European unified communications-as-a-service trying to hold off US aggressors

Small UCaaS operators are being threatened by larger US telcos

The gradual retirement of integrated services digital network (ISDN) services by European telecom carriers means that customers are increasingly turning to other solutions; however, growth can be curbed by customer inertia, and US providers are threatening established European vendors, says Frost & Sullivan.

Newly-released research shows that carriers and customers are migrating from ISDN services to alternatives such as IP connectivity. Next-generation business communication solutions, such as unified communications as a service (UCaaS), are also being adopted, and market growth is further being boosted by the availability of cloud communication offerings. Although they are aware of the benefits of UCaaS, however, customers are hesitant to transition due to ‘significant' investments in premises-based communications infrastructure. There is also a preference for premises-based solutions among some businesses.

US providers like Fuze, 8x8 and Microsoft are moving into European markets, and their presence is creating price pressures. European operators, traditionally operating in smaller markets than their US counterparts, cannot sufficiently scale their operations to compete on price or service bundle features.

Frost & Sullivan's Digital Transformation VP Elka Popova said, "To succeed and maintain high growth rates, European providers must seek to expand throughout Europe and internationally." Popova also recommended advances that hosted IP telephony providers could make, including optimisation of their sales, provisioning and customer engagement processes; enhancing onboarding, training and customer support; and expanding customer reach with new technologies and third party partnerships.

Working with third parties was identified as a key trend in the European IP telephony and UCaaS market by Frost & Sullivan. Service providers are using APIs to enable integration with popular third-party software, such as helpdesks, vertical apps and customer relationship management. These moves help to improve the ‘stickiness' of UCaaS.

Other trends include:

• The availability of feature-rich, inexpensive cloud collaboration solutions, bundling team messaging and real-time communications. ‘Freemium' models should be used to attract businesses that are not yet ready to move their entire UCC to the cloud, said Frost & Sullivan;
• Enterprise demand for bespoke solutions and communications integration with other business software to directly influence ‘key' business processes. In response, technology developers and service providers are providing flexible APIs, SDKs and communication platform as a service (CPaaS);
• Strong market penetration in the Nordics and Benelux regions; these areas have highly mobile workforces and a limited installed base of premises-based systems;
• High growth rates in CEE countries, due to relatively limited UCaaS penetration, combined with high demand for flexible and economical communications solutions;
• Mobile-first business solutions are finding appeal with SMBs throughout the region, and in specific regions such as the Nordics.

In 2016, the European hosted IP telephony market grew 25 per cent YoY, and revenue was up 21 per cent. Frost & Sullivan predicts a CAGR of 23.1 per cent in terms of users and 17.4 per cent in terms of revenue between 2016 and 2023. Growth will be limited by the effects of the Brexit vote; the refugee crisis; and other socio-political events creating uncertainty in the market.