The Channel: Key to UC and Gaining Traction
The Channel: Key to UC and Gaining Traction by Marty Parker
For years now, UCStrategies has been emphasizing that the "channel" is key to Unified Communications (UC) success. While the vendors have the heavy lifting of creating the software, servers, end-point devices and network appliances that comprise the building blocks of UC, the channel has to deliver these building blocks to the market in a way that is compelling, efficient and effective for the customers.
Of course, by channel, we mean the Value Added Resellers and the System Integrators, as well as the master Distributors who serve them. These VARs and SIs are the face to the customer in the vast majority of cases. They can call on the vendors when needed, but the actual solutions and the services needed for installation, integration, testing, roll-out, adoption, and support are all provided by "the channel" participants.
In addition, the channel is a major enabler of the power of UC, i.e. the ability to deliver UC as "communications integrated to optimize business processes," as we say at UCStrategies. Without the creativity of competent channel participants, customers may only get a VoIP telephone replacement (often not a good investment) rather than the broad-reaching, high-ROI benefits of UC.
Well, as has happened before, the current evidence is proving our forecast correct. When The Eastern Management Group reported that the global PBX sales (which are driven or gated by UC, per Gartner, and which include UC revenues) were $59 billion in 2010, it seemed like a pretty large number, since the vendors with visible financials point to only $18 billion vendor revenues. So, in “Show Me the ($59B) Money” posted on NoJitter, an analysis shows that VAR Services comprise another $18 billion. I.e., the VARs and SIs now represent the largest portion of the market, even without counting their product resale revenues!
One important proof point is the recent report for Fiscal 2011 results (year ended 9/30/2011) from Dimension Data. Even though they are now a subsidiary of NTT, they did publicize some key facts:
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Total revenues: $5.8 billion. This is more revenue than earned by any of the IP PBX and UC vendors for their IP PBX and UC businesses in 2010 or 2011.
Avaya came in at about $5.2 billion for FY2011 ended Sept. 30 and about half of that was maintenance services.
Cisco has suggested publicly that their entire UC and Collaboration portfolio (presumably including WebEx and Tandberg) is around $4 billion in annual revenues.
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Revenue growth: 22.1% in reported currency, 14.8% in constant currency.
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Operating Profit growth: 21.3% in reported currency, 10.8% in constant currency.
All this is pretty impressive. When you look for the drivers of this success, Unified Communications is definitely one of those. Dimension Data was one of the first to publicize and practice a Unified Communications discovery and planning methodology. Dimension Data has also taken a diverse approach to the market, representing both Cisco (network-centric) and Microsoft (application-centric) to their clients, providing a choice or even a blend between two very different UC solution types.
Other indications of the importance of the channel in the UC market include the many acquisitions that are occurring to consolidate this opportunity into larger firms with more market coverage. Examples include acquisitions by PAETEC (before they were acquired by Windstream), by Arrow Electronics, and by Strategic Products and Services (SPS). Distributors are also upping the ante for UC; one example is the proactive UC program at ScanSource Communications to educate their channel partners on UC opportunities and solutions.
Some channel members are also being proactive in creating new delivery mechanisms. For examples, both Enabling Technologies and BT have created cloud-based hosted versions of Microsoft Lync with voice capabilities to provide that option for their customers and to capture that revenue stream.
UCStrategies continues to see the channel as key. We will be hosting the 2012 annual UC Summit specifically to facilitate the vendor – channel conversation from May 6-9, 2012, in La Jolla, CA.
So, stay tuned here for an ongoing discussion of the importance and the successes of "the channel" in UC. Our compliments to all those channel members who have developed their UC practices to fuel their growth and profitability.