Do You See What I See in UC?Do You See What I See in UC?

This article originally appeared in the November 2007 issue of Business Communications Review.

Some years ago, one of my college professors stated, “What one perceives as truth is more important than what is truth.” He said this because people tend to act on their perceptions.

Because perception drives action, Wainhouse Research wanted to find out how end users perceive issues and trends in the unified communications market. To this end, we launched an online survey in June 2007, the results of which are helping to shape our predictions about which products are likely to sell and which vendors are likely to see success.

We asked for survey responses from the nearly 12,000 people who download our weekly newsletter, as well as members of the BCR audience and readers of several communications and collaboration websites. We received 370 valid responses, of which 160 were verified end users. Among these end user respondents, 70 percent were from companies with more than 1,000 employees while 43 percent were from companies with more than 10,000 employees.

This article explores some of our findings from this survey and hypothesizes about their implications. We begin by looking at the importance respondents place on planning for UC, who they are most likely to buy UC products from and where they think UC will bring value to their organizations. Then we explore the linkage between IP-telephony and the UC capabilities that end user companies are actually buying.

Do You Have A UC Strategy?

We believe companies that weave unified communication into the fabric of their organization will derive the biggest benefit from their UC investment. To achieve this benefit, however, they will have to develop a concrete strategy for deploying UC and collaboration. One of our objectives was to find out whether, and to what extent, such planning and strategizing is underway.

As shown in Figure 1, our survey found that nearly 30 percent of end user respondents do have a UC and collaboration strategy, while slightly more (31 percent) consider UC and collaboration to be one of their top three initiatives. Our findings also cast doubt on the comments of large vendors, who regularly tell analysts that the Fortune 500 have already developed their unified communications strategy and that these companies already have decided which vendor’s products they will buy. We found that less than half of the end user respondents from companies with over 10,000 employees have a UC and collaboration strategy. Clearly, however, many of them are thinking seriously about it, and very few are rejecting the concept. In fact, only about 7 percent believe UC is not cost-justifiable.

Why do 93 percent believe UC is cost-justifiable, yet only 30 percent have a UC strategy? We think the explanation is simple: UC is still in the early adopter stage, and many companies are not sure which vendor’s pitch to believe and which platform to implement. They have begun to consider these vendors and platforms, however, as we shall see next.

Vendor Mindshare

To find out which unified communications vendors and solutions the end user respondents are considering, we listed several of them and, for each one, asked if the respondents’ organizations were 1) currently using the product, 2) considering the product, 3) not considering the product, 4) didn’t know their company’s plans for the product, or 5) had never heard of the product. The results are shown in Figure 2.

Perhaps the most striking aspect of this figure is the mindshare lead that Microsoft’s OCS 2007 and LCS 2005 have over all the other unified communications platforms. Over 45 percent of end user respondents indicated that their companies are either now using LCS or OCS or are considering one of them.

We expected Lotus to take either first or second place, on the strength of its installed base, but it came in third, behind Cisco’s Unified Personal Communicator (CUPC). Nearly 35 percent of end user respondents said their firms are either using CUPC or considering it, compared to 27 percent for Sametime and 24 percent for Lotus Notes. If we look only at the percentage that are considering a UC product, it is clear there is a two-way battle between CUPC at 26 percent and Microsoft OCS at 37 percent, while only 6 percent are considering IBM Lotus Sametime (and 51 percent are not considering it at all).

When Cisco saw these findings, it protested, claiming it is the true UC leader and asking how a company (Microsoft) that did not even have a shipping product (OCS) could claim UC mindshare leadership. We told Cisco that the users supplied the data in this survey. In addition, we pointed out that, while Cisco does indeed ship many, many IP-PBXs and IP phones, and has market leadership in the IP-telephony space; very few of these telephony systems are placed in what we would consider as presence-enabled, unified communications environments. We note that Cisco is actively seeking to change this, by modifying its licensing structure so that IM and presence come standard with an IP telephone.

Microsoft’s mindshare lead is stronger among respondents from smaller companies (less than 1,000 employees) than among those from larger companies (more than 1,000 employees). In smaller companies, 28.3 percent are considering Microsoft OCS compared to 12.8 percent considering CUPC and 6.4 percent considering Lotus Sametime. In larger companies, 36.3 percent are considering Microsoft OCS, 28.3 percent are considering CUPC; and 5.3 percent are considering Lotus Sametime.

Figure 2 presents a few other golden nuggets. For example, note that 10 percent of end users are considering Exchange whereas only 3 percent are considering Lotus Notes. The implication is that Notes, and consequently Sametime, may face net market erosion as more end users move to Microsoft solutions.

We also should mention that, according to IBM, approximately 50 percent of Sametime users are in organizations that have Exchange deployed. Clearly Sametime is at risk of being displaced by OCS for these users, because deploying OCS is relatively simple for Exchange users. IBM is responding by making Sametime compatible with Microsoft Office applications and thus more competitive with OCS/LCS for existing Office and Exchange users. In addition, IBM is significantly ratcheting up its own market awareness programs, some of which were clearly evident at VoiceCon Fall.

Figure 2 also suggests that several vendors— including Alcatel-Lucent, Nortel and Siemens—had better consider whether their products are viable, since nearly two thirds of the respondents either aren’t considering them or have never heard of them. All vendors need to make sure that their sales efforts are properly aligned with customer perceptions. It isn’t clear that this has happened yet, as we shall see next.

Who Would Benefit Most From UC?

Figure 3 shows that there is quite a difference of opinion between end user and vendor respondents when it comes to expectations about UC benefits. The vendors believe sales departments would benefit most, followed by executives and then marketing, while end users believe executives would benefit most from UC, followed by operations and project teams.

Given the fact that many (if not most) vendor sales and marketing people are not only in the business of selling UC and collaboration solutions, but they also are already receiving significant benefit from UC, it’s probably natural for them to assume that their potential customers’ sales and marketing people also would benefit. In contrast, the end users, most of whom are in IT operations, are naturally inclined to look for UC benefits for the groups that they perceive as driving their own business: executives, operations and R&D. Apparently, end users see much more value in unified communications for internally facing employees than for customer facing employees.

This is more often true in larger companies, where 50 percent of respondents expect UC to benefit operations, 40 percent expect it to benefit administration and 34 percent expect it to benefit HR. By contrast, among smaller companies the responses were 30 percent expecting a UC benefit for operations, 15 percent expecting it for admin and 11 percent expecting it for HR. In contrast, 40 percent of respondents from smaller companies believe their sales force will benefit from UC, while only 26 percent of respondents from larger companies think they will.

Perhaps larger companies see more benefit from embedding UC in internal process-related business functions than smaller companies, because the latter are less likely to be so process-intensive. Clearly, however, these data reinforce the growing industry sentiment that communications-enabled business processes (CEBP) are where the big financial and productivity gains from UC are likely to occur.

Whoever ends up with UC capabilities to do their work, it looks increasingly likely that they will be using these capabilities from a softphone rather than the traditional desk telephone.

Softphones, IM And IP-telephony

When we compared the results of this survey to our findings from 2006, we found a significant increase in the percentage of respondents who have purchased, along with their IP-telephony systems, some UC capabilities and UC-enabling add-ons that are often sold with them. Softphones purchases, for example, were included with IP-telephony system sales for 24 percent of respondents in 2006, versus a whopping 42 percent in 2007.

This big gain in softphone purchases bodes ill for telephony vendors who rely heavily on telephone handsets as a primary revenue source (which is most of them). It also makes products like Microsoft OCS, which now has softphone capability, and IBM Lotus Sametime, which is adding softphone capability, even more attractive.

If we are heading toward a future where UC client software running on a PC or laptop delivers the features and functions, either via a softphone or a simple desk phone, then this would tend to support Microsoft’s vision of the desk phone market, in which some of the phones are very simple, some have no dial pads, and others have only dial pads, but none have line appearances or feature/function buttons because all the control and the features will be done on the PC.

Other notable UC-related increases include purchases of audio bridging (up from 20 to 27 percent), and purchases of premises-based Web conferencing (up from 10 to nearly 24 percent). In contrast, speech access to voice mail and unified messaging systems as well as enterprise presence solutions are still ranked near the bottom of our list, as shown in Figure 4.

One reason we believe enterprise presence purchases are currently so low is that presence and IM are still free from the hosted providers (AOL, Microsoft and Yahoo), and they are widely deployed. However, we expect to see a shift from these public presence/IM providers to premises-based presence/IM solutions, as companies plan their UC strategy, and as they are forced to come into compliance with increasingly stringent record-keeping and privacy regulations.

Generally speaking, and consistent with other industry analysts, we find that IP-telephony is still sparsely deployed within the organizations that have implemented it. Not surprisingly, vendors seem to have deployed more widely within their organization than have the end users, as shown in Figure 5. It is a bit surprising, however, that more than half the vendor respondents (55.2 percent) said they had deployed IP-telephony on less than half of their desktops (19.7 + 22.7 + 12.8 = 55.2). This would imply that IP-telephony deployment is either difficult, expensive, or both, even for vendor companies, and that they, too, have a long period of transition ahead of them.

Smaller companies seem to be deploying IP- telephony more completely than larger ones, as shown in Figure 6. Among smaller companies, almost 30 percent said they had deployed to 90 percent or more of their users, while 35 percent of large organizations have IP-telephony deployed to less than 1 percent of theirs. This is not surprising, as small companies have fewer IT integration and silo issues to deal with.

We consider the slow deployment of IP-telephony by the larger companies a precursor to a similarly slow deployment of UC solutions in these companies. Given that many of them will keep their hybrid deployments (some TDM, some IP PBXs) for some time to come, we also expect UC solutions that make it easier to use an existing PBX with Microsoft’s OCS, such as the GETS middleware from Genesys Telecommunications Laboratories, could get some traction.

Conclusion

In this article, we have attempted to provide a glimpse of what end users are thinking about unified communications. The UC market is still nascent. A lot of hype exists regarding market size and who will compete against whom. At the end of the day, it is the users who will buy and implement UC based on their needs and their perceptions of the capabilities/offerings of each vendor

E. Brent Kelly, Ph.D., is senior analyst and partner with Wainhouse Research, specializing in all aspects of unified communications and collaboration. This article is based on data from a recent survey titled, Unified Communications, Videoconferencing and Collaboration.