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September 28, 2020
The Synergy Research data shows spending exceeded $12 billion during the quarter. Most notably, spending on hosted and cloud offerings grew by 18%. At the same time, spending on on-premises products declined by 18%.
Hosted and cloud now account for more than three-quarters of the market. While most hosted and cloud segments are expanding, growth was particularly strong in teams SaaS, conferencing SaaS and CPaaS. As a result Zoom, Twilio, Vonage and Slack all now feature strongly in the top 10 ranking of collaboration vendors.
John Dinsdale is Synergy Research’s chief analyst and research director. He said the momentum is continuing beyond the second quarter.
Synergy Research Group’s John Dinsdale
“There is a steady and long-term trend toward growth in the overall collaboration market, and that will continue,” he said. “These are services that are essential to the efficient operations of enterprises. The transition away from on-premises products to cloud and hosted solutions will also continue. The speed of that transition has spiked a bit due to COVID-19, so we wouldn’t expect to see as big a shift in future quarters, but the trend is inexorable.”
Within on-premises products, the largest segments are IP telephony, video conferencing, email and content management. Total on-premises spending is in decline; however, there was some growth in video conferencing equipment.
“Any vendor whose focus is on legacy on-premises products, and who doesn’t have a good product story for cloud and hosted solutions, will struggle mightily,” Dinsdale said. “I’m not going to name names, but there are vendors out there who have not been forward looking enough.”
The highest growth segments in hosted and cloud solutions were teams, conferencing and CPaaS. But the largest segments remain hosted PBX and UCaaS, hosted contact center and hosted/cloud email.
While business growth is always healthy, extremely rapid growth can greatly challenge vendor organizations, he said.
“The stress will play out particularly in the ability to successfully provision services and to fully support customers,” Dinsdale said. “When the number of customer accounts grows exponentially, it can be very difficult to maintain quality of service.”
“We were already seeing a steady migration in the collaboration market away from on-premises products and towards cloud solutions,” said Jeremy Duke, Synergy Research’s founder and chief analyst. “CIOs need to find ways of maintaining communications and productivity in a world where remote working is the new norm and offices are sparsely populated. This is a world for which hosted and cloud solutions are perfectly suited.”
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