A desire to reduce capital expenditure is driving many businesses to consider investing in hosted IT.
The market for technologies such as hosted telephony and software-as-a-service (SaaS) is predicted to mushroom. But voice and data channel players offer differing projections on how far hosted offerings will spread over the next few years.
Gartner has made ambitious predictions in recent months about the growth of various hosted technologies. The analyst has said unit sales per year of hosted virtual desktops will increase almost a hundred-fold in four years.
Revenue from SaaS in enterprise application markets grew by more than a quarter last year to $6.4bn (£4.4bn) and is tipped to reach almost $15bn (£10.2bn) by 2012. The largest slice of that market comes from content, collaboration and communications, which accounted for about a third of revenue last year.
Opal’s business transformation director Andy Lockwood said there is a trend towards outsourcing a variety of business applications.
“The economic malaise continues to drive firms towards moving their services into the cloud,” he said.
“I expect we will see growth, not just of hosted telephony but managed services as a whole. Businesses want to evolve their services without significant capex investments.”
Lockwood indicated a trend towards lower-cost hardware was driving many VARs to seek annuity revenue streams. He also said the market for hosted offerings would really flourish once IT budgets began to pick up.
“The economic climate has forced people to think in a different way,” he
said. “But the arguments for hosted platforms are strong and, once they have
technology, the commercial and operational benefits are clear.”
Dave Millett, telecoms industry veteran and founder of Equinox Business Consulting, claimed household names such as Google and Skype would continue to drive acceptance of hosted platforms.
“People have got used to the concept of their private email being hosted and a lot of these home-based technologies will get adopted in business,” he added.
Uncertainty will drive adoption
Millett claimed there are no compelling reasons for start-ups to buy hardware in the current climate. He also indicated that economic unpredictability could drive established businesses towards hosted offerings.
“Uncertainty will drive adoption,” he said. “A company with 100 employees may not know if it will employ 70 or 130 in a year’s time. Hosting provides flexibility, but hardware investment is a commitment.”
Carrier Gamma Telecom has sold a hosted offering for years. Group marketing director Richard Bligh said PBX VARs are ready for hosted services.
“It has been reasonably fruitful for us,” he said. “But, as usual in telecoms, the rapid growth of hosting at the expense of PBXs was greatly exaggerated. Traditional PBXs provide the bulk of new sales.”
Bligh added that customers based buying decisions mainly on a product’s features, instead of going hosted for its own sake. He stated that PBX resellers and those from data or IT backgrounds faced differing challenges when selling hosted voice over IP (VoIP).
“PBX VARs need to understand the technicalities of IP,” he said. “Data resellers already know IP but have to get their head around billing. For instance, what is the pence-per-minute rate to Zambia?”
Proving they can bill effectively is one of the steepest challenges facing resellers of hosted platforms, agreed Nick Roullier, UK managing director of VAR Datapoint. He added that proprietary and hosted technologies have differing merits.
“With today’s hosted platforms, there is a trade-off between scale and key features,” he said. “Moving towards a pay-as-you-go model might mean things like messaging and conferencing are not available.”
He claimed hosted was predominantly “an SME play” so far, but investments from key vendors would continue to drive resellers towards annuity models.
“Manufacturers are seeing their hardware sales dropping and most of them are offshoring a lot of their services,” he said. “It is about building a sustainable business.”
Hosted ‘is what we do now’
Reports from research house Infonetics suggest the market for hosted VoIP and managed PBXs grew by more than 50 per cent in both 2006 and 2007. Infonetics claims the market is now worth more than $24bn (£16.4bn) annually and predicts double-digit growth for two more years.
Bligh said that hosted offerings are “part and parcel of what we do now”, claiming that most telephony resellers saw it as “worth carrying in their kit bag”.
Meanwhile, Millett claimed the economic climate and the technology’s growing maturity gave hosted VoIP a chance to make a splash in the communications market.
“It is a golden opportunity,” he said. “If hosted services cannot make it in 18 months, the environment will never be more conducive to it.”
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