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The spending never slows in the world of UC

Jack Loo | Dec. 17, 2008
While CIOs are looking at spend cautiously, demand for hosted UC services looks to climb

SINGAPORE, 17 DECEMBER 2008 - The Unified Communications (UC) services market in the Asia Pacific has been tipped to grow by 13.4 per cent this year and clock revenues of US$2.94 billion, according to analysts firm Frost & Sullivan.

Asian enterprises are expected to adopt a cautionary approach towards IT investments in the next two years, preferring to spend on applications that can shift capital costs to operational costs and focus on growing top and bottom-lines. This is likely to work in favour of driving demand for hosted UC services which offer OPEX (operational expenditure) or utility-based pricing models, said Frost & Sullivan analysts.

Further estimates from Frost & Sullivan indicate that the market can grow by a further 14.2 per cent next year, reaching a market size of US$3.36 billion by end-2009. Hosted UC services, which include telephony, email and conferencing services, are the most commonly contracted UC services, accounting for approximately 53 per cent of revenues in 2007, 2008, as well as 2009.

According to Frost & Sullivan senior industry analyst Yen Yen Har, In the next 24 months, businesses will look to spend-to-save and focus heavily on technologies that can help reduce costs and optimise resources. While CIOs understand the potential benefits of newer and emerging technologies such as UC in meeting these priorities, the high upfront cost of full-scale UC deployment is a big limiting factor.

The hosted model allows enterprises to trial and experience the real value of UC without the significant capital investments, she said. Hosted services are expected to continue to account for the bulk of UC services revenues, hovering just over the 50 per cent mark by 2014.

Other UC segments are looking good too

UC typically involves the integration of various UC elements from a variety of best-of-breed solutions providers, as well as with other business applications and existing business processes. The need to manage such complex implementation which demands a comprehensive understanding of networks and voice-data integration skills makes professional services the second biggest contributor to UC services.

Professional services, encompassing consulting, implementation and integration, accounted for 22.2 per cent (US$575 million) of the total UC services revenues in 2007 and this is expected to grow to 25.5 per cent (US$1.68 billion) by end-2014.

Managed UC services by far the smallest segment in UC services currently, accounting for about 8.3 percent (US$215.1 million) of revenues last year is expected to see rising uptake as more businesses find it viable to outsource such functions and eliminate the need for costly in-house technical expertise.

Maintenance services, which accounted for 16.6 percent (US$430.3 million) of the total UC services revenues in 2007, are expected to decline over time as maintenance is increasingly viewed as a standard service in any given hosted or managed services contract. To compete more effectively, system integrators and service providers bundle maintenance while focusing on delivering higher margin services such as consulting, integration and implementation.


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