UCaaS in the age of Digital Transformation
The basics: Vanilla isn’t everyone’s flavour of choice - customers want variety
When shopping around for UCaaS solutions that suit the business’ requirements, it quickly becomes clear how difficult it can be for a customer to spot the non-financial differences between the products available in the market.
There is a simple explanation for this. Ever since the start of UCaaS as a business model, UCaaS vendors seem to have religiously adhered to a somewhat uninspiring Gold, Silver and Bronze product marketing strategy.
The principle is straightforward: the more phone features your service profile has, the higher the monthly charge you are billed. Coincidentally, more features also happened to mean higher UCaaS platform sales revenue numbers for the UCaaS vendors.
Whilst this approach has been successful in certain markets, it has proven quite difficult, if not impossible, to replicate in other markets.
So, this in itself provides an argument for new product and business models.
We probably all agree that the telephone and all other services built around it, are mandatory tools for any business. But, for most businesses at the end of the day the telephone is just another, albeit crucial, cost centre and a potential major headache, when things don’t exactly behave as expected.
It seems only logical then, that every UCaaS product is designed based on this knowledge, right?
Unfortunately, the reality is a market riddled with excessive products designed by engineers trying to best guess customer requirements, and product managers trying to price them.
Almost all UCaaS product offerings in today’s market continue to focus heavily on ‘product feature quantity’, just as it was originally invented by the UCaaS vendor industry. The simple logic goes, the more bells and whistles your service has, the higher the monthly subscription fee you can charge the customer.
But why would a customer be willing to pay for features they most likely won’t ever use?
The short answer? They are not
The generally accepted norm is simple: customers make investments or changes for three major reasons: to save money, make money or both. Yes, naturally up-time is important, as are collaboration features and so many other advantages you gain by switching over to UCaaS.
Although the latter certainly add positive weight in the buying decision, they are rarely part of the crucial decision-making factors.
Armed with this wisdom in mind, it becomes impossible not to ask the following questions:
1. Is an important part of the UCaaS resellers and platform owners misaligned and out of sync with customers’ needs and wants?
2. Has the UCaaS market lost track of its customers?
3. Has UCaaS made itself obsolete as a futureproof customer solution?
Before we lift the veil on what customers do want, let’s take a short trip down telecom memory lane.
How did it work before?
Maybe the future of UCaaS success can be found in the past.
Back in the day, the PBX sales model was based on carriers offering both the line and telephony equipment directly to the customer.
As such the customer had a single point of contact, ‘the carrier’. The only alternative for the customer was to either rent or outright purchase the equipment.
The next evolution happened when PBX vendors were given the possibility to homologate their equipment on the carrier’s network. As such, guaranteeing its functionality on, and compatibility with, that carrier’s network.By authorising PBX vendors to sell directly to carrier end-customers, the carrier monopoly that existed in the previous model was no more.
As a direct result of this market evolution, most businesses could purchase equipment directly from the manufacturer or one of its resellers. These single vendor PBX equipment purchases would usually consist of a CAPEX-based investment, involving some form of bank financing.
But, in the process of freeing the customer from the previous lock-in, an additional point of contact was introduced to the service chain. This now forced customers to deal with two independent service partners, when an issue arose.
Present day in the telco service market, customers can choose from a vast potential of vendor and carrier services, which can be freely mixed and matched as customers see fit.
This mix and match ability translates into an exponential increase in the number of service partners, further blurring the lines of servi- ce accountability and who to call when things go wrong.
This freedom brought with it additional service challenges for UCaaS service providers. one example of such an often over-looked risk is inter-vendor compatibility.
In the pre- Voice over IP market model, homologation ensured interoperability between vendor equipment and carrier networks, whereas the new VoIP-based model relies on RFC-based standards, defined just loosely enough to allow each vendor to interpret them with subtle differences. This ‘flexibility’ in the interpretation of protocol standards created a new reality, a world filled with ‘almost, intra-vendor compatible’ VoIP solutions and equipment.
UCaaS vendors try to limit this risk by providing ‘compatible endpoint configuration packs’ on their endpoint provisioning servers, hoping as such to circumvent these RFC standards interpretation differences.
The downside of this approach is that these configuration packs depend very heavily on UCaaS suppliers deploying specific firmware and/or hardware versions on their customer’s endpoints, inevitably taking full control over these, typically customer-owned endpoints, blurring the lines of ow- nership and responsibilities.
All too many UCaaS solution providers overlook these potential service-breaking risks when launching ambitious Bring Your Own Device (BYOD) product offerings, resulting in customers being exposed to security, compatibility, functionality and fraud risks.
As a rule of thumb, we can say that the higher the number of variables in the UCaaS service chain that are controlled by the party offering the service, the more secure, stable, functional the service will be.
Although this sounds very logical, the statement may still come as a surprise to many UCaaS providers. For a variety of reasons, only a few UCaaS providers have full control over all the variables in their UCaaS product chain.
So if a customer doesn't want vanilla, what do we give them?
As mentioned before, customers make changes mostly for three reasons: to save money, make money or preferably both.
How can UCaaS help the customer save money?
The traditional UCaaS model consists of two major pricing elements, the monthly subscription fee and the voice minute transfer price.
Any discount on either one of these pricing elements would need to be compensated by either:
1. a monthly commitment on volume,
2. a customised minute rating plan (where price reduction of a few destinations would be offset by a price increase on all other destinations),
3. opting for high compression / low quality minute termination routes with a lower carrier in- terconnect cost; or
4. by using the tool of last resort: a reduced profit margin.
Can the traditional UCaaS business model survive in the age of Digital Transformation (DX)?
So, how will UCaaS survive in the age of Digital Transformation (DX)? Customers are being offered Cloud and Internet Access products based on the power of Software Defined Networking (SDN), allowing them with the simple click of a button to change their connectivity, capacity and service cost?
Thanks to the falling cost and increased power of CPU resources, we are moving from a static network environment, where every network function had its own specific hardware to a new model where the network and its components become software defined.
This intelligent evolution allows customers to increase / decrease their connectivity bandwidth by a simple click of a button.
Scenario: The customer and Microsoft Office 365
A real-life example of this new world could be a customer purchasing a cloud-based Office365 license followed, a minute later, by the purchase of dedicated access to the Microsoft Cloud, ensuring smooth and secure usage of Microsoft applications.
All of these services are delivered within minutes after authorising the order. Zero-touch provisioning will transform minimum contract requirements and render high setup costs obsolete.
For UCaaS to continue to provide real cost savings to the customer, UCaaS needs to evolve into a service model that can be rolled out on top of the SDN network.
Through a simple click of a button the customer will be able to order, activate, modify or expand their UCaaS products.
‘UCaaS is NOT an Island!’ this statement from my first article has now become truer than ever.
For those online button clicks to transform into a fully fledged service, many platforms and technologies need to work in perfect harmony. This is where zero-touch provisioning comes into play.
This technology will, for example:
• fully manage the creation of the ‘data pipe’ between the customer site and the voice network on the SDN network,
• engage with the UCaaS number management system to assign an E.164 telephone number to the service,
• create and push a phone service configuration into the UCaaS core elements, so that all the correct features for that customers service or extension can be activated,
• maybe assign and expedite a sip phone or gateway,
• pre-provision endpoints on the UCaaS provisioning server,
• assign product tariff plans, set credit limits on the Online Charging Service platform,
• update the ENUM servers for number portability and so forth.
A key consequence of the digitalisation of UCaaS will be its evolution towards OPEX-oriented models, where customers can dynamically add and remove PBX subscribers independently of their soft- or hardware nature by clicking a button on their respective carrier’s service portal.
For the UCaaS carrier, Digital Transformation, when executed correctly, will boost UCaaS service flexibility, increase its market potential and reduce its deployment cost.
As UCaaS will undergo its Digital Transformation, traditional subscription and minute margin models will continue to experience further pressure, further accelerating the evolution towards dynamic service models where customers only pay for the services they require, when they require them.
So where does this position UCaaS in the age of buzzwords like ‘Digital’, ‘DX’, ‘Cloud’, ‘Zero-touch provisioning’ and ‘SDN’?
Will UCaaS become obsolete?
On the contrary. For those that embrace the next telephony evolution and successfully transform themselves into true ‘digital’ UCaaS service providers, UCaaS will be a strategic margin component that will allow these providers to continue financing their journey towards ‘Digital Transformation’.
In the new ‘digital’ world where subscription-based products from vendors like Microsoft, Amazon and Google are forcing carriers into single digit margins, we can expect UCaaS, with its typical high double-digit margins to continue its growth both on margin and revenue; keeping carrier investments safe well into the future.
In my next article we will explore how this evolution will change the deployment, service delivery and support models for UCaaS and how all these changes will lead to higher service and product margins.
