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January 18, 2024
CPaaS providers likely have a bright future ahead as the global market will provide lucrative opportunities for both established players and new entrants in the years ahead.
CPaaS is a cloud-based delivery model that focuses on improving communication channels. It allows companies to add various communication features to their existing business applications.
Our latest CF20 focuses on CPaaS providers. Analysts shared their views on what it takes to succeed with the technology. It includes an updated list and fresh views on changes in the CPaaS market.
The global CPaaS market should reach nearly $131 billion by 2033, registering a compound annual growth rate (CAGR) of almost 28%, according to Acumen Research and Consulting. That’s up from $11.8 billion in 2022.
Michael Brandenburg, senior industry analyst of connected work at Frost & Sullivan, said the CPaaS market is getting caught up in the artificial intelligence (AI) hype cycle. That’s in part due to all of the customer experience and contact center use cases driving it.
Frost & Sullivan's Michael Brandenburg
“I think you're going to start seeing a lot of AI-focused enhancements and features come from the CPaaS providers,” he said. “Being a platform, it's the obvious place for AI to infuse itself. The focus is probably still going to stay on the classic use cases since the beginning of customer engagement and digital channels, and AI is an addition there.”
Also, there’s going to be an additional focus driven by a few providers on fraud detection, Brandenburg said.
“More scrutiny and verification of who is this person calling or, are we sending to valid customers,” he said.
Unlike other markets, such as UCaaS, there’s still room for new providers to grab market share, Brandenburg said.
“Twilio and several others grabbed a lot of the addressable market because of COVID-19,” he said. “Now, ... maybe Twilio was our first pick, but let’s evaluate the market now that we have some time to breathe, and it could transition [to another provider]. So there’s still room in the market for new entrants.”
Raul Castanon, unified communications and collaboration (UCC) analyst at S&P Global Market Intelligence, said several M&A transactions in 2023 highlight how the market is evolving. Tata Communications’ acquisition of Kaleyra, Ooma’s acquisition of 2600Hz, and SharpenCX’s acquisition of Plum Voice highlight an increasingly competitive environment, particularly for CPaaS pure-play vendors.
S&P Global's Raul Castanon
“We believe these transactions anticipate the potential for other CPaaS pure-play vendors to exit in 2024,” he said.
Key trends S&P Global is following include the role of CPaaS enablement vendors — for example, those focused on helping communication service providers deliver API-based communication services, helping telcos reposition within the CPaaS value chain, Castanon said.
“Several factors are coming together that could enable telcos to capture a larger share of the CPaaS market while providing new ways to monetize their 5G infrastructure investments,” he said. “Examples include Infobip’s recent partnership with Brazilian network operators Claro, TIM Brasil and Vivo (Telefonica Brasil) to offer the first camera-compliant number verify, SIM swap and device location APIs. Vonage/Ericsson and Deutsche Telekom also announced a partnership to offer MagentaBusiness API, a platform of communication and network APIs for developers and enterprises.”
Roy Illsley, chief analyst of IT operations at Omdia, which shares a parent company with Channel Futures (Informa), said an ongoing trend in CPaaS is the move to have a true omnichannel integrated experience across voice, text and video, and the use of generative AI to make it accessible.
“The one aspect that has yet to become a major impact on the business is the rise of digital sovereignty,” he said. “How CPaaS meets this potential challenge will be interesting.”
The market has evolved and the rise of generative AI has had a major impact on the concept of customer experience, Illsley said. People now expect seamless movement between different communications channels and don't expect to repeatedly provide any information previously supplied.
“AI will have a massive impact and will change the way services are developed to how the customer uses the communications channels,” he said.
We’ve compiled a list above, in no particular order, of 20 top CPaaS providers. It’s based on analysts’ feedback and recent news reports. The list is by no means complete. It includes a mix of well-known providers as well as lesser-known suppliers making strides in CPaaS.
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