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11/12/2007
06:32 PM
Melanie Turek
Melanie Turek
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Sizing up the UC Market, Part Two

I’ve gotten a lot of feedback on my posting last week in which I talked about the size of the unified communications market. A few vendors complained that surely I had mistyped when I wrote that the current market is less than $10 million. But that’s exactly what I meant. The reason goes back to how we define UC applications.I’ve gotten a lot of feedback on my posting last week, in which I talked about how we at Frost & Sullivan are sizing the unified communications market. A few vendors complained that surely I had mistyped when I wrote that the current market is less than $10 million. But that’s exactly what I meant.

The reason goes back to how we define UC applications: Voice, presence, chat and audio/video/web conferencing integrated in a single application. Companies using VoIP with telephony presence information, or IM and Web conferencing, are not using unified communications applications, and therefore whatever they spend on that technology does not count as part of the UC market.

Take Microsoft as an example. We estimate there are around 16 million LCS licenses in the enterprise. But LCS is not a UC application—its an IM application. So that revenue counts as part of the IM market, not as part of the UC market. In fact, Microsoft released a true UC product—Office Communications Server—only last month. At the time of that release, a spokesperson claimed around 150 customers for the product, but he admitted that the number of users within each customer organization is small—most under 100.

Let’s assume that’s 15,000 licenses bought—at $97 each (list), that’s a total of about $1.5 million. Throw in 150 servers at around $3,000 a pop, and you add almost another half-million dollars—bringing the total to $2 million. That’s nothing to sneeze at for a product that’s less than a month old, but it doesn’t get us to an overall market above $10 million (let alone the “billions” one vendor claimed) for 2007.

Another question that was raised by a few people was the issue of communications-enabled business processes (CEBP), which some analysts and many vendors are touting as the real value of UC. That may be, but CEBP is not a part of the UC market, except, perhaps, insofar as companies spend money on integrating UC software with their back-office applications (and no one is spending money on that in 2007). CEBP is not UC. Indeed, plenty of companies have been using CEBP for years—anyone who’s ever received an e-mail or text message from a corporate application or data system knows this.

Unified communications can significantly improve the value of CEBP because the presence-based real-time technology reduces human latency, and that, in turn reduces the time it takes to complete the business process at hand. But still, you’re looking at improving the “communications” part of communications-enabled business processes; you’re not inventing CEBP.

Clearly, this is a hot topic. I look forward to hearing more thoughts on this—please keep them coming via email or posting below.

Melanie Turek is Principal Analyst, Frost & Sullivan

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