communications paas: turningmobile communications and cloud-based collaboration are key components...

©2018 451 Research, LLC | WWW.451RESEARCH.COM

Communications PaaS: Turning Business Communications Inside Out

Raúl Castañón-Martínez, Senior Analyst, Workforce Collaboration and Communications

Business communications is transitioning into an open, software-defined ecosystem

that will enable intelligent, communications-enabled workflows for customer and

employee interactions. We look at the role that programmable communications will play

in this transformation and outline the four key attributes that will define the emerging

business communications ecosystem.

DEC 2018

THOUGHT LEADERSHIP

REPORT EXCERPT

THE FOLLOWING IS AN EXCERPT FROM AN INDEPENDENTLY PUBLISHED 451 RESEARCH REPORT, “COMMUNICATIONS PAAS: TURNING BUSINESS COMMUNICATIONS INSIDE OUT” RELEASED IN DECEMBER 2018 .

TO PURCHASE THE FULL REPORT OR TO LEARN ABOUT ADDIT IONAL 451 RESEARCH SERVICES, PLEASE VIS IT HTTPS://451RESEARCH.COM/PRODUCTS OR EMAIL [email protected].

A B O U T 4 5 1 R E S E A R C H451 Research is a leading information technology research and advisory company focusing on technology innovation and market disruption. More than 100 analysts and consultants provide essential insight to more than 1,000 client organizations globally through a combination of syndicated research and data, advisory and go-to-market services, and live events. Founded in 2000 and headquartered in New York, 451 Research is a division of The 451 Group.© 2018 451 Research, LLC and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication, in whole or in part, in any form without prior written permission is forbidden. The terms of use regarding distribution, both internally and externally, shall be governed by the terms laid out in your Service Agreement with 451 Research and/or its Affiliates. The information contained herein has been obtained from sources believed to be reliable. 451 Research disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although 451 Research may discuss legal issues related to the information technology business, 451 Research does not provide legal advice or services and their research should not be construed or used as such. 451 Research shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

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A B O U T T H E AU T H O R

RA Ú L CASTA Ñ Ó N - M A RT Í N E ZSENIOR ANALYST, WORKFORCE COLLABORATION AND COMMUNICATIONS

Raúl Castañón-Martínez is a senior analyst based in Boston focusing on business communications and collaboration technologies such as enterprise messaging, voice, bots, speech recognition and unified communications. Before 451 Research, he was a product manager at EMOSpeech, analyzing emotion recognition technology. At Comverse Network Systems, he gained significant experience in product marketing working with tier one mobile operators to define strategy, pricing and business models for voice and data products. Raúl is widely quoted in the top tier press including publications like CIO, Computer World, Fortune and Wired.

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Table of Contents

1. THE RISE OF THE SOFTWARE-DEFINED BUSINESS COMMUNICATIONS ECOSYSTEM 1

PROGRAMMABLE COMMUNICATIONS WILL TRANSFORM ENTERPRISE WORKFLOWS AND BUSINESS PROCESSES 1

Figure 1: The Type of Worker and Nature of Their Workflows Dictate Communications and Collaboration Requirements 2

KEY ATTRIBUTES IN THE SOFTWARE-DEFINED BUSINESS COMMUNICATIONS ECOSYSTEM . . . . . . . . . . . . 2

Figure 2: The Software-Defined Business Communications Ecosystem � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 3

THE SIGNIFICANCE OF THE CPAAS MODEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

WE ARE NOW IN THE SECOND ERA OF CPAAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Figure 3: Evolution and Emergence of Enterprise-Focused CPaaS � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 4

Figure 4: The Shift to CPaaS 2�0 Is Driven by Web-Based Communications and the Expansion into the Mainstream Enterprise Market � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 5

CPAAS WILL BE A $6BN MARKET IN FOUR YEARS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Figure 5: CPaaS Will Grow at a CAGR of 31% in the Next Five Years� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 6

Figure 6: CPaaS Market Monitor at a Glance � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 6

2. VENDOR LANDSCAPE 7

THE CPAAS COMPETITIVE LANDSCAPE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Figure 7: Market Segmentation for CPaaS � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 7

INNOVATIONS DRIVING THE SOFTWARE-DEFINED BUSINESS COMMUNICATIONS ECOSYSTEM . . . . . . . . 10

Figure 8: Innovations in the Software-Defined Business Communications Ecosystem � � � � � � � � � � � � � � � � � � 11

3. INDUSTRY OUTLOOK: CUSTOMER ENGAGEMENT, SECURITY AND AI WILL DRIVE M&A ACTIVITY 15

Figure 9: Timeline of Sample CPaaS and Cloud Communications-Related M&A Transactions 2015-2018 � � � � � 15

4. CONCLUSIONS 17

5. FURTHER READING 18

6. INDEX OF COMPANIES 19

REPORT EXCERPT


1. The Rise of the Software-Defined Business Communications Ecosystem

451 Research contends that business communications will transition into an open, software-defined ecosystem that is diametrically opposite to the closed, hardware-centric systems that have dominated the industry for the past two decades. This will result in a shift from the prevailing siloed, one-size-fits-all applications to flexible solutions that enable real-time, communications-enabled workflows. CPaaS will play a major role in this transformation.

PROGRAMMABLE COMMUNICATIONS WILL TRANSFORM ENTERPRISE WORKFLOWS AND BUSINESS PROCESSES451 Research believes that the emerging software-defined business communications ecosystem will evolve as a platform that will support a wide range of use cases, addressing the communications and collaboration requirements defined by the different types of workers and the nature of their workflows (see Figure 1). The software-defined business communications ecosystem will enable workers across the organization to integrate different communications modes – including messaging, chat, voice and video – into their business workflows. Coupled with the capabilities afforded by mobile communications and cloud computing, this will enable new work arrangements, including remote workers, mobile workers and gig economy workers.

We believe these emerging work arrangements reflect a fundamental shift in how we organize work: The conventional office and 9-to-5 work arrangement are giving way to a distributed work environment, which we define as the technologies that come together to enable IT to provide employees with secure, real-time access to business applications and resources, regardless of their location or the device or network they choose to use.

Traditional business communications – including unified communications and email – have focused largely on knowledge workers and office workers; this also applies to newer tools such as team collaboration, which surged in popularity in the last three years. We believe the software-defined business communications ecosystem will evolve to encompass all types of workers, including those in non-desk work environments such as field workers, frontline employees and remote workers.

• Knowledge workers: Employees whose job involves transforming or managing information. Their work is largely defined by unstructured processes and outcomes and entails a flexible schedule and work location. They include ‘road warriors’ and mobile workers, and employees with flexible work arrangements (work from home). These workers interact and collaborate regularly with each other and rely on different communications modes – including messaging and chat, voice calls, and voice and video conferencing – using traditional and emerging tools including unified communications, email and team collaboration. Examples include software developers, marketing and communications professionals, software engineers, sales professionals and business managers.

• Task workers: Employees whose job requires handling or consuming information. Their work is based on structured processes with defined outcomes and entails clearly defined shifts or work schedules and location. Their collaboration needs are dictated by business workflows, and for some positions may include interacting with customers; this is the case for call center agents and field work technicians. While the former is the target group for contact center solutions, this group includes workers who, until recently, had remained outside the scope of traditional business communications. This can be explained by the nature of their work, which may entail mobility, as in the case of healthcare practitioners and field technicians.

• Service workers: Employees whose job does not involve the use of information or is largely based on data entry. Their work tends to be highly structured with discreet, measurable outcomes, and their schedule and work location are defined by business workflows. The workflows for some workers in this category may involve customer interaction; this is the case for frontline workers such as hotel housekeeping staff, fast food restaurant workers and customer-interfacing positions in retail. Other examples of service workers include logistics and transportation jobs such as warehouse employees and drivers. In a similar way as the previous category, this group includes workers who have largely remained outside the scope of traditional business communications.

REPORT EXCERPT

C O M M U N I C AT I O N S PA A S : T U R N I N G B U S I N E S S C O M M U N I C AT I O N S I N S I D E O U T


Figure 1: The Type of Worker and Nature of Their Workflows Dictate Communications and Collaboration Requirements Source: 451 Research, 2018

KEY ATTRIBUTES IN THE SOFTWARE-DEFINED BUSINESS COMMUNICATIONS ECOSYSTEMThe software-defined business communications ecosystem will evolve as a continuation of existing categories but will be significantly different in its architecture, with programmable communications playing a major role.

We expect the space will continue to be defined in terms of the broad use cases that business communications applications seek to address (e.g., customer engagement and employee engagement) with technologies such as CPaaS catalyzing existing product categories to evolve – in particular, unified communications as a service (UCaaS) and the contact center as a service (CCaaS). CPaaS will influence their roadmaps with capabilities that will provide much more flexibility in the delivery of business outcomes those communications solutions aim to provide. This will enable organizations to address a broader set of use cases.

The software-defined business communications ecosystem will evolve based on a series of attributes that support a distributed work environment and address the collaboration and communication requirements of different types of workers in a highly customizable way. They are:

• Ubiquitously accessible. Mobile communications and cloud-based collaboration are key components in the software-defined business communications ecosystem, providing employees with ubiquitous access to content and applications, regardless of their location or the device or network they choose to use.

• Workflow-defined. Communications and collaboration will be tightly integrated with business workflows and business applications in the software-defined business communications ecosystem. This will be enabled by two key capabilities: pre-built and do-it-yourself integrations that enable integration with business processes and other applications, and programmable communications that will allow organizations to further customize workflows.

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• Intelligent. Artificial intelligence (AI) in the form of machine learning (ML) and natural language understanding (NLU) will have a major impact in the evolution of the software-defined business communications ecosystem, enabling organizations to intelligently orchestrate interactions with and between employees and customers in real time.

• Secure and compliant. Security and compliance will become increasingly relevant for business communications and collaboration, given recent events that are influencing the evolution of security standards such as GDPR and the California Consumer Privacy Act. A key attribute in the software-defined business communications ecosystem will be the ability to provide secure access to business resources, regardless of the location or device that employees choose to use. This includes use cases with higher complexity such as mobile and remote workers, as well as employees whose work location and schedules are dictated by their workflows, as in the case of healthcare practitioners or field technicians that move between locations.

THE S IGNIF ICANCE OF THE CPAAS MODELThe growth of this ecosystem is being spurred by new platform models supporting technologies that enhance real-time communications and collaboration to intelligently and securely enable interactions between employees and with customers. CPaaS is the key catalyst, emerging over the past decade as a highly disruptive model for delivering business communications that allows developers and organizations to tightly integrate communications into business applications and workflows.

Our definition of CPaaS refers to vendors that provide APIs, SDKs and libraries intended to allow developers to integrate voice, video, chat and messaging communications into their web and mobile applications. Developers and organizations will use these services to enable features such as push notifications, voice and video click-to-call capabilities, and two-factor secure authentication. When leveraged strategically, it can help organizations redefine how they engage with their clients, partners and employees.

Early CPaaS initiatives date back 20 years to projects such as the Parlay Group, a consortium created in 1998 to define APIs for the telephone network; this later evolved into OneAPI, a set of APIs supported by the GSM Association (GSMA). We can also trace its roots to concepts such as communications-enabled business processes (CEBPs), which refer to the integration of communications into software-enabled business processes and applications to enable business processes automation (BPA).

Industry consensus places the emergence of CPaaS around 2008 with developer-focused, cloud-based providers of telecom APIs such as Twilio and Nexmo. Its rise is intertwined with the emergence of digital-native companies such as Airbnb, Uber and WhatsApp. These companies have leveraged CPaaS to develop a disruptive user experience, enabling groups of users to connect and engage with each other in real time. While at first glance they might seem like a more convenient or polished variation of existing services such as booking a hotel room or hailing a taxi cab, a closer look reveals that the end-user experience has been critical for service adoption, driving user behavior in a disruptive way and in the process creating entire new economies and spend behaviors.

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The disruption is evident in the ways in which users access the services and engage with providers. Industry-changers like Alibaba, Airbnb, eBay, Lyft and Uber provide virtual platforms that enable groups of users to connect and engage with each other. Engagement can take different forms, from peer-to-peer (P2P) messaging using mobile apps like Facebook Messenger and WhatsApp; to P2P lending with players such as Upstart, Prosper and Funding Circle; or to giving someone a ride or hosting a guest in a spare room in the case of ‘sharing economy’ apps such as Uber and Airbnb.

These companies have benefited from the platform business model, which is based on building the infrastructure that provides suppliers with the means for efficient delivery of their products and services and enables consumers to access them. This can involve several interactions between suppliers and consumers to exchange information about availability and demand, followed by the actual exchange or delivery of these products and services and the payment transaction. In the case of Uber and Lyft, this translates into identifying an available driver, coordinating pickup, delivering the service and completing the payment. For Airbnb and Hotel Tonight, it translates into identifying available lodging, coordinating the stay and completing payment. Each of these steps entails curating a tight, engaging user experience around different forms of secure application-to-person (A2P) and P2P communications and several other technologies that come into play.

WE ARE NOW IN THE SECOND ERA OF CPAASThe early definition of CPaaS in terms of public switched telephone network (PSTN) connectivity has been surpassed and augmented by new capabilities enabled by IP-based communications and WebRTC technology. These technologies are defining the emergence of what the industry now refers to as CPaaS 2.0, as shown in Figure 3.

Figure 3: Evolution and Emergence of Enterprise-Focused CPaaS Source: 451 Research, 2018

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451 Research contends that the transition into CPaaS 2.0 coincides with a major shift in the market. CPaaS is expanding beyond the early adopters of developers and digital-native companies, and into the mainstream enterprise market. The success of companies like Uber and Airbnb – and more specifically, the way in which these companies have leveraged the platform business model to disrupt the transportation and hospitality industries – is leading enterprises to consider the use of programmable communications to redefine how they engage with partners, customers and employees. Our use of the term in this report will therefore refer to both the new technical capabilities afforded by CPaaS 2.0 as well as its expansion into the enterprise segment, as shown in Figure 4.

Figure 4: The Shift to CPaaS 2.0 Is Driven by Web-Based Communications and the Expansion into the Mainstream Enterprise MarketSource: 451 Research, 2018

The emergence of CPaaS 2.0 is consistent with key trends identified in 451 Research’s 4SIGHT report, a framework that defines four broad themes that we expect will shape the digital transformation agenda over the next 10 years and beyond (Contextual Experience, Invisible Infrastructure, Pervasive Intelligence and Universal Risk). More specifically we see CPaaS as one of the underlying technologies driving Contextual Experience, which we define as “interactions between a customer, worker or citizen and an organization that are augmented by rich sources of real-time information, delivered to them in the right format and at the right time, for an experience that is friction-free, empowered by technologies such as smartphones, machine learning and the cloud.”

It is also consistent with our understanding of Invisible Infrastructure, which describes “the evolution of IT and communications infrastructure to meet the demands of modern, digital organizations, enabling technology consumers to assemble, access and pay for digital services in a simple, seamless and automated manner, without specific knowledge of the underlying physical infrastructure.”

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2. Vendor Landscape

The emergence of the software-defined business communications ecosystem has resulted in a reshuffling of the competitive landscape, with emerging players entering the market and a repositioning of incumbent providers. CPaaS providers are increasingly overlapping with providers of UCaaS and CCaaS. This has led incumbent players to expand into programmable communications to counter the challenge and seek differentiation. More recently, the space has grown increasingly competitive with a new wave of enterprise-focused CPaaS 2.0 vendors entering the market. In this section we look at how the competitive landscape for CPaaS is evolving; we also highlight companies we regard as innovative within their segments and good examples of the key attributes in the software-defined business communications ecosystem.

THE CPAAS COMPETIT IVE LANDSCAPEVendors in our CPaaS competitive landscape are segmented based on a framework that builds on four major criteria to identify how they define their products and go-to-market strategies. We first introduced this framework in our report Four categories defining the competitive landscape for communications PaaS, published earlier in 2018. Based on this framework we have identified three key segments, as shown in Figure 7.

Figure 7: Market Segmentation for CPaaS Source: 451 Research’s Market Monitor, 2018

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