Measuring the Unified Communications and Collaborative Applications Market  

When I founded Synergy, we started with one market research service. It was the late 90’s and it was a technology that was getting little respect from the established voice industry -Voice over IP (VoIP). When we began segmenting the market, many said it would be impossible to count this nascent market and they suggested we not waste our time trying to publish research on such a nebulous and overly ambitious technology. Although that was 10 years ago, in my mind it seems like yesterday. So when I heard the same reservations and objections voiced about our quest to quantify unified communication (UC), I was not surprised. After a rigorous 6-month process, I believe we have “cracked” the code and have developed a sound way to measure this emerging market.

The two biggest obstacles were defining what to count and how to count it. Given that Collaborative Applications are more commonly sold and deployed in a mixed-vendor environment than as a single-vendor solution, the overall task to come up with a comprehensive measurement that is realistic, accurate, and fair to each player has been, to say the least, challenging.

Looking at how applications are deployed as a single “unified” UC desktop or as a separate standalone network application was our first step. This led us to dividing the market into five separate segments: UC Desktop, Presence/IM Servers, Conferencing, Unified Messaging, and Other Emerging Applications (mobile, email 2.0, and others as they arrive).

All 5 pieces roll up into a single measurement of what we have defined as “Collaborative Applications.” From our preliminary work, we have identified the top 5 vendors for Collaborative Applications. The top 5 vendors, defined in terms of seat/line shipments in Q4 2008 are shown below in alphabetical order.

Top 5 Vendors for Collaborative Applications seat/line shipments- Q4 2008
1.    Alcatel-Lucent
2.    Avaya
3.    Cisco
4.    Microsoft 
5.    Siemens

A UC Desktop is what most people think of when UC is discussed - a collection of multiple applications such as IM, Presence, Video, Conferencing, etc. on a single desktop. For counting purposes, we strictly define a UC Desktop “seat” as a single desktop platform that integrates the PC and network resources for both PBX Call Control and Presence. 

Further, we break out the UC Desktop market into Enterprise and Small Medium Business (SMB). We make this cut, by separating the market into those systems that ship with over 150 lines (Enterprise) and those systems that ship with 150 lines or fewer (SMB). From our preliminary work, we have identified the top 5 vendors for Enterprise and SMB UC (shown in alphabetical order).

Top 5 Vendors for Enterprise UC Desktops seat/line shipments- Q4 2008
1.    Aastra
2.    Alcatel-Lucent
3.    Avaya
4.    Cisco 
5.    Siemens

Top 5 Vendors for SMB UC Desktops seat/line shipments- Q4 2008
1.    Alcatel-Lucent
2.    Avaya
3.    Cisco 
4.    ShoreTel
5.    Siemens


For Presence/IM Servers, it is not too difficult to call the top players - IBM and Microsoft. From the Synergy research, IBM and Microsoft enjoy an almost even split of the market opportunity. For revenue leadership, IBM was the number one player for Presence/IM Server shipments in Q4 2008.  IBM’s Sametime product has been shipping since 2000 and claims to have over 18 million subscribers.

In the coming months, we also will be publishing market share for the other Collaborative Applications market segments, such as Unified Messaging, Conferencing, and possibly other categories such as Email 2.0.

Typically, at this point after discussing our approach and definitions, we are barraged with many good questions. Let me share some of the common questions we have encountered thus far:

QUESTION-
If Cisco ships a Call Manager Express or a UC500 system with a third-party Presence server, how does Synergy count that shipment? Or if Avaya or Alcatel-Lucent ship systems without their own Presence/IM servers, how do you count them?

ANSWER-
That is correct; Cisco’s Call Manager Express & UC500 system  typically will be bundled with a Microsoft OCS or IBM Sametime server. However, when Cisco ships with a partner’s presence server with 1 CUWL license, we count that deployment as a Cisco UC Desktop seat. We give credit to Microsoft and/or IBM in the Presence market and the associated server revenue is attributed to Microsoft or IBM into the Collaborative Applications total.

Same would apply to Avaya and Alacatel-Lucent, as well as any other PBX vendor. If they ship a 3rd-party Presence server with 1 PBX line, the PBX vendor would get credit for 1 UC Desktop seat shipment. The 3rd-party server vendor would get credit for 1 seat of Presence server shipped.

QUESTION-
Isn’t Microsoft number one in UC applications? Don’t they also have call manager PBX and presence integrated with their OCS architecture? Do you count every OCS line as a UC seat shipment? And if they are one of the biggest vendors of Presence server deployments isn’t the company, by default, a top UC vendor?


ANSWER-
While Microsoft has been very successful with OCS - the success has been primarily for Presence/IM server deployments not for desktop voice deployments. Synergy estimates that OCS deployments with desktop voice is well under 50,000 lines per quarter -  in comparison to other traditional voice vendors shipping over 1 million lines per quarter.

Nevertheless, Microsoft should not be discounted as a market disrupter for the voice vendors. Their sheer desktop presence alone gives them a unique competitive advantage. However, Synergy does not believe Microsoft can gain any sizeable market size in the voice market without a bold acquisition strategy. They need more tools in their war chest to gain any sizeable beachhead in this market. Currently, Microsoft’s strategy for voice is built around the notion that the PC is the center of communications, and with the market transition of VoIP they believe they have an opportunity hop scotch over the installed base of 40B+ voice lines with a battle cry of PC Softphones riding over a SIP cloud.  That notion is bold and is riddled with some very profound assumptions.


QUESTION-
Why isn’t IBM accounted for in the market shares for UC Desktops?

ANSWER-
IBM does not have a PBX product, so by definition they would not be counted as shipping a UC Desktop. However, they get credit for their Presence/IM server shipments and the respective revenue is credited to IBM in the totals for Collaborative Applications.


QUESTION-

How do the Collaborative Application market segments compare to one another? That is, what is the biggest market today that you have measured? And what is growing the fastest?

ANSWER-

In Q4 2008, Unified Messaging was the biggest in terms of dollars spent, representing 62 percent of the Collaborative Application market. Second was Conferencing at just under 20 percent, followed by UC Desktops and Presence/IM Servers. The fastest growing Collaborative Application market is UC Desktop, which has gone from single digits to under 15 percent of the market in a relatively short period of time.


QUESTION-

Why does Cisco breakaway from the pack for Collaborative Applications revenues in Q3 2007, when at that point time, most of the other UC vendors were all shipping roughly at the same level?  And what proof points can you point to that Cisco did see a noticeable acceleration in UC Desktop shipments in Q3 and Q4 2008.

ANSWER-

Cisco’s Collaborative Applications revenue jumped significantly in Q3 2007 driven by the acquisition of WebEx. The on-going subscription revenue from WebEx contributes significantly to the Conferencing revenue for Cisco, which in turn roll up into the total Collaborative Applications revenue. 

The acceleration of UC Desktop shipments that Cisco had in the second-half of 2008 was driven by Cisco rolling out a UC desktop bundling program- Cisco Workgroup Unified Licensing (CUWL). CUWL encourages the purchase of Collaborative Applications via a discounted bundling model. The program has been very effective as exemplified by Cisco publicly commenting that they had shipped over 1 million CUWL licenses as of February 23, 2009- CUWL was recently launched in the Fall of 2008.


QUESTION-

Where does Nortel stand in all this with their large installed base?

ANSWER-

Nortel is not going down without a fight, but the cold reality is that Nortel’s installed base is currently open game for their competitors. Nortel has launched some new marketing programs recently focusing on channel loyalty and new application sales to stem the tide, but with their Q4 2008 Enterprise voice revenues dropping 34% year over year and dropping 18% quarter over quarter- Nortel’s overall trajectory looks grim and to get a firm footing as a UC leader looks daunting.


What is next for Synergy and UC?

The week before VoiceCon, Synergy will be publishing its preliminary Q4 2008 Collaborative Applications Market Share Report- an 80 page report that quantifies the UC market and provides quarterly market shares for the last 8 quarters- we will also be providing these market numbers broken out by Region and Country on our Web 2.0 SIA Research Platform- www.ianalysis.org . The market shares and market analysis will be published every quarter.

We anticipate that during the VoiceCon show, we will have the privilege of some robust debates and questioning. We intend to publish an on-going Unified Communication Q&A on our website as more questions come in and we can share the discussion openly with our clients and industry.


Jeremy Duke