A Synergy Research Group report released this week shows that Cisco's WebEx conferencing service is driving the market for unified communications (UC) software applications.

According to the report, the UC market grew by almost 11%, to just over $1 billion in the second quarter of this year, compared to the year-ago quarter. The growth was driven in large part by a 27% increase in the desktop conferencing apps market and, within that segment, by a 33% jump in software-as-a-service-delivered conferencing apps revenue.

Cisco Systems rules the SaaS conferencing market with a 58% share, due mostly to its WebEx conferencing service.

"This business unit pushes the needle," said Jeremy Duke, Synergy's founder and principal analyst. "When there was discussion in early summer that Cisco would be possibly divesting WebEx, I thought it was absolutely ridiculous."

Conferencing has quickly become an accepted way of conducting business meetings, Duke said. Meeting by videoconference avoids the time, expense, and environmental impact of air travel and enables collaboration by different people often working at distant locations. And SaaS-based conferencing is a key component of an overall unified communications platform. The UC applications market that Synergy tracks in this report includes unified messaging, contact centers, presence, instant messaging, and conferencing.

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Cisco's 58% share dwarfs that of number-two Citrix (12.98%), whose service is called GoToMeeting, and number-three Microsoft (10.94%), provider of Office Live Meeting.

SaaS is by far the delivery method of choice for webconferencing software, accounting for 76% of all UC conferencing app revenue, versus 14.5% for on-premises software and 9.86% for on-premises audio, which is tracked separately. Synergy forecasts that annual revenue from SaaS-based webconferencing will double over the next five years, said Duke. For all UC apps, SaaS accounted for 36% of revenue in the second quarter, a 33% increase from the second quarter of 2010.

Cisco also lead the overall UC applications market in the second quarter with $351 million in revenue, followed by Avaya ($149 million), Microsoft ($105 million), Alcatel-Lucent ($69 million), and Citrix ($49 million).

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