Cisco increases the push for hosted collaboration

Claudio Castelli, Senior Analyst, Enterprise

The highlight of Cisco’s recent C-Scape conference in Melbourne was the news of its collaboration portfolio, which is gaining momentum. The company is engaging with an increasing number of service providers to position its Hosted Collaboration Solution (HCS).

HCS offers a clear path to help enterprises migrate their communications to the cloud, and positions uniquely in the market; its delivery model is expected to disrupt the current partner ecosystem. Traditional channel partners will need to rethink their role, while Cisco must evolve its partner program to support this transition.

A unique proposition for telcos

Cisco has a large market share in IP telephony, of which a significant portion is managed on-premise by a service provider. This gives service providers deploying HCS a large addressable market. Enterprises already using Cisco’s on-premise solution Communications Manager can now deploy the company’s collaboration technology with seamless functionality, whether they do so on-premise, in the cloud, or with a hybrid deployment.

If it is commercially worthwhile, companies already familiar with Cisco’s collaboration features will be more comfortable moving their solutions into a telco private cloud, and will benefit from a cloud deployment model.

Telcos can differentiate from other cloud providers by their ability to prioritize traffic and offer end-to-end SLAs covering the availability of the services, the network, and the hosting infrastructure, which are all particularly important for mission-critical and realtime applications. They are also in a unique position to provide collaboration services across a broader range of devices, including smartphones and tablets.

In the past we saw a significant portion of the enterprise communication business migrating from telcos to systems integrators (SI). Ovum believes that hosted and cloud solutions will help telcos counter SIs in this market.

Growing momentum in Australia and New Zealand

Australia is Cisco’s second-largest collaboration market, behind only the US, and it has engaged a number of telcos in the region. The leading providers, including Telstra in Australia and Gen-i in New Zealand, have announced hosted collaboration solutions based on HCS. Amcom will also offer HCS in Australia and will provide competition in this market.

To avoid providers competing with a single commoditized product, HCS allows high levels of customization. Providers can create their own sets of functionality and pricing structure. Telstra, for example, offers a pricing model that divides users into four categories: essential, office, information, and mobile, which helps sales teams to work with building blocks in a simple way.

Cisco expects that 50% of its new collaboration business in Australia will be based on HCS in two years. This is aggressive, and sales teams have incentives to push for hosted rather than on-premise solutions. In an average HCS deployment approximately 70% of providers’ capex goes into the underlying infrastructure (generally Cisco network and data center products) and just 30% into the HCS solution itself.

Cisco premise-based collaboration technology is already widely accepted in this market, and so the question now is to what degree and how fast enterprises will be willing to embrace the cloud concept.

Growing complexity in partner management

As Cisco shifts its product proposition to the cloud approach it will have to deal with any conflicts that arise when established channel partners see some of their traditional business moving to telcos.

As more services are bought and managed online, traditional channel partners need to develop skills beyond selling and distributing hardware systems and shrink-wrapped software. They will need to move upstream into helping their clients integrate the systems and use them effectively to grow their businesses.

As more collaboration services become embedded in the offerings of cloud providers (which are likely to be telcos), Cisco’s traditional channel partners need to avoid being left behind. They must learn how to help their customers take full advantage of cloud services, and develop their own unique sources of added value.

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