For Canadian Managed Services Providers looking for long-term growth, high margins, and recurring revenue streams, the Unified Communications as a Service (UCaaS) and related Contact Center as a Service (CCaaS) markets represent a compelling business opportunity.
According to research firm Frost & Sullivan, the North American UCaaS market grew by over 30% in both revenue and number of users in 2016 and is forecasted to exceed double-digit annual growth from 2018 through to 2023.
It’s not just the size of the opportunity that makes it attractive. The Canadian voice market, once dominated by complex and capital-intensive hardware-centric solutions, is in the middle of a radical disruption. Smaller, emerging players are challenging the handful of large incumbents with cloud-based solutions that offer clear advantages for both customers and these new providers.
Customers are forgoing traditional capital technology purchases in favor of consumption-based, pay as you go models, and UCaaS solutions fit the bill perfectly — they require minimal upfront investment and are quick to deploy, expand, and upgrade.
Customers are also looking to focus more on their core business requirements and less on managing their technical infrastructure. UCaaS moves much of the burden for design, implementation, and support to the provider, allowing business and IT resources to be reallocated to more strategic initiatives.
While it’s clear that customers are embracing both the capabilities of UCaaS and its opex-based procurement model, what are the benefits for Canadian MSPs?
UCaaS remains a largely untapped market opportunity. The Gartner Group estimates that on-premise solutions still account for 70% of the solutions sold to larger customers. At the same time, according to Gartner’s 2017 Magic Quadrant report, “UCaaS capabilities now exceed those available from premises-based UC solutions.”
While selling premise-based voice solutions is capital-intensive, selling UCaaS requires much less financial investment and involves a much shorter sales cycle.
Selling UCaaS also generates recurring revenue for MSPs, typically for 6-10 years. Growth, upgrades, and integrating new applications all create an ongoing engagement with clients, growing those revenues and making UCaaS a truly ‘sticky’ solution.
MSPs may also benefit from the current trend of customers towards streamlining supplier relationships and embracing ‘one-stop shopping.’ Once engaged with UCaaS, MSPs can position and consolidate other XaaS solutions such as managed security, cloud, and infrastructure services.
While selling UCaaS creates many opportunities for Canadian MSPs, it may require significant investment and business retooling to be successful. As a result, some Canadian MSPs with limited Unified Communications background or capabilities may be tempted to stick with their current core offers and pass on selling UCaaS.
That could prove to be a costly error. Canadian telcos, hungry for new revenue streams, are using UCaaS as a wedge to position other XaaS solutions and benefit from the ‘one-stop shopping’ trend — putting them head to head with competing MSPs.
Established bandwidth and connectivity services, long the bread and butter of the carriers, are more frequently being viewed as commodities by customers. Management consultant and research firm Arthur D. Little (ADL) predicted this shift in their 2015 report ‘Managed services for telecom operators’. According to ADL,“the transformation of once-praised connectivity services into undifferentiated commodities makes the case for managed services all the more compelling for telecom operators.”
The increased revenue and margins associated with selling managed services make the prospect very attractive for carriers. ADL found that customers were willing to pay up to five times more for managed connectivity solutions than for their non-managed counterparts.
ADL also highlighted just how well carrier strengths align with the requirements of building and delivering managed services. Telcos operate highly-available and secure networks supported by 24/7 network operations centers. They have both the internal expertise and monitoring tools to maintain complex network environments. Carriers also know how to manage applications end-to-end and deliver on SLAs.
As they engage with customers, telcos are well aware of the trend towards cloud-based pay-as-you-go solutions, and also of customers’ appetite for one-stop-shopping. UCaaS is a logical insertion point for carriers — in many cases, they are the incumbent provider for voice, network, and services.
Once they gain a foothold with UCaaS, telco sales teams will follow the same path as MSPs and position related network, security, and cloud offerings, then consolidate them under a single purchasing umbrella for the customer. This strategy, executed well, effectively limits other competitor’s opportunity in those accounts.
Canadian MSPs are well aware of this threat. In a recent channel survey conducted by TechnoPlanet and the Corlea Group on behalf of LANtelligence, 90% of Canadian MSPs expressed concern about carriers and other master agents selling competing solutions.
While MSPs see the need to compete in the UCaaS space, they’re faced with a tough reality — despite the hype, implementing UCaaS or CCaaS solutions isn’t easy. A successful UCaaS business requires highly skilled engineering resources, top-notch project management, and deep technical support.
Canadian MSPs looking to engage in the UCaaS market face a key decision, especially if they don’t have a history of selling voice solutions. Do they build capabilities in-house, rely on a master agent, or choose one or two leading solutions providers and depend on their technical and support capabilities?
The consequences of making the wrong choice are top of mind for Canadian MSPs. In the TechnoPlanet survey, over 50% of Canadian respondents identified the lack of design and deployment expertise as a key roadblock to selling UCaaS. In related responses, almost one in three pointed to a lack of sales and support capabilities, and 28% feared losing a customer over a poor deployment.
Building an in-house UCaaS practice allows MSPs to customize their offers to their target customers and differentiate themselves from the competition. But it’s a costly and complex undertaking. Technical and sales resources need to be trained or hired. Vendor certifications, support center requirements, marketing — the list goes on, and much of the investment takes place before there’s a viable sales funnel or revenue stream to support it.
Partnering with a solutions provider addresses some of these issues, but can lock MSPs into a limited range of technology options. MSPs also report limited design or engineering assistance, especially if it involves integration with legacy or competitive solutions. As for ongoing support, many solution providers only offer access to a bare-bones contact center and will often contract out their field support requirements to third parties.
Working with a master agent opens up an MSP’s technology options, but may accomplish little else. Master agents also have limited resources, often relying on solutions providers themselves. They typically don’t offer project management and have difficulties supporting complex integration requirements.
A new partner category, pioneered by leading solutions integrator LANtelligence, promises to fill in the missing pieces of the current UCaaS channel delivery model and provide full support across the solution lifecycle.
Known as Master Solutions Providers, these companies provide a full suite of technical, project management and sales support to the MSP community:
Access to top solutions – Master Solutions Providers will typically evaluate the field of over 70 UCaaS and CCaaS platforms to identify and partner with the most capable, stable and technically superior providers.
Complete Engineering and design support provided by a team of certified, dedicated engineers.
Experienced project managers will ensure each solution is tailored to customer requirements and delivered according to a detailed and documented timeline — all captured in an automated, online project management system.
Available 24/7/365 Technical Support providing full level one/level two support and using real-time CRM alerts to update MSP partners.
Sales and marketing support including inside sales and lead generation to help MSPs engage new prospects and customers.
Advanced Integration with legacy platforms and CRM systems such as Salesforce and ConnectWise.
Canadian MSPs are eager to find a solution to the technical and operational challenges of selling UCaaS and are looking outside their own companies to do it. According to the TechnoPlanet survey, 80% of MSPs are likely to partner with a UCaaS solutions provider that offers expert-level deployment and post-project support.
With sales, technical and support capabilities spanning the entire UCaaS lifecycle, emerging Master Solutions Providers offer a compelling alternative for Canadian MSPs and may provide them with the partnership and resources they need to compete and win in the UCaaS market.
By Chris Poupart
Chris Poupart’s bio: Chris Poupart is a networking and IT industry veteran. As a member of the Cisco Canada executive, he led the Canadian Services team, engaging the Cisco partner community to grow sales and drive customer satisfaction. Prior positions included national sales and channel roles with Cisco, Nortel, and Bay Networks.
Now an independant B2B technology marketing consultant based in Toronto, Chris writes about technology solutions and how they have the power to transform businesses and the workplace
If you would like to learn more about Lantelligence check out this interview with their CEO Martin Tracey