Synergy & IDC: Hosted and Cloud Services are driving the Unified Communications & Collaboration Markets

In a new report, Synergy Research Group states that spending on premises and cloud collaboration grew 8% from 2021 and is now approaching $15 billion per quarter. The on-premise portion of the market continues to decline steadily and now accounts for only 20% of the total, down from 30% two years ago.

The transition from enterprise use of on-premise products to cloud and hosted services has also been a boon for the collaboration market, which has benefitted in a big way from increased demand due to the rise of hybrid working during the pandemic.  It includes as-a-service (aaS) software such as UCaaS (unified communications), CCaaS (contact center) and CPaaS (communications platform). These three services together grew 17% from last year and now account for more than $7 billion in quarterly spending.

Based on worldwide Q2 revenues Microsoft is the overall leader in total collaboration and continues to hold a steady market share, thanks to a broad portfolio of collaboration products and services. Cisco is the overall number two ranked vendor but is seeing its market share under pressure from Microsoft and companies propelled by the Covid pandemic. The biggest challenger is Zoom, which is now the number three ranked vendor driven by extraordinary growth rates over the last four years. Twilio is the fourth biggest vendor and now has a growth rate far in excess of the other three, as it dominates the rapidly emerging CPaaS market. Twilio’s CPaaS revenue run rate has now reached $2.5 billion per year. Other major vendors with particularly high growth rates include RingCentral, NICE, Five9 and Sinch.

“The impacts of the pandemic opened a tremendous new market opportunity within collaboration, especially in video conferencing services and devices, rapidly driving change that would otherwise have taken a decade to achieve,” said Jeremy Duke, Synergy Research Group’s founder and Chief Analyst  “The collaboration market continues to evolve rapidly, as new technologies and services emerge that increase both management capabilities and productivity of in-office, remote and hybrid workers.”

IDC released a similar analysis of the global Unified Communications & Collaboration (UC&C) market, stating that it grew 11.4% YoY for Q2, reaching $14.8 billion. The market was up about 3% compared to Q1. IDC researchers noted that UC&C growth will continue as a result of increased interest in video conferencing, collaboration and UCaaS technologies.

“We’re seeing more strategic buying decisions by organizations versus fewer short-term reactive decisions in the recent past,” said Rich Costello, senior research analyst for Unified Communications and Collaboration at IDC, in a statement. “While the overall market remains a growth story, providers are starting to see some sales cycles return to the pre-covid pace.”

Some UC&C market specifics include the following:

  • Hosted Voice/UC Public Cloud (UCaaS) revenue grew 17.0% year over year and 4.3% sequentially to almost $5.2 billion in 2Q22.
  • UC Collaboration (including video conferencing software and cloud services) increased 10.2% annually and 1.3% sequentially to $7.2 billion in revenue in the quarter.
  • IP Phone revenue increased 7.9% year over year and 13.9% quarter over quarter to $525 million in 2Q22.
  • IP Phone shipments increased 2.8% year over year and 11.6% compared to 1Q22 to 4.5 million units shipped in the quarter.
  • Enterprise Videoconferencing Room Endpoints (i.e., large video room endpoints) revenue increased 15.6% annually and 27.4% sequentially to more than $525.6 million in the quarter.
  • Videoconferencing Huddle Room Endpoints revenue increased 24.7% year over year and 22.4% quarter over quarter to $263 million in 2Q22.

“We’re seeing more strategic buying decisions by organizations versus fewer short-term reactive decisions in the recent past,” said Rich Costello, senior research analyst, Unified Communications and Collaboration at IDC. “While the overall market remains a growth story, providers are starting to see some sales cycles return to the pre-covid pace.”

The UC&C market saw the following overall positive results in 2Q22 from a regional perspective:

  • In North America (U.S. and Canada), UC&C revenue was up 10.1% year over year and 3.6% sequentially to just over $7.0 billion in 2Q 2022.
  • Asia/Pacific (including Japan) revenue was up 16.8% year over year and 4.1% compared to 1Q22 to almost $3.0 billion in the quarter.
  • EMEA revenue growth was up 8.9% year over year but just 1.0% sequentially to $4.2 billion in the quarter.
  • Latin America revenue increased 20.9% year over year and 3.8% sequentially to $551.5 million in 2Q22.

UC&C Vendor Highlights

  • Microsoft’s total worldwide UC&C revenue was $5.7 billion in 2Q22, up 22.7% year over year and 4.9% sequentially, representing a 38.3% share of the worldwide UC&C market for the quarter.
  • Cisco’s total worldwide UC&C revenue was almost $1.2 billion, up 1.0% year over year and 8.6% sequentially, representing an 8.0% share of the worldwide UC&C market in 2Q22.
  • Zoom’s total worldwide UC&C revenue increased 7.2% annually and 2.1% sequentially to more than $1.0 billion in the quarter, representing a 7.0% share of the worldwide UC&C market for 2Q22.
  • RingCentral’s total worldwide UC&C revenue grew 29.8% year over year and 5.1% quarter over quarter to $424 million, representing a 2.9% share of the worldwide UC&C market for 2Q 2022.