Cloud Based Communication Services

Hi Folks!

I've been doing a lot of thinking and speaking to people about what it will take to win, or rather, become a market leader in the cloud based communications market? Which enterprise unified communication vendors and service providers have made the market investments and moves towards delivering communications capabilities as a service? Which providers will be the winners? How will the business of the unified communication vendors change? In a series of articles I'm going to share my view and opinions on what’s happing in this space.

Even if it’s still early in its evolution, sourcing communication capabilities as a service as opposed to buying, integrating and managing premised based equipment is more viable than ever. It’s primarily the current economic climate and focus on cost control that has escalated the rate of adoption of cloud based communication solutions. The increased demands for OPEX based solutions certainly help generating a lot of interest. In addition, while the use of sophisticated communications and collaboration capabilities is often a strategic part of conducting business, it’s rarely a core competency. Result: vendors and service providers of varying types and sizes are hurrying to take advantage of this evolving market.

A historic inhibitor to adoption and growth of cloud based voice and unified communication services are that sceptics and “nay-sayers” have been making lots of noise. Concerns for data security, integrity and privacy have been the most common arguments. All I have to say here is; Come on, look at SaleForce.com. They have convinced hundreds of large global corporations to buy into their CRM solution, delivered as a service. What can be more sensitive than trusting a 3’rd party to control and manage all kinds of data records and correspondence with customers and partners? Yet, SalesForce.com has been very successful and today sports a market cap of more than $7b. I think we have crossed the chasm and corporate customers will now seriously consider cloud based unified communication services.

Even with some customer concerns lingering, as I see it, the biggest inhibitor to growth lies inheritably with the vendors and service providers themselves. In order to execute on the cloud opportunity, vendors and service providers will need to augment their business models and channel strategies. The fact is, the notion of cloud computing represent an open and democratic (so far…) infrastructure to build upon, or a clean canvas on which vendors and providers can paint their technology vision. Thus, the cloud has opened the floodgates for service innovation and market disruption. This disruption will quickly force vendors and service providers to seek new ways for aggregating, selling and delivering communications services.

Lemon-Operations, a services company focused on recruiting, developing and managing indirect sales channels for IT and communications vendors across Europe and United States, is doing a lot of work for vendors who want to win in the cloud. I think Lemon-Operations metaphor for what’s happing in the cloud space is quite astute: While service innovation is shaping the IT revolution below the Cloud, vendor Galaxies will fight it out above the Cloud.

The key to success will be for the vendor to establish themselves as a center-of-gravity, or a Galaxy, to which other technology partners and resellers are attracted. To continue with the metaphor, the intensity of a vendor galaxy’s gravity will depend on to which extent other technology partners, resellers and influencers can grow and prosper within that galaxy. As such, the vendors need to get on-top in the value chain by developing compelling value propositions that attract many other types of businesses and partners. Further more; this will require new partnerships and contractual arrangements with infrastructure partners, technology partners, resellers and influencers. Put simply, establishing market leadership in cloud based communications market will require an augmented business mode, a much different eco-system and much more diverse indirect sales channel.

What do you think? Which vendors and service providers are in a position to establish the greatest and most influential Galaxy?

IPExpo: A missed opportunity to make the case

Autumn greetings to you all! After a very busy start to the fall season, I’m back. The IPExpo 2009 event concluded in London last week, where the leading vendors of IP communications & collaboration, virtualization and cloud computing were demonstrating innovative solutions.

There was definitely a buzz around the infrastructure players promoting cloud computing and capability delivery as a service. My guess is… at this point there are enough major players investing in cloud and SaaS delivery to make this a realistic alternative to premised based software and equipment. Thus, I believe the infrastructure fans and customers were quite pleased with the show.

However, I’m not sure what the spectators of voice and Unified Communication (UC) solutions thought? I for one was quite disappointed with presentations and messaging around the UC vendor’s solutions. The majority of the communications vendors spent their energy explaining and “educating” the audience on what UC is, what the perimeters of UC are, plus highlighting the value of their product features. Except for Mitel, no other vendor tried to leverage the Cloud buzz in the hall or surf on the Cloud wave. It was almost as if the vendors felt they needed to defend their own existence while trying to claim as much of the UC “solution space” as possible… Very frustrating!

Did anyone try to make an operational case for:

• Improved reliability and scalability?
• Improve productivity yet reduce TCO?
• Utility pricing (pay for what you use and when you use it)?
• Minimize or eliminate capital expenditures?
• Open standards for interoperability?

No! In a world of increased pressure to reduce or eliminate capital expenditures, the UC vendors missed a golden opportunity to talk about operational differentiation, key partnerships for delivery options. To my knowledge, Mitel was the only vendor trying to differentiate themselves on anything other than product features. Who cares about product features such as 1-number dialing, unified messaging, fixed to mobile convergence, video and collaboration unless the overall solution delivers meaningful results to customer’s business.

It’s time for the marketing folks to step it up: this is just not good enough. It’s been more than a year since the credit crunch stalled or slowed down the markets, surely the vendors have noticed.

What say you?

Communication as a Service

Wow, thank you for all your feedback and email I received on my last post Is Google Voice a Game Changer? I do appreciate it. Here I want expand the discussion around delivering business communications as a Service, and ask what role the voice vendors will play.

Even if Google Voice is primarily consumer focused, it still has merit. What I believe Google has accomplished with its Google Voice launch (only available in the US so far) is to instill a bit of fear with carriers, network providers and even with voice equipment vendors. People go: Google did WHAT? You’re telling me that Google can liberate me from the stronghold of my service provider, circumventing roaming charges, one number, aggregated voicemail etc. Wow, that’s very cool... I want that.

It’s not that I think Google Voice represents technical innovation or feature superiority over what other service providers in the voice space can provide today. The issue is that these other providers don’t have the audience and mindshare to be fully heard yet. On the other hand, Google does have scale and mindshare with us, both as individuals and as consumers in order to bring this type of service model to forefront. Perhaps Google has illuminated what “some-what-more-intelligent” communications is to more people. If so, that is good.

But Google Voice is not business grade and is certainly not a full featured Unified Communication (UC) solution. But for a business who can’t afford an IT staff to manage a UC solution, the alternatives aren’t that obvious. Full featured UC solutions are still complicated to deploy, and the operational footprint is too large for the vast majority of small and medium businesses to seriously consider it. Various types of service providers (SIP, FMC, high-speed broadband) have recognized this and are working feverishly to put themselves in a position to deliver communications capabilities in the network, as a service. However, their biggest challenge is establishing the right sales channels.

What about the voice vendors…are they in a position to deliver UC as a service? No, not yet. Even if Cisco did acquire the voice conferencing service WebEx in 2007, it’s still just one slice of the UC spectrum. The fact is; the business model for most voice vendors is still based on selling hardware equipment and software licenses through an indirect sales channel. But in a world where software and services, embedded in the network is becoming more common, what role will they play?

Question: Which of the leading voice vendors (Cisco, Avaya, Siemens EC, Shoretel, Mitel etc.), do you think will be first in evolving their business model to include Communication as a Service, either as a complement or as an alternative to premise based equipment? Alternatively, who will be first to acquire or create a meaningful joint venture with a network/service provider or a Fixed-Mobile Convergence (FMC) provider? Such a move would open up many more sales channels and make UC more accessible for the small and medium businesses.

Let me know what you think.

Is Google Voice a Game Changer?

Google un-wrapped its anticipated GrandCentral voice project earlier this year under the name of Google Voice. Although Google Voice only available in test mode to users in United States for now, my guess is it will become the talk of the town going forward. What impact will Google Voice have on the voice communications market? Will it be a game changer… and for whom?

Key Google Voice features:

• Calls are routed to all my registered phones simultaneously. In other words, layered integration of mobile and fixed line phones
• Text messaging & conference calling feature.
• Inexpensive international calling
• All my voicemails are aggregated at Google Voice. Transcribed voicemails or voicemail notifications are emailed or sms’d to me.

However, it is the flexible service layer of Google Voice handling inbound and outbound calls that is the differentiator. With the ability to port existing mobile number to Google Voice, I can rid myself from long and expensive contractual commitments with other mobile carriers. By loading Google Voice apps onto a smart phone, my outbound calls can be routed through Google Voice with significant cost savings as a result.

I’m sure it will take some time for the market to learn and adopt Google’s new voice proposition, but if successful Google will likely change the game for service providers and mobile carriers.

Question: Does Google Voice give Google an entry point into business communication market? For example, could Google Voice serve as a cost effective mobile integration service to the SMB and enterprise market?

I’m interested in your opinion…

Do Unified Communications and VoIP Vendors Need New Channels?

After a couple of weeks of holiday and R&R it’s time to get going again. During my time off, in between dips in the ocean and naps in the shade I couldn’t help but ponder how the Unified Communications (UC) and VoIP market is changing. What’s happening? Where is the technology disruption heading? Is the channel capacity of the vendors wearing down? Who are the most suitable channel partners going forward?

One thing for sure, the indirect sales channel for Unified Communication (UC) and VoIP is a lot more diverse today than just 12-18 months ago. Today, Service Providers, IT consulting firms, System Integrators, technology VAR’s, vertical software & ISV’s, cloud/Saas providers etc. are all part of the collective sales channel for UC and VoIP. But, they are all selling and delivering customer value differently, aren’t they.

What the UC and VoIP vendors have been slow at recognizing is that the classic channels for “moving” product to the end customers are eroding or diverging. The vendor contest for market leadership will not be decided on technology alone but rather on who can develop the most comprehensive distribution paths for their solutions to the end customer. It’s all about reach, far and deep. Geographic coverage used to be the critical dimension for reach, but that is far from sufficient today. Delivery models, influence, capabilities and commitment are dimensions that also need to be considered. The vendors that can develop the most comprehensive and low resistant distribution paths to the end customers will benefit massively. You would think that UC and VoIP vendors already have a functioning model for selling through service providers, system integrators or vertical consulting firms. Not so, think again. There is still not enough focus or flexibility in most vendors operations and underlying infrastructure to accommodate different sales models and delivery models.

Heather Margolis at Channel Maven Consulting wrote a great article on the “New Breed of VAR” as an enabler of new routes to the customer. Ms. Margolis is spot on in her assessment. The technology disruption along with new delivery models (cloud or as managed service) and more sophisticated financing options have opened the market for a new breed of VARs that perhaps were not selling UC or VoIP before. However, recruiting this breed of VARs and enabling them to sell UC value in what ever way that suits them, with an attractive commercial proposition, is the responsibility of the vendor organization. This is an area where vendors are struggling. What new channels have Cisco, Microsoft, Avaya, Polycom, Shoretel or Siemens EC enabled today?

What do you think?

Driving Sales Performance Through the UC Channel

First, I want to give a shout-out to all of you who sent me such positive feedback on the whitepaper Unified Communications – Capturing the Growth Wave. I truly appreciate your comments and will refer to them in future posts.

I’d like to continue on the topic of improving channel sales performance. As an industry poised for significant growth, the Unified Communications (UC) market is getting quite crowded. More competing vendors are coming onto the UC stage bringing disruptive innovation and new business models, all claiming market leadership. As a result, the resellers of UC aka VAR’s will naturally align with vendors and delivery partners that can lead them to sustained sales success with the least amount of resistance and complications. Are the UC vendors prepared to deal with this?

Question: Are the manufacturing vendors in the Unified Communication (UC) market sufficiently tuned-in to have an affect the sales performance of their indirect sales channel?

My answer is: For the most part, no, not really. Of course the vendors should be in the driver seat when it comes to driving sales performance of their indirect sales channel. However, the economic downturn has accelerated the disruption and evolution of the UC market and the vendors haven’t kept up. Unfortunately some UC vendors have turned inward to sort out their own problems, while their VAR’s are at the epicenter of the economic downturn, experiencing severe problems with shrinking margins, poor cash-flow and limited access to new capital.

Assertion: Sales performance of a UC vendor’s indirect channel is the product of the VAR’s Capabilities and relative Loyalty to the vendor.

- Capability is defined here as the reseller’s knowledge and ability to sell, install and service UC solutions (directly or indirectly), with satisfied customers.

- Loyalty is defined here as a reseller’s enthusiasm and focus on the UC market and commitment to the technology set from the particular vendor.

Based on the assertion above, UC vendors need to find ways to have meaningful impact on their VAR’s capabilities and loyalty (the loyalty aspect will be discussed in a later blog post). However, with the sheer volume of VAR’s, many vendors are struggling to drive incremental, yet meaningful impact of the channel’s capabilities.

Invest in Sales Capabilities

Of course we need to recognize that much has changed since the start of the economic downturn. The business imperatives addressed by UC before the decline embarked on strategic aspects such as driving growth, innovation, speed and flexibility. Vendors pushing this agenda today will find themselves struggling. Our collective logic which justified the business value of UC just 12 months ago is now being heavily scrutinized. Today, the business imperatives and purchasing behavior have shifted to a more balanced and refined criteria, driven by operational economics, such as ROI and TCO. Having said that, it’s almost like some of the vendors haven’t noticed that the market has changed or are waiting for the market to come back to what it once was. We all know it will not. In fact I commented on some marketing messages pushed by leading UC vendors, in a previous post: Who is speaking the language of the customer?

Some VAR’s are struggling with the shift in purchasing behavior and have resorted to compete on price, stripping the solution of most value beyond the intrinsic product value. In order to maintain the focus on value and avoid technology commoditization, vendors need to ensure their sales channels are trained how to sell solutions that deliver measurable business results, not just how the technology works and is installed. The vendor’s success or failure depends on this. The name of the game: Consultative Solution Selling.

To have a chance at driving positive impact on the sales performance, vendors need to take ownership of the sales education beyond traditional product training:

• Consultative selling of UC solutions
• Analyze and calculate solution ROI and TCO
• Selling solutions through leasing or financing options
• Selling UC solutions as a service (Cloud or Saas)

I would also claim that the large volume of VAR’s typically have negative impact on the channel and thus on the sales performance. Since the majority of VAR’s in the channel typically only produce insignificant sales results, vendors should be bolder and drop or de-authorize VAR’s that don’t produce or only sell the vendor’s products when the customer demands it?

Interested in your comments….

Unified Communication: Capturing the Growth Wave

Summary

Leading research suggests that the Unified Communications (UC) market in Europe is primed for phenomenal growth over the next 4-5 years. Despite this, there is little evidence that the manufacturing vendors in the space are making the required investments in order to capitalize on the growth opportunity. Many of the vendors in the UC space are still too product centric and are suffering from a “box-pushing” legacy of how to do business that is hard to shake.

Recognizing that UC represents an expanded chapter of the convergence of voice, data and video, vendors need to develop sales channels with improved capabilities, new routes to market and simplified delivery models. Vendors should hit the reset button, and revaluate how they sell through indirect channels and how they manage, motivate and support its value added resellers.

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