With numerous hosted unified communications (UC) offerings coming to light this year, channel partners are working to figure out just what hosted UC actually is and where they fit into the equation.
For now, at least three or four different technology models are categorized as hosted UC, ranging from Software as a Service (SaaS) to remotely managed on-premise equipment. In some cases, these models can offer a huge profit potential for partners.
What is clear is that even small value-added resellers (VARs) can't afford to ignore
According to a recent Forrester Research study, 57% of enterprises and 40% of small and medium-sized businesses (SMBs) are interested in implementing UC -- and 71% of those companies are also considering hosted UC.
Forrester chalks up interest in hosted services to a series of problems with UC in general, including confusion about which applications are most beneficial, unsettled interoperability standards and uncertainty about return on investment. Hosted UC offers the noncommittal route -- less capital expenditure and the ability to add and drop applications at will. That's an advantage, as long as users are willing to pay a monthly fee for life and in some cases surrender administrative control.
The possibilities of hosted unified communications
Still, hosted UC in all of its forms presents its own confusion.
"We look at the hosting market as a broad continuum," said Chris Thompson, Cisco's senior director of solutions marketing. Thompson added that he also sees various forms playing out in "very large and very small" companies.
First, there is the fully hosted scenario in which all hardware and software are housed off premises in a data center or on a network owned or rented by a manufacturer, systems integrator or network operator.
"A small mom-and-pop VAR could put a communications cluster in a data center somewhere and provide services to customers in their area," Thompson said.
Then there are managed services in which the UC equipment is on-site at the enterprise, but administered remotely. This offers all kinds of opportunities for systems integrators who can charge for hardware sales, implementation and then ongoing management fees.
And there's the hybrid model, which means some equipment is stored in the network and some on premises. These solutions can be jointly managed by in-house IT staff and a systems integrator or network operator.
"Many of our customers don't want everything hosted," said Mitchell Hershkowitz, converged communications practice manager for systems integrator Dimension Data North America. "We could keep an IP PBX and communications platform in-house, and maybe it's audio and video conferencing that gets hosted. If you talk to most vendors, they see a vision of off-premise and on-premise solutions."
On the very large end of enterprises, there is the "multi-tenanted" approach that allows a multinational corporation, for example, to have one centralized UC system in its own data center that reaches out to remote locations worldwide. That can be managed by in-house IT staff, a solution provider, manufacturer, telecom network operator or some combination.
"We created software that takes Cisco solutions and makes them multi-tenanted," said Brett Shockley, CEO of Cisco partner Spanlink Communications, explaining that the software enables solution providers to manage a large distributed solution. "We turn enterprise customers' IT departments into their own service provider."
How do partners fit into hosted UC?
It is likely that most equipment manufacturers now offer or will end up offering all of the hosted UC options. Nortel, in coalition with Microsoft, for example, offers on-premise UC, a hybrid solution where Microsoft Office Communications Server (OCS) is on-premise, but telephony is hosted. And then there is a completely hosted UC scenario for SMBs.
"The first offer targets the large enterprise, the second is for enterprises that want to integrate their OCS to have unified communications, and [the hosted option] targets the SMB market," Sita Lowman, Nortel's leader of converged core and application marketing for carrier networks, said in June when the hosted offer was first announced.
But Nortel's hosted plan does what partners fear most about hosted UC -- and all SaaS for that matter -- it cuts them out of the equation. Nortel is selling the services directly to customers, though there is a network operator play. Even though Nortel partners sell the company's on-premise UC solutions -- including options for SMBs -- they must also compete against the hand that feeds them. Nortel officials declined numerous requests for an interview.
Thus far, Nortel partners aren't too concerned about the offering, but they are keeping their eyes open.
"We are not so worried because we are not in the SMB space," said David Nahabedian, co-founder of Integration Partners Corp., a Microsoft and Nortel partner. "There is nothing stopping them from going [into larger enterprises]. Maybe it causes us to compete with them for a customer or two, but the benefit would outweigh that."
Nahabedian said if the program takes off, it would expand Nortel's name, which would ultimately benefit all of its partners. Most partners agree that Nortel has a lot of marketing to do to catch up with competitors like Cisco.
Nortel is not alone in competing with its own partners.
"Avaya still does a significant portion of their revenue direct and that does cause some conflict; they will pull back deals from their channel," Forrester analyst Henry Dewing said. Avaya declined comment.
Yet it's not impossible for manufacturers to offer fully hosted UC and involve partners. Ironically, though Microsoft partners with Nortel in its SMB hosted UC plan, the software giant took the first major steps in the industry to ensure a clear SaaS plan for partners. At its Worldwide Partner Conference 2008 in July, Microsoft released a partner payout plan for hosted services, including Office Communications and Live Meeting services among others. Partners will be paid for bringing customers to the company's hosted online services and will receive both an initial referral fee and continuing margins for the life of the contract.
Most vendors will eventually be forced to follow Microsoft in releasing a clear payout plan or expect the partner backlash.
IBM's Bluehouse group, which now offers hosted conferencing called Sametime Unyte, is led by the channel, a spokesperson said. In the fall, IBM plans to beta test an expanded family of hosted collaborative services that include document sharing, chat and presence. A partner payout plan has not been released, but it is expected to become clearer upon the official launch.
Cisco's WebEx SaaS collaborative solutions, which are in the company's UC group, are also sold through the channel, and its WebEx Connect, which enables developers and partners to create their own applications, will only expand partner interest.
"We'll be making announcements in September about how our partners will take that to the world," Thompson said. "There are dozens of different business models, and it is going to be partner-dependent."
Beyond WebEx and a straight SaaS offering, Cisco offers several hosted and managed service possibilities -- and there is already strong partner involvement.
Partners dig in as hosted UC spreads
Spanlink offers VoIP, UC and other applications as hosted and managed services, but has a strong focus on multi-tenanted solutions for which it created its own software. Spanlink makes a "dedicated instance" of a Cisco call manager and presence and messaging servers and places it in the data center of choice for the company.
"Technology gets rid of distance, and now you have changed the management model," Shockley said. "Then [it] becomes a question of who administers this thing on a day-to-day basis."
Depending on the management system that the customer chooses, Spanlink's role varies.
"We sell Cisco hardware and software, as well as some of our own software, and provide implementation services. Then we work with them to define who should provide ongoing services. We could do it as a managed service, they could run the whole thing or it could be somewhere in between," Shockley said.
Dimension Data sees huge potential in ongoing managed services, but also sees the value in planning and design services for companies getting into hosted and hybrid models.
"We sit down with the customer and understand their vision or roadmap as if it were consolidation and virtualization," Hershkowitz said.
Hershkowitz admits that selling UC as straight SaaS can be less profitable in the long run.
"By reselling WebEx, we no longer have to deploy or manage," Hershkowitz said. "It is an annuity business. If you're looking at the profit we get from services, it doesn't go at the same level."
But ultimately, WebEx collaborative services, for example, will be only one element of an overall hybrid system.
"For us, moving forward, we'll be reselling components of UC," Hershkowitz said, giving the example of combining hosted wireless UC with an on-premise IP PBX. "If we do it right, it will be very profitable."
Move over VARs, here come the telecoms
While VARs can find a place in hosted UC, they will run into heated competition from big-name telecom network providers along the way. Those providers have a leg up, since they control the enterprise circuits and their own data centers and networks.
What's more, hosted applications are nothing new to telcos. Centrex -- or off-premise PBX -- is considered the "granddaddy" of hosted services, Cisco's Thompson said. Centrex moves routers and software off premises and into the network.
So it's no shocker that companies like AT&T and Verizon have jumped into SaaS. AT&T just announced a utility computing offer this month, and while the initial goal is hosting IT-oriented applications and on-demand capacity, the company has said it will extend into cloud-based UC offerings. Verizon is also expected to release a SaaS offering that will involve UC applications in the coming months.
"This is going to be one of those cases where they are going to cooperate one day and compete the next. HP services may use AT&T for a network, but they are going to compete for the rest of the dollar," Forrester's Dewing said. Though the telecom network operators have a leg up with infrastructure control, they won't have a completely easy road since they don't always have the skills to manage integrated systems. "There's room for both of them," Dewing said.
Plus, even the larger network operators will run into hot competition from smaller, more nimble IP telephony providers that control their own pipes.
Enet Solutions, a Houston-based Cisco partner that runs its own IP network, gets in the SMB door to offer hosted UC from an IP telephony angle.
"SMB clients rely on us for dial tone. We manage their phone number, voicemail and unified messaging, as well as single-number reach," said Faisal Bhutto, vice president of operations at Enet. Enet has about 70 SMB customers that connect to its IP pipe where applications can be added onto the voice offering.
Once the company has customers hooked on voice, it moves to hosted UC and then other IT offerings, including hosted Microsoft Exchange.
"You sell them one service, and once they like it, they get more," Bhutto said.
Though Enet serves SMBs now, from a technical perspective, there is no reason why the service can't grow to serve companies with 1,000 users or more, Bhutto said. The company currently has a tiny data center with eight to 10 racks of equipment, but it's in the process of building out a center four times the size.
As more IP telephony companies like Enet work their way into hosted UC and VoIP, vendors are working feverishly to get applications out to them.
In July, for example, VoIP application company BroadSoft and open source phone system provider Fonality brought their technology together to enable carriers to offer hosted IP PBXes and phone systems. The companies work with service providers that enable SIP trunking to connect IP transport outside the enterprise network.
But BroadSoft and Fonality expect to see systems integrators working with carriers in selling hosted UC and other services.
"What the SMBs are looking for is someone to bring it all together for them -- one throat to choke. The integrators are that throat to choke," said Mark Enstrom, manager of Wireline Soltutions at BroadSoft.