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UNIFIED COMMUNICATIONS - FOUNDATIONS FOR GROWTH IN 2010PDF

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					             UNIFIED COMMUNICATIONS:
             FOUNDATIONS FOR
             GROWTH IN 2010




10/19/2009   Findings from the 2Q09 MTI Buy-Side Research

             Data from the 2Q09 IT Market Dynamics Market Tracking Initiative buy-
             side research – a survey of more than 1300 Canadian IT managers –
             shows that unified communications is starting to come into its own – and
             spotlight interviews confirm interest in the channel and financial services.
                                    Unified Communications: Foundations for Growth in 2010




EXECUTIVE SUMMARY
Throughout the second quarter of 2009, IT Market Dynamics – working with publication
partners Information Executive Magazine and CRN Canada – conducted a large-scale
survey of Canadian IT managers and channel members, asking about budget trends
and purchase intentions across eight product categories and three solution areas,
including Unified Communications. Our intent was to monitor the pulse of the Canadian
IT community, in order to stay abreast of changes in how IT is purchased and deployed.

Unified communications is one area that is at the forefront of these changes. On the
“sell side” of the industry, we find Unified Communications is one of the leading growth
solutions in the channel. While only 8% of the 298 resellers surveyed in 2Q09 believe
that UC will drive current-year revenue growth, just 4% believe that their UC business
will contract. The +4% differential is better than any solution listed except VoIP (itself
a core UC technology) and green IT.
On the buy side, UC still has very modest recognition, with six-month purchase intentions
lagging behind the other 10 products and solutions covered in our survey of 1,355
Information Executive subscribers. However, this finding masks several causes for UC
market optimism. One is that investment intention levels in large enterprises are
typically much higher than in small businesses, meaning that the organizations which
“jump start” adoption of new technologies in Canada, such as financial institutions, are
seeing reasons to purchase UC to streamline business processes. The other important
finding is that channel members themselves are one of the key UC buying groups
identified in the survey. This is likely to mean that UC will get a big push into SMB
accounts in 2010, backed by an experienced, knowledgeable supply chain.

BUILDING THIS ANALYSIS
To investigate the outlook for UC in Canada, we have combined five different sources of
insight into the technology and its application in the Canadian context:

    •   A survey of 1355 IT managers, drawn from the Information Executive
        subscription list
    •   A survey of 298 managers from the Canadian reseller community, drawn from
        the CRN Canada list
    •   Five “spotlight” individual interviews with managers from both lists
    •   A vendor perspective, offered by Bryan Rusche, UC and Collaboration Product
        Manager for Microsoft Canada

This “360° treatment” gives us a compelling perspective on the prospects for UC in
Canada over the next 12 months.




                                                                                   Page 1
                                  Unified Communications: Foundations for Growth in 2010




THE BUY-SIDE PERSPECTIVE
In our survey, we asked respondents whether they were planning any new spending on
UC over the next six months. In all, we found that just under 20% were ready to make
new UC investments. As Figure 1 shows, though, this focus is not shared evenly across
the business population: large organizations are much more likely than smaller ones to
be investing in UC. When asked why this might be the case, Bryan Rusche, UC and
Collaboration Product Manager for Microsoft Canada, observes that “in large
organizations, we're working in a very distributed, mobile fashion…Unified
communications really helps to facilitate communication and collaboration across
disparate geographic locations, time zones, people working on the road, etc.”

FIGURE 1. SIX MONTH UC PURCHASE INTENTIONS BY COMPANY SIZE

   30%

   25%

   20%

   15%

   10%

     5%

     0%




                      N=1354; minimum of 98/category




                                                                                 Page 2
                                   Unified Communications: Foundations for Growth in 2010




ACTIVE BUY-SIDE SECTORS

Reviewing the source data for Figure 1, we were struck by the frequency with which
financial services firms and channel organizations appear on our near-term buyer list.
To explore the reasons for this, we contacted a representative of each group, asking
them to shed some light on why companies in their industries are investing in UC.
RYAN NEWMAN, BROADRIDGE
Ryan Newman is a Network Manager for Broadridge, a global brokerage processing
firm. With headquarters in New York, Canadian offices in Toronto and Vancouver,
and associates across Canada, the US, and in India, Broadcom has extensive
                                  communications requirements. He believes that UC
   The biggest UC technology      “makes life a little bit easier.” The biggest
    wins are conferencing and     technology wins, he says, are conferencing and
      desktop sharing, which      desktop sharing, which reduce travel expense and
   reduce travel expense and      helps Broadcom to take care of clients. Broadcom
     helps Broadcom to take       is particularly focused on use of videoconferencing:
          care of clients.        the company has set up meeting rooms with
                                  videoconferencing gear that links staff in Vancouver
and Toronto with each other, and with individuals in other cities across the globe.

MIKE LANDRY, BURNTSAND
Mike Landry is the Western Region Managing Director for Burntsand, a publicly-
traded IT implementation and consulting firm with offices in Toronto, Calgary,
Vancouver, Boston, San Jose, Indianapolis, and Houston. Like Ryan, Mike points to the
efficiencies that UC can bring to a far-flung enterprise: “there’s a cost factor
involved…and our company has people all over.”

Unlike Ryan, though, Mike has a second motive for investing in UC – he sees it as an
important business offering. UC, he believes, is “getting to the point where it just makes
sense.” The IP network, Mike says, “has become like the telephone network” in the
sense that it is ubiquitous and “always on.” This in turn has enabled “the progression
from the cell phone to the browser…[which] is really driving UC.” Mike finds that
clients who are used to this ubiquitous, always-
on network are looking to enable IM and
presence across their organizations.                     “the progression from the cell
                                                        phone to the browser…[which]
                                                             is really driving UC.”




                                                                                   Page 3
                                   Unified Communications: Foundations for Growth in 2010




BRYAN RUSCHE, MICROSOFT CANADA
We asked Bryan Rusche of Microsoft Canada to comment on how Microsoft’s customers
are approaching UC in 2009 and 2010. His response focused on the staging of the
UC investment. “What we're seeing [is that] the path to unified communications isn't
maybe taken in its entirety – so they [customers] are not moving from a siloed
communication infrastructure all the way to a very integrated communication
infrastructure.” Rusche points out that
organizations are instead “implementing
key capabilities along the way. We're            “What we're seeing [is that] the path
seeing a lot of piloting, rolling out UC         to unified communications isn't maybe
capabilities to specific departments or          taken in its entirety – [customers] are
particular types of users, such as remote               not moving from a siloed
workers, where they're adopting a large           communication infrastructure all the
suite of the technologies as a whole.” He               way to a very integrated
has also noticed the surge of UC                    communication infrastructure, [but
investment in financial services, but finds        are] implementing key capabilities
that like other industries, these firms are                  along the way.”
also using the incremental approach to
UC deployment: “in terms of the way that we actually see them deploying it at this
point in time, it's a very careful, managed roll-out of UC capabilities.”




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                                                Unified Communications: Foundations for Growth in 2010




THE CHANNEL PERSPECTIVE
In addition to our survey of 1355 buy-side IT managers, IT Market Dynamics surveyed
298 subscribers to CRN Canada. One of the questions asked of all respondents was
“Which solution categories – such as virtualization, server consolidation, VoIP, unified
communications, green IT, security, business intelligence, etc. – do you think will grow
fastest for your company in 2009, and which are most likely to decline?” Figure 2
presents the answers to the question, with “growth” shown in green, “decline” shown as
a negative number in red, and the blue line illustrating the net difference between the
two.

FIGURE 2. TREND IN SOLUTION OUTLOOKS
                      20%
                      15%

                      10%
   % of Respondents




                      5%
                                                                                             Growth
                      0%
                                                                                             Decline
                      -5%
                                                                                             Net Growth
                 -10%

                 -15%




                                                Source: IT Market Dynamics, 2009
                                                             N=291


The UC finding stands out on this list. UC has less presence in the installed bases of
customers than any of the other product-linked solutions, and doesn’t garner the
“buzz” in the trade and business press (outside of IT in Canada’s own UC in
Canada microsite, and a handful of US-based sources) that these other areas
attract. However, its “net-growth” rating is quite high, as is the rating for VoIP,
which is often positioned as a stepping-stone to UC. What is driving this interest in
UC, as compared to the more established solution areas? To explore this question
in more depth, we placed follow-up calls to three of the 2Q survey participants:

      •                Ken Ramelson, owner of Markham, Ontario-based Laser Matrix
      •                Neil Hallis, President of Electronic Connections in Edmonton
      •                Steve Weeks, President of Netcetera in North Vancouver, BC


                                                                                               Page 5
                                    Unified Communications: Foundations for Growth in 2010




Two of the three discussions focused on VoIP, which is often viewed as the first step
in the UC journey that Bryan Rusche described above. In our discussion with Ken
Ramelson, he pointed out that VoIP is benefitting tremendously from the pervasive
availability of low-cost, high-speed connections. Business owners (such as Ken
himself) quickly recognize that a VoIP system that offers rapid, very-low-cost
connections to customers anywhere in the world has huge and rapid payback
potential.

Steve Weeks also lists VoIP as a growth area. Like Ramelson, he sees the
availability of fast internet connections as a VoIP driver, but believes that the
primary reason for VoIP growth is the widespread need to replace aging PBXes,
coupled with the experience that the market is developing with IP-based voice
systems: “it’s out there, and people are successful with it.”

Our conversation with Neil Hallis provided the most bullish perspective on UC.
Despite the well-publicized fluctuations in the fortunes of the oil industry that
Electronic Connections serves, Hallis believes that UC will attract a great deal of
new investment. This interest is being spurred by remote workers who need to
access corporate systems from wherever their work takes them – as Hallis says, “a
lot of the outside guys want to be able to flip open their laptops and do
everything: talk, access information…know where everybody (within the
organization) is at all times.” The appeal of such a system in an environment like
an oilfield, where workers are often called to truly remote sites, is clear, as is the
need for partners who deliver these solutions to provide effective support not only
to IT departments, but also to the line of business clients that they support.

Our discussion with Microsoft’s Rusche echoed Hallis’s perspective. Highlighting the
flexibility intrinsic to software – “Software is inherently a lot more flexible than a
very vertically integrated stack that's based around hardware and PBXs” – Rusche
described a solution that mirrors the key requirements in Hallis’s scenario: “what we
provide is actually a client that combines all of those capabilities within the same
interface. I can reply to an email with an instant message and escalate that into a
phone call and add video and add applications – but the client stays the same.”




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                                    Unified Communications: Foundations for Growth in 2010




WHAT THIS MEANS FOR 2010
The data gathered in the ITMD research – both the solutions findings and the buy-
side perspectives – point to greatly increased deployment of UC component
technologies in 2010. As Mike Landry of Burntsand said, “UC is a technology that’s
been around for awhile…getting to the point where it just makes sense.”

The evolution of UC as a market force will depend on three factors. One is the
scope of the buyer organization. As we saw in Figure 1, and in the remarks from
Mike Landry and from Ryan Newman, the rationale for UC is most clear in
organizations that have staff in multiple locations, and a need to drive greater
productivity. In these environments, investing in UC to make staff more effective
provides obvious payback.

We are already seeing evidence that the financial services industry – typically,
one of the leading Canadian verticals for new technology adoption – is
accelerating its take-up of UC. At this point, we are not seeing a similar trend in
government, which is often also a lead adopter in Canada (the one government
employee we reached for follow-up discussion said “no sign of willingness [to buy
UC] today – just trying to understand” what the technology might do in the
government context). To increase as a force in the Canadian enterprise community,
UC will need to achieve increased penetration in the public sector.

The second key factor in UC expansion will be the ability of UC to begin scaling
successfully in to the SMB market. This in turn will depend on the ability of the
Canadian channel to offer compelling packages – based on managed services, for
example – that suit the needs of SMBs. As Bryan Rusche points out, “SMBs can’t
make the investment in on-site IT staff in order to be able to manage a
complicated, tightly integrated infrastructure. And so the ability to consume these
technologies as a service or as a utility has a lot of interest… [which] takes out a lot
of the risk associated with big implementations and things like that and makes UC a
lot more palatable and much more manageable from a cost perspective.” It’s
axiomatic that enterprise technology is designed for elegance, while mid-market
solutions are engineered for relevance. UC’s ability to solve different kinds of
problems will help it to expand its foothold in corporate Canada; the ability of the
channel to demonstrate how UC delivers specific capabilities will be the key factor
in determining how quickly it gains acceptance in smaller enterprises.
The third factor that will determine how fast UC adoption ramps up in Canada in
the coming year will be the ability of buyers and suppliers alike to position UC
successfully against the current needs of business users. At root, there are three
paths into UC: it can be viewed as a means of extending the functionality of the
communications infrastructure, as a software capability embedded within
applications, or as the deliverable arising from a process consulting/integration



                                                                                     Page 7
                                    Unified Communications: Foundations for Growth in 2010




initiative. The first path offers the clearest business rational and the shortest path
to payback, but is likely as well to provide the lowest total ROI. The software and
integration approaches may be more difficult to encapsulate in a business plan and
to roll out within an organization, but are likley to have very high “ceilings” for
business returns on IT investment. No one approach will be best suited to all
environments. It will be important for suppliers to represent the advantages of the
different approaches in many different situations, and for buyers to invest the time
needed to understand which is most appropriate to their context.

For our last word, let’s return to Microsoft’s Bryan Rusche, who offered these
comments in response to a question on how buyers should approach building the
business case for UC:

        IN TERMS OF THE APPROACH TO UC, I DON 'T THINK IT NEEDS TO BE AN
        ALL -OR-NOTHING PROPOSITION. THERE ARE KEY, SPECIFIC WORKLOADS THAT
        WILL PROVIDE GREAT BUSINESS VALUE BACK TO AN ORGANIZATION AND A
        STRONG ROI, SUCH AS VIDEO AND WEB CONFERENCING, AND THE ABILITY TO
        REDUCE TRAVEL AROUND THAT . THERE IS A VERY STRONG, IMMEDIATE PAYBACK
        ON THAT TYPE OF AN IMPLEMENTATION…

        BUT I THINK THE IMPORTANT THING IS THAT WE KNOW ORGANIZATIONS ARE
        MOVING AWAY FROM BUYING SILOED COMMUNICATIONS CAPABILITIES THAT
        ARE POINT SOLUTIONS FOR SPECIFIC PROBLEMS AND STARTING TO THINK ABOUT
        THIS MORE AS A PLATFORM. AND SO, AS YOU MAKE THESE INDIVIDUAL CHOICES
        AROUND LOOKING AT VIDEO CONFERENCING , FOR INSTANCE , OR WEB
        CONFERENCING, OR A VOICE -OVER-IP IMPLEMENTATION, IT 'S IMPORTANT TO
        DO THAT WITH THE BIG PICTURE IN MIND.




ABOUT IT MARKET DYNAMICS
IT Market Dynamics is a full-service IT research company. It is part of the IT in
Canada network, which also includes the web sites for Information Executive,
CRN Canada, and Canadian Government Executive magazines, as well as
GreenerIT.ca, UC in Canada, The Efficiency Platform, the IT Forum Exchange,
and the IT in Canada site.

For more information on IT Market Dynamics, please contact us at
info@itmarketdynamics.ca



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Unified Communications: Foundations for Growth in 2010




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