UCaaS MQ – Does Platform Matter?

By

Gartner recently published its UCaaS Magic Quadrant Report for North America.

The Gartner MQ reports are about the closest thing this industry (and many other industries) have to the Academy Awards. Gartner does a great job in putting this stuff together. Like the Academy Awards, they can be somewhat controversial. For example some people find it a travesty of process that George Lucas has never won an Oscar. Also, James Cameron’s Avatar and Titanic, the two top grossing films to date, did not win Best Picture. But then if Best Picture was about sales, you wouldn’t need an Academy.

Like winning an Academy Award, being placed in the MQ can be a big deal professionally.

The MQ report is not new – Garter publishes one for every slice of the economy they can find.  See this earlier post on UC MQ for more background.

There is no ranking process that can adequately describe contextual situations. Who makes a better truck: Ford or Chevy? The answer, of course, is it depends. There are huge differences between products. Customers tend to uniquely favor different attributes of the solutions. I just picked a SIP provider and among my top criteria were location – I wanted a provider with a Denver point of presence. I don’t fault Gartner for not providing context, nor do I fault Consumer Reports. But as a buyer, I need to consider sources such as these along with additional information as part of a larger equation. Anyone that makes a decision based primarily on the MQ report is a fool.

There’s lots to say about this year’s report. It’s the first time Gartner put any service provider in the actual Magic Quadrant known as Leaders. More on that later. Here, I want to discuss the premises-based vendors – where arth thou?

There’s two important components to UCaaS – the technology/infrastructure (AKA platform) and the hosted operation/sales (AKA business).

As the premises-based vendors move into hosted, they are already half way there as each one has a platform that is already better than everyone else’s. But Gartner put four companies in the MQ (8×8, ShoreTel Sky, Thinking Phones, and West) and not one of them primarily uses core technology found in premises-based equipment (from the likes of Cisco, Avaya, Microsoft, Mitel, NEC, Siemens Enterprise, or ShoreTel).  Three of the four companies are using their own homegrown technology – and one is using commercial softswitches.

I introduced this issue in Voice in the Clouds. Does having your own technology make more sense than purchasing a platform? When I asked this question to Michael Tessler, CEO at Broadsoft, he made a compelling point that no independent vendor can possibly match the R&D  that a company like BroadSoft spends on product improvement. This year, BroadSoft made numerous announcements and improvements – particularly with UC One. But that would have all been too late for Gartner this year. Dan Hoffman of ShoreTel Sky said he tried to use a purchased platform, but had to change to a custom solution in order to be competitive. That custom solution was a key part of what ShoreTel got out of the acquisition. I also spoke to Bryan Martin, CEO of 8×8, and he suggested that there is no way to stand out from the crowd if the crowd is all using the same technology. Bryan points to his video bridging solution (Hollywood Squares like) as an example of area where 8×8 is ahead of the industry.

(Related: Check out this Interview featuring CEOs of 8×8 and Thinking Phone Networks from 2011).

Building a hosted operation is hard work. I would think that alone would be a difficult task, but adding in development of the platform seems crazy. Yet, it seems meritorious based on the fact that 3 out of 4 MQ providers are doing exactly that. Where’s the premises-based vendors?

NEC announced their 3C hosted solution last Spring, but it’s still not publicly available. 3C is based on what NEC once called Sphericall – a rich platform optimized for SIP and SOA. NEC is running it on NEC servers in a professional grade data center in closed trials. Avaya’s Collaborative Cloud was probably too new for consideration, but it’s an SMB play, and Gartner is supposedly looking for enterprise. Siemens Enterprise, talks-up public cloud, but Gartner removed SEN from consideration “because its cloud UC focus for the North American enterprise market is on private UC cloud infrastructure.” ShoreTel is featured as a leader, but it’s not the same technology found in its premises-based systems. ShoreTel Sky is a separate platform ShoreTel acquired in Q1-12 (podcast).

Mitel is probably the most disappointing. They have more experience in hosted than the other premises-based equipment companies, a platform offered commercially (MiCD) that has native support for multi-tenant, its own MVNO, its own network services, its own hardware endpoints for advanced integration, and several rich applications. Yet Gartner placed Mitel in a bad spot on the board, what I call the Muggle Quadrant. Gartner-speak “Niche” quadrant.  That’s a big ouch and a commentary on Mitel’s execution, technology, or both.

Cisco’s hosted strategy is via partners. In fact, its most well known direct hosted service  WebEx has recently been productized. Most UCaaS is still SMB, and Cisco HCS solutions are not even feasible for less than 100 users. But that is ok as seat size is clearly heading north.

Thinking Phone Networks, 8×8, and ShoreTel Sky use homegrown technology not sold anywhere else. Presumably based on open source and evidently very robust. West is the only company in the MQ that is using commercially available infrastructure. West got into the MQ with its BroadSoft based Smoothstone service. However, West is also deploying solutions that utilize Cisco HCS and Microsoft Lync. Gartner actually cautions its readers that three may be too many.

Based on the Gartner report, it looks like custom infrastructure is the way to go. Of course, Gartner doesn’t look at the business dynamics or compare the cost of development to purchase.

It’s a very odd situation, companies with decades of experience with switches are not the leaders, and economies of scale in development don’t appear to apply. Though we are sill early in the game. As the market matures, commoditization will favor commercial platforms. Before that, industry consolidation may favor custom software. Sooner or later the big premises vendors are going to figure out their cloud approach and that will make things doubly interesting – especially regarding hybrid solutions.

In the meantime, I’ve started ordering services from various providers. More to follow.

Dave Michels