Consolidation within the Vendor and Service Provider landscape set to be key themes in 2018

The Cloud Communications market is in a state of rapid growth towards reaching maturity, with established European markets adding significant numbers of users over the past year. Cavell have seen the widespread adoption of Cloud services across all areas of business, a “cloud-first” mentality which benefits Cloud Communications providers and is ensuring significant market growth across Europe.

As our latest European reports show, no two markets are the same and the varying market dynamics of each country means that they remain at different stages of growth. While it has been clear for a number of years that the UK and Dutch markets have been strongest in Western Europe, Cavell are seeing strong indications that the French and German markets, although less mature, are set for significant periods of growth.

Although these markets all show indications of development, it is important to note that most countries still have large on-premise bases. Therefore, the opportunities for further cloud migration are huge, with Cavell forecasting that the Western European market will grow to over 25m users by 2022, a CAGR of 24.6%.

Cavell believe that there is a number of noteworthy events from 2017 which will have a profound impact on the Cloud Communications markets in 2018:

Supplier consolidation drives uncertainty in Service Providers

In the last year we have seen dramatic changes in the vendor landscape, mostly acquisitions and mergers, the impact of which have yet to be seen. These include:

Cavell covered the impact of the Cisco acquisition in our recent webinar and will be revisiting the topic in February once the deal has been completed. Of all acquisitions last year, this will have the largest impact on the market, creating a behemoth with over 30% platform market share in Europe and the USA – how this impacts Service Providers will be interesting to see.

With Avaya coming out of Chapter 11, and the increased market presence of Mitel, signals indicate that they both will increase emphasis on their cloud products instead of their traditional on-premise services. With their large midmarket reseller bases, it will be interesting to see whether this invigorates historically underdeveloped cloud penetration.

The final part of the supply market to watch will be the actions of Amazon, Microsoft and Google, who have all have placed increased emphasis on communications in recent product releases.

Competition with deep pockets and successful models arriving from overseas – the European market roll up begins

Cavell believes that this year will see the emergence of a number of larger multinational providers. We saw the first significant announcement as we entered the new year, with Blueface announcing it had merged with the large US player, Star2Star, to create BlueStar. Following the entrance of EvolveIP into the European market through their acquisition of Mtel, we also believe that there will be a number of acquisitions across Europe as both Service Providers and Private Equity firms look to create economies of scale as well as pan-European Service Providers.

Enterprises seek to improve value of their customer interactions as competition heats up

Cavell has worked with a number of Service Providers and vendors over the last year who have been looking at how to improve interactions between their enterprise clients and their end customers. As markets become increasingly competitive, enterprises are placing higher value on these interactions, wishing to understand, analyse and streamline the communications with their customers. This has occurred in two forms, through cloud contact centre services and solutions, or through decoupled contact centre features delivered to enterprises as point solutions. Cavell have also seen the rise of Service Providers offering analytics, reporting, advanced IVRs and other services aimed at educating enterprises on how they interact with their customers. Throughout 2018 and beyond, Cavell expects Service Providers to take an increased interest in AI, machine learning and omni-channel solutions, delivering both advanced enterprise communications and Contact Centre services.

These are becoming key differentiators to the basic Cloud Communications services and both Service Providers and enterprises are seeing the advantages of offering these types of products. Cavell believe that that these services will become increasingly prevalent in 2018, as will the number of providers offering them, in order to match demand from enterprises.

SD-WAN – A bitter pill or tonic for Service Providers?

SDN has been a topic of conversation for a number of years, but Cavell believes that SD-WAN will become an important part of Service Providers offering in 2018. We see SD-WAN impacting the market in a couple of ways:

  • SD-WAN deployed as a replacement for traditional MPLS Services
  • SD-WAN delivered as a cloud enablement service enabling high quality, new cloud services like cloud communications.

There also seems to be an opportunity for Service Providers to deliver new services and replace reduced MPLS revenues. We have already seen a number of US providers start to sell SD-WAN services, although many have yet to offer services in European – something Cavell expects to change in 2018.

Should Service Providers? Stick or Twist as Networks move to all IP

The move to all-IP networks across Europe has seen incumbents drive SIP Trunking and ISDN Networking end of life programmes forward. Each country has set their own targets for moving to an all-IP infrastructure and as such are at various stages of completion. However, this comes at a cost; the financial impact on the incumbents has been fairly severe as they experience a fall in traditional fixed line revenues, both to lower revenue services like SIP Trunks and competitors.

  • KPN fall of 18%
  • Swisscom fall of 11%
  • Proximus fall of 7.7%
  • EIR fall of 4%

Incumbents, who are starting to feel the pinch, are facing the conundrum of gaining market share of IP services, whilst at the same time protecting substantial traditional revenue streams.

What will Cavell be doing this year?

  • Cloud Communications and SIP Trunking market surveys

We will be surveying the UK Cloud Communications and SIP Trunking markets in January, with the reports due to be released in February. If you would like to take part in the survey or a face-to-face briefing please get in touch. Participation gets you a free pass to the Cloud Comms Summit and access to our webinar with the results of our survey.

We will also be covering Europe (10 countries) during the summer, providing individual research reports on those markets, as well as expanding our research into the North American Cloud Communications market.

Cavell have rebranded the European VoIP Summit as the ‘Cloud Comms Summit’, which will be running on 8th March in London. This is the largest Service Provider focused event in Europe, bringing the industry together for a day of panels and networking on the evolution of the Cloud Communications market. Tickets and sponsorship are still available!

Cavell is also running a reseller focused event on the Channel market in conjunction with Comms Business, to help resellers, VARs and partners to understand how the communications market is changing and how they need to adapt to survive in this market.

We will shortly be announcing dates for our mainland European event in Brussels later in the year.

  • Other Market Reports

Cavell has released reports on 10 Western European markets in 2017 and will be expanding our research coverage to the USA in 2018. We have also released reports on the following subject areas in the last month, which are also available for purchase in 2018:

  • Industry verticals – Key applications and solutions
  • Contact centre and the opportunities for Service Providers
  • CPaaS and the impact and opportunities for Service Providers

For more information, please contact Dominic Black at dominic.black@cavellgroup.com.