base is largely comprised of small and medium sized organisations, with only a small proportion of large enterprises. This market dynamic demands tailored go-to-market strategies from vendors and channel partners who must have a broad solutions portfolio that also caters to the small business segment. Players that have such a diverse base are beginning to experience steady revenue growth, and will be advantageously placed in the next few years. Responding to the competitive threat posed by new cloud-based players will be a key focus for established UC vendors, while channel partners will look to partner with these players to address the future demand for cloud-based UC solutions. In the next five to seven years, players with a clear roadmap and execution strategy. Low growth rates and limited opportunities will make for challenging market conditions and give rise to consolidations and acquisitions, reducing the number of major channel partners in the market.
