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APAC firms to tap on hosted UC in downturn

Enterprise caution on IT spend in next two years will drive growth of hosted unified communications services in the Asia-Pacific region, predicts Frost & Sullivan.
Written by Vivian Yeo, Contributor

Conservative spending patterns of businesses in the Asia-Pacific region over the next two years will favor spending on hosted unified communications (UC) services, according to market analyst Frost & Sullivan.

The region's investment trend--preferring operating expenditure over capital expenditure--will help revenues from UC services in the region grow at an eight-year compound annual growth rate of 14.2 percent, Frost said in a media statement Tuesday. The Asia-Pacific UC services market will reach US$6.6 billion in 2014, from last year's US$2.6 billion.

"In the next 24 months, businesses will look to spend-to-save and focus heavily on technologies that can help reduce costs and optimize resources," noted Har Yen Yen, senior industry analyst at Frost & Sullivan. "While CIOs understand the potential benefits of newer and emerging technologies such as UC in meeting these priorities, the high upfront cost of full-scale UC deployment is a big limiting factor.

"The hosted model allows enterprises to trial and experience the real value of UC without the significant capital investments," she added.

According to Frost, UC services offered via a utility-based pricing model--the most commonly contracted UC services--will continue to account for slightly over 50 percent of total UC revenues in 2009. These services include telephony, e-mail and conferencing provision.

Increased adoption is also expected for managed UC services, currently the smallest segment in UC services with a share of about 8.3 percent. The increased uptake will come about as more businesses find it viable to outsource such functions and eliminate the need for costly in-house technical expertise, said Frost.

Professional services, which encompass consulting, implementation and integration, accounted for 22.2 percent (US$575 million) of the region's total UC services revenues in 2007 and by 2014 will grow to US$1.7 billion, just over a quarter of the overall market, the analyst forecasted.

On the decline, however, is maintenance UC services, which accounted for 16.6 percent, or US$430.3 million, of the total UC services revenues in 2007. This, noted Frost, is a result of maintenance being increasingly viewed as a standard service in hosted or managed services contracts. Bundling maintenance, as well as focusing on "higher-margin services such as consulting, integration and implementation" would help service providers and system integrators compete more effectively, it said.

The biggest obstacle in the way of wider enterprise adoption of UC technologies, said Har, is the difficulty in "quantifying real productivity gains and demonstrating tangible ROI".

Complexity in implementation also poses a challenge, she pointed out. "The whole UC deployment process involves long-term strategic planning requiring business process re-engineering, and in some cases, a complete change management program. It involves changes to existing structures and the way people work; which is why very few enterprises are committed to changing the already established work cultures and embark on UC deployments, explained Har.

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