Dis-Unification and the tumble of SIP into legacy. How UComs never happened.

The term "unified communications" emerged in the mid-1990s, when messaging and real-time communications began to combine. The vision of an all-integrated and unified communications system was appealing. 

Today, 20 years later, we are looking at an industry in rapid fragmentation. SIP, the standard intended to unify it all is tumbling into legacy. PBXs are still PBXs and the evolution of these platforms to deliver a multitude of services has not happened, or at least customers have hesitated to buy all the different service add-ons the PBX vendors made available on their platforms.

A chasm has opened up between those still waiting for UC to take off, and those who have moved on convinced that communications has already turned into a feature of the Web.

Nobody denies that phones are still necessary and that there will be a long tail on the phone industry. But the numbers are clear: The PBX industry has been contracting for some time and in spite of considerable effort to remake, rebrand, and reposition, only few companies have turned the corner. The divide between telephony and data goes deep inside the channel and persists to this day.

UCaaS, or telephony from the cloud, is the new growth area. But looking at the Gartner Magic Quadrant report for UCaaS paints a different picture. While demand for UCaaS is picking up, overall adoption is way too low given that this offering has been around for about a decade. Penetration of UCaaS in the enterprise space remains low, while the opportunity to replace on-premises PBXs seems huge.

The reality is that there still is no good cloud-based replacement for an on-premises PBX, at least not for larger enterprise. Customers continue to sweat their assets, reluctant to invest, but forced to maintain their maintenance contracts. UCaaS will accelerate its growth, but it will remain significantly below its potential of taking over from the PBX era. Its overall addressable market is shrinking, which started to put a cap on demand.

At the same time users transition to other means of communication. Alternatives to desk phones are many. Users go mobile or use Skype or the many Skype look-alikes. Users also transition to more informal means of communication like chat and all forms of activity streams.

The Web is now the final frontier for dis-unification. It is the ultimate disaggregation of unified communications, creating a fragmented market where communications turns into a feature. No longer a stand-alone product, the ability to real-time communicate, whether with voice, video, screen sharing, chat, or otherwise, turns into a table-stakes feature for more and more Web applications. The arrival of WebRTC paved the way for the Web to take over. The SIP protocol, created at significant effort as a standard for all parties to interoperate in a unified communications world, is no longer necessary. Even the need for a standard has vanished. In fact, WebRTC explicitly does not standardize the signaling protocol used between end-points.

The browser in all its forms is the new universal client. With its ability to load the required software to communicate with a certain server or other party on demand, that software no longer has to follow a standard. Web developers use the path of least resistance to create the services users want at ever increasing speed, and they use technologies that make software development easy. Instead of complicated SIP interactions, these applications rely on JSON messages that can be as proprietary as they need to be. The user who wants to participate in a real-time interaction points the browser at a URL, loads the required software in the form of JavaScript, and establishes the connection. Done.

The PSTN and the PBX will stay where they always were. Dis-unification has obsoleted them as platforms for unified services. However, they will have a long life as gateways between the new and the old, providing universal reachability between the new fragmented world of Web-based communications and old telephony devices.

The bottom-line seems to be that users want to collaborate and not just communicate. Such collaboration happens using the applications and tools made for the specific type of work, and these tools are now expected to offer real-time communications as a feature. As simple as that.

3 Responses to "Dis-Unification and the tumble of SIP into legacy. How UComs never happened." - Add Yours

Mark Stadtmueller 2/25/2015 5:17:20 AM

Hi Martin, Great post! I think you hit on some great points, certainly with respect to commerce and WebRTC. I don't disagree. However, I think you may understate the UCaaS addressable market. As we enter into the Digital Industry Economy enterprise IT is seeing the demand for investment in what IDC calls "third platform" capabilities like IoT and Big Data Analytics at the same time traditional IT functions (like voice/communications services) are being ever more cost constrained. Gartner talks about this as the requirement for a "two-speed" IT organization. As these voice/UC type systems (whether they are PBXs or new UC platforms) become more complicated to run and the people to run them become more hard to come by, IT has to cut costs. The only viable option becomes UCaaS. In addition, as part of the Digital Industry Economy, probably because of the above, usage vs ownership is preferred. Some call this the "usage" based economy with apps such as BMW Drive-Now as a consumer option, for instance. For this reason, again, I think UCaaS upside is still strong. I know you state that UCaaS will accelerate growth, so I think our difference is just a matter of degree. I think the larger market forces around the Digital Economy and Usage based models requires and drives toward UCaaS. Great article! Kind regards and thanks, Mark

Martin Steinmann 3/9/2015 3:01:43 PM

Mark - awesome feedback and well reasoned. This is the big debate, isn't it? Net UCAAS potential market is composed of today's PBX market minus substitution for other services. My thesis is that the growth of Web communication and collaboration will outpace the move from PBXs to UCAAS. This puts a cap on UCAAS and it makes it a much less interesting sector for investments. So, what is the best strategy if you are in the UCAAS business?

Greg Zweig 3/20/2015 10:59:48 AM

Martin -- Great piece. I'm a shameless advocate for WebRTC, UCaaS and PaaS. The disruption in cost and simplicity of deployment assure their success. However, I'm always reminded of a a piece I read from Jack Welch in Fortune in 2000 (I'll add the hyperlink below). Basically, he was talking about getting GE on the Internet and what he figured out was that the value was NOT in being an Internet company but rather exposing all of GE's resources to the Internet. He realized that he had the customers he just need to offer them new avenues to buy from him!

I think some people treat WebRTC like the Internet of the 90s such that it doesn't matter what the technology is doing it just maters that it is WebRTC?? WebRTC is almost a red herring because people start to treat it as an end not a means. The important thing is to deliver a compelling service and make it easier/ more cost effective to obtain and use! The communications industry needs to get better at exposing its considerable assets in a form that people can consume and as Martin suggests, the browser is the obvious answer.

Jack realized the Internet was not going to eliminate the need to sell parts for his jet engines -- it was going to change how they were ordered. Likewise, WebRTC or UCaaS does not eliminate the need for admins to manage their bosses phone calls but there is no earthly reason we should limit that function to a 30 button phone. To date our industry seems to constantly talk about either the need to support legacy services or the need to move to new experiences. I think Jack is right -- we have the customers -- why don't we simply offer them a more cost effective way of getting the services they have AND the ones they want?

https://archive.fortune.com/magazines/fortune/fortune_archive/2000/05/01/278969/index.htm