Hosted Services: December 2007 Archives
As we transition into the New
Year, it is interesting to read about all of the predictions related to
technology. As a consultant in the communications industry, it is vital that I
recognize the trends and events that will shape the industry and potentially affect my customers. Here are a few
of my thoughts on what we can expect in IP Communications during 2008.
TelePresence / Video
Conferencing
Expect to see a decrease in
the capital expense required to implement TelePresence systems. Operational
expenses will however, remain a significant factor in the TelePresence business
justification. For many organizations, the high cost of the high-bandwidth and
the predictable / low-delay characteristics of the network circuits required to
support TelePresence will continue to negate the business justification. A
service provider, focused on providing the appropriate network connectivity with
a pay-per-use / on-demand business model, could accelerate the adoption of TelePresence
in some smaller enterprise but I don't expect to see that in 2008.
Net Neutrality
Expect to see more
controversy related to Net Neutrality as service providers continue to test the
waters with respect to public opinion and the scrutiny of regulators. My
expectation is that Canadian providers are more likely to experiment with
various control mechanisms than their
Margin pressures, increased
competition and accelerating bandwidth demands by competing applications and services
will motivate providers to find ways of tipping the scales in their favour. It
will be interesting to see how it all plays out. Public opinion and potential
apathy are likely to be the most significant influencer's.
I expect many changes in the
mobility market in 2008. Canadian mobility rates have had a reputation for
being among the highest in the world and in the last several years, mobility
has been very profitable for Canadian service providers. The downward trend in
both service pricing and associated profits will accelerate in 2008. Contributors
to the trend include:
- Innovative and new devices
like the iPhone
- New spectrum allocation and
associated competitors both in the
- The trend towards openness
will result in the Incumbents' infrastructure being leveraged by competing
applications and services with no associated increased revenue
- Increased competition among
existing providers as they compete for a larger piece of the shrinking revenue
pie
- New competitors unencumbered
by existing technology and supporting systems or the need to defend existing
revenue models
Hosted Voice Services
- A general trend by
enterprise towards acceptance of outsourced and hosted services.
- General market acceptance
that IP Telephony is ready for prime time and that the transition from TDM to
IP-based communications in inevitable.
- Service providers will
consider the errors of previous service launches. Expect services that are
targeted at very specific verticals and horizontals.
- Service offerings, where
voice is simply one component of a rich service that will include
other services such as a-la-carte on-demand software products.
- Services that hold
the promise of reducing the complexity of Unified Communication services, and include integration services.
- Increased focused by Cisco
and Microsoft on the hosted space.
IP Trunking
By the end of 2008, everyone
in the industry will acknowledge the unstoppable trend towards IP Trunking and
away from analogue and ISDN circuits. As I mentioned in one of my previous
posts, there are huge advantages to IP Trunks relative to PRI. Expect new IP
Trunking services with aggressive marketing and national service delivery
capabilities.
Residential Voice Services
The Canadian Incumbents will
see continued erosion of their share of residential voice services. Led
primarily by the cable companies and to some extent other providers such as
Vonage, the impact to Bell and Telus' revenue streams is significant with the
loss of over 1,000,000 subscribers and growing. I doubt that anything will
emerge in 2008 to slow or reverse this trend. In my view, the Incumbents have
been slow in acknowledging the threat and have been conflicted in
how to address it effectively.
Vonage will likely
experience a significant reorganization, buyout or will simply go out of
business. I'm convinced that the standalone, best-effort voice delivery
business model is not sustainable. Couple that with the seemingly never-ending
lawsuits brought on mostly by their large competitors, and something has to
give! Vonage can probably be transformed by enhancing the existing voice
service with other innovative and complementary services. However, as it is, it
cannot survive.
Unified Communications
Expect continued hype and an intensification and a more public battle between Cisco and Microsoft. Business awareness of the benefits and strategic importance of UC will grow and we are likely to see some large organizations invest significantly.
In addition, we will see related acquisitions
and investments by service providers and system integrators as they ramp up
their capabilities to address the increased complexity of communication
services as they strive to move up the value chain. Credible and quantifiable
benefits necessary for a compelling business justification of the
required investment for UC will continue to be a challenge.
Commoditization
and reduced margins will continue to challenge the operations of IP Telephony
product resellers and implementers. Those who don't make the complex transition
up the value chain and acquire the skills necessary to assist their customers with integrating UC into
their operations, business processes and applications will be relegated to the
very thin margins of the UC plumbing.
Rick McCharles
IP Communications and Telecom Consultant
Toronto, Ontario, Canada
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