Frost & Sullivan: Cloud based UC to emerge as the growth engine in the New Zealand UC market

~ Cisco and Microsoft dominate a two-tiered UC market in New Zealand ~

SYDNEY, Nov. 7, 2013 /PRNewswire/ -- The New Zealand on-premise Unified Communications (UC) market was worth $97.7 million in 2012. This represents a decline of 4.5% from the previous year, mainly due to organisations reducing IT spending and deferring UC investments amid challenging economic conditions. Cost and efficiency pressures are driving the demand for hosted and cloud based solutions, which offer greater flexibility and with minimal maintenance overheads.

Frost & Sullivan's new research, New Zealand Unified Communications (UC) Market 2013, forecasts the overall NZ UC market to grow a CAGR of 6.2% from 2012 to 2019. Government and Banking, Financial Services and Insurance (BFSI) are among the main revenue generating sectors for UC in New Zealand. Both these sectors were cautious with UC deployments over the past year, with a marked decline in large deals. Another key factor for the decline in the UC market is the performance of two major application segments. Enterprise telephony and conferencing and collaboration, which accounted for over 50% of revenues, were impacted by market conditions, and experienced revenue decline. Enterprise telephony was particularly affected, declining by 15.6% from 2011.

Changes in business attitudes towards capital intensive UC deployments are driving interest in hosted and cloud based solutions. Organisations are finding it harder to secure funds to invest in expensive UC infrastructure. This is lengthening the decision making process and thereby the overall sales cycle. Organisations are beginning to closely evaluate hosted and cloud based alternatives at the time of their UC infrastructure refresh. This shift in market attitude is forcing UC vendors and channel partners to change their go-to-market strategies.

Audrey William, Head of Research, ICT Practice, Frost & Sullivan ANZ says, "There is a growing demand for flexible and feature rich UC solutions at affordable price points. Vendors such as Interactive Intelligence and Mitel have built their business strategies on addressing this demand, and are experiencing high growth rates. Demand for hosted and cloud based solutions is also beginning to gather momentum as organisations increasingly prefer more flexible solutions that offer usage based pricing. The shift from on-premise to cloud based solutions is tightening profit margins in the UC market. Vendors and channel partners have realised UC related services (including managed services and cloud based solutions) are the growth engine of the future."

The New Zealand UC market has become a two-tiered market with the top two vendors accounting for over 40% of the overall market and a number of vendors competing for the remaining share. Cisco and Microsoft see each other as the biggest competitors in the market, mainly due to the breadth of UC solutions offered. Both these vendors have a strong collaboration focus and leverage their respective expertise in networks and desktop applications to drive growth.

"Microsoft Lync is a disruptive factor in the New Zealand UC market as it gives Microsoft the ability to offer core functionality such as IM, presence, voice and video on a single platform. Lync's defining feature of serving as a PBX is driving many organisations to evaluate Lync at the time of their PBX renewal as an option to simplify and reduce costs in their UC infrastructure," William explained.

Anand Balasubramanian, Industry Analyst, ICT Practice, Frost & Sullivan ANZ, says, "Cisco and Polycom dominate the New Zealand video conferencing market, collectively accounting for over 95% of market share. Over the last few years, both vendors recorded high growth rates driven by strong demand and a general lack of competition in the market. Through their products and strong channel partnerships, Cisco and Polycom have built very high barriers to entry."

He elaborated, "However, cautious spending towards video conferencing hardware and changing business attitudes toward cloud based alternatives are challenging the status quo. The emergence of a new breed of vendors is threatening the established business model of these players with players such as Blue Jeans expected to enter the market with cloud based video conferencing solutions in the next few years. The ability of cloud based models to bypass the on-premise based infrastructure will be a major driving factor for uptake over the next few years."

Contact centre applications were a segment that recorded growth in 2012. While Genesys and Avaya recorded moderate growth, emerging vendors such as Interactive Intelligence recorded triple digit growth. Traditional contact centre vendors will also face competition from cloud based vendors expected to enter the New Zealand market in the next few years. A weaker New Zealand Dollar against the Australian Dollar is making New Zealand an attractive destination for outsourcing customer support functions from Australia. As a result, many Australian businesses moved their contact centres (either partly or fully) to New Zealand. This demand for outsourced contact centres was one of the main reasons the overall contact centre applications market grew in 2012.

Frost & Sullivan New Zealand UC Market Report 2013 forms a part of the Frost & Sullivan Enterprise Communications Research program. All research services included in this subscription provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants. The report also includes survey results and statistics of 227 IT decision makers in Australia to understand market behaviour and views towards Unified Communications (UC). Respondents were senior management level executives, IT managers and IT decision makers with control of or insight into the technology budget and strategy of their organisations.

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