Cisco's Cloud UCC Offering

Key Findings

• Cisco has signed up 35 partners across the globe for delivery of unified communications as a service (UCaaS). Approximately 20 have generally available offerings, with the balance having rollout schedules over the coming six months. Cisco continues to recruit more partners.
• Expect to pay $15 to $45 per user per month (PUPM) for Cisco's Hosted Collaboration Solution (HCS) UCaaS offering. The pricing variations are based on the number of unified communications (UC) services procured, contract size, country market, and individual delivery partner.
• The largest barrier to Cisco's UCaaS success remains the back-end office toolset. Getting multiple UC products to run in a cloud environment while integrating with the channel partner's back-end office environment is a major undertaking.

Recommendations

• Consider Cisco's HCS UCaaS if you seek a feature-rich, Cisco-centric solution. Users with significant customization requirements will be better served with a customer premises equipment (CPE) delivery.
• Existing users of CPE-based Cisco UC will need to analyze and negotiate the licensing terms for transitioning to Cisco UCaaS. While Cisco does now have a cloud compensation transfer policy in place, it is still not a fully transparent process.
• Perform due diligence on your Cisco UCaaS channel partner. Ensure that they offer the requisite ancillary services — such as Internet Protocol (IP) Multiprotocol Label Switching (MPLS) — that are important to your organization.

Cisco has developed a UCaaS infrastructure, HCS, whereby services are supported and delivered by third-party channel partners. End users seeking Cisco UCaaS technology do not, therefore, go directly to Cisco but rather to a channel partner.

The Cisco UCaaS offering has experienced delays that are largely attributed to the technical challenges of offering a highly-scalable, real-time, cloud UCC service supporting multiple communications modalities. Nonetheless, many of the partners now report that these hurdles have been largely overcome and they are now supporting a number of multi-thousand-endpoint deployments. Through 2012, Gartner expects most partners to be delivering UCaaS in their core region (for example, Orange will focus on Europe and Verizon on North America). Many partners will expand to global deployments in 2013 as they add data centers in different regions. Gartner estimates that there are currently approximately 300,000 endpoints supported by Cisco HCS through various channel partners, with 750,000 expected by 2Q13.

A summary status of the maturity of Cisco HCS is presented in Figure 1. Cisco has been successful in establishing partner contracts — getting the HCS data centers built out (spanning North America, Europe, and Asia/Pacific) and working with partners to achieve general availability of service — all the way up to helping partners roll out early customer deployments. There are two areas where Cisco HCS is still in the early stages of deployment:

• Scaling — Supporting numerous large user accounts with 10,000 or more activated employees.
• Rich UC adoption — Having end users deploy a full complement of services, particularly Web conferencing and contact center which utilize different underlying operations support system (OSS)/business support system (BSS) tools for service management.

HCS = Hosted Collaboration Solution; UC = unified communications; UCaaS = unified communications as a service

Source: Gartner (September 2012)

Technology Description

The Cisco UC cloud architecture, as illustrated in Figure 2, has three core components:

• HCS — Provides functionality for IM, presence, VoIP, voice mail, desktop video (with dial plan integration), mobility, and contact center. The Cisco HCS infrastructure is maintained and operated in the channel partner's data center.
• WebEx — A set of Web, audio, and videoconferencing services operated and maintained by Cisco out of its dozen or so global data centers. The channel partner then wholesales these WebEx services (from Cisco) to its customers. Gartner expects Cisco to expand the available set of partner wholesale communications and collaboration capabilities in forthcoming releases.
• Support platform — This is an OSS/BSS suite designed to operate the UC and collaboration environment from the partner data center. It includes a set of servers and delivery software to cloud-enable third-party delivery of UC services. Some of the key capabilities provided by the support platform include service provisioning, performance management and domain management.

SIP = Session Initiation Protocol; UC = unified communications; UCaaS = unified communications as a service

Source: Gartner (September 2012)

There are two other key ingredients that are part of the Cisco cloud UC environment:

• First, there are the value-added services (VAS) that channel partners contribute to the Cisco HCS offering. Examples of VASs include managed LAN/WAN/Wi-Fi, IP MPLS networks, security, Session Initiation Protocol (SIP) trunks, and fixed-mobile convergence — which can leverage HCS's IP Multimedia Subsystem (IMS) Service Control interface.
• Second, there are Cisco's professional services to help the channels become market ready; that is, to build out the infrastructure and tune the environment — complete with technical knowledge transfer.

Technology Definition

UCaaS is provided over multitenant or virtualized infrastructure that is owned, maintained and hosted by the provider. Users purchase the service based on a PUPM fee. UCaaS is the cloud delivery alternative to CPE-based UC. As such, UCaaS supplies equivalent functions spanning integrated IM/presence, telephony and mobility, messaging, and conferencing.

A confluence of business drivers spanning vendor licensing policies, time-to-market schedules, technology complexities and vendor market share objectives have pushed the UCaaS market toward single vendor solutions (as opposed to best-of-breed). This trend applies not only to Cisco, but to other UCaaS vendors including Microsoft, Google, Siemens, and ShoreTel's M5 acquisition.

Standards

The Cisco UCaaS implementation emphasizes an "off the shelf" set of rich UC functions delivered via Cisco's proprietary standards. The off-the-shelf descriptor highlights that Cisco's UCaaS is designed for wide-scale, repeatable deployments. Users secure the majority of their functionality via Cisco technology identical to that used in CPE deployments: for example, Jabber, Unity Connection, Communications Manager, WebEx, Contact Center Enterprise, and Telepresence.

UCaaS is a strategic offering for Cisco. Gartner therefore expects Cisco to expand functionality in future releases: in areas such as videoconferencing, video content management, business collaboration, and third-party federation. Non-Cisco product integration primarily occurs in those cases where other vendors lead the market, such as with Apple smartphones, Apple iPads, and Microsoft Exchange (email).

Cisco HCS currently runs on release UC 8.6 software, while the CPE-based UC offering is at release 9.0 (August 2012). Given Cisco's commitment to cloud feature/functionality parity with CPE, Gartner would expect a UCaaS release 9.0 in early 4Q12.

A major component of the Cisco UC architecture is the Jabber client — based on the Extensible Messaging and Presence Protocol (XMPP) standard. Jabber consolidates many of Cisco's legacy UC clients, such as Cisco Unified Personal Communicator (CUPC), Movi, and WebEx Connect. A key strength of Jabber is its ability to work across a broad base of mobile endpoints, including iOS and Android. Jabber can be installed on the iPad tablet to replace the traditional telephone handset. The Jabber video capability now supports four-way video, H.264 scalable video coding codecs, and HD quality. Other key Jabber capabilities include IM/presence integration with Microsoft Outlook and Office, and IM federation. Jabber achieved general availability in 1H12 and is therefore just starting to get adopted by end users.

Operating Requirements

The biggest challenge with Cisco HCS UCaaS is the OSS/BSS support infrastructure. This includes service provisioning, performance and network management, billing, and customer support. Users may not be interested in these functions, but their execution is vital to the quality of experience and is therefore relevant to this discussion. The challenges are even greater, given that Cisco UCaaS supports: (1) real-time services, and (2) global deployments designed to support millions of endpoints.

A high-level architecture of the Cisco OSS/BSS environment is depicted in Figure 3. The software components that comprise this architecture are built by Cisco, and selected technology partners are brought in such as VOSS for service provisioning and InfoVista for mediation. The HCS architecture is part of Cisco's broader Unified Computing System (UCS) data center architecture, which includes the server virtualization capabilities.

IP = Internet Protocol; UCM = Unified Communications Manager

Source: Cisco

An additional hurdle with the Cisco UCaaS ecosystem is integration into the partner environment. Partners have back-office environments that must tie into the Cisco architecture via APIs. Communications service provider (CSP) OSS/BSS environments are particularly complex (leveraging toolsets that are decades old), leading to integration cycles of six to 12 months. Therefore, system integrators (SIs) have been quicker to market than their CSP counterparts in delivering Cisco HCS solutions.

The complexities of the back-office environment are the central reason for the slower than expected (that is in 4Q10) customer deployments. Nonetheless, Gartner is aware of at least five channels reporting that these early roadblocks have been largely overcome — as evidenced by their support of a number of multi-thousand-endpoint deployments. However, these early deployments do not typically leverage the full base of UC functions, focusing instead on voice over IP (VoIP), messaging, desktop video, and IM/presence. The Web conferencing and contact center functions reside on different domain managers, and are not yet tightly integrated into the software delivery architecture.

Uses

Cisco HCS is designed for businesses seeking a rich set of cloud UC functions based on Cisco intellectual property. The architecture suits from midsize businesses (down to 250 to 500 employees) up to large enterprises of 100,000-plus employees, though upper end proof points have yet to be achieved. Gartner expects future hardware infrastructure density improvements to make HCS cost-effective for the small or midsize business market — that is, down to 50 to 100 employee deployments.

Benefits And Risks

With Cisco HCS, businesses can: (1) avoid upfront capital expenses, (2) do not have to support an internal UC IT staff, and (3) secure access to the most current product releases. Cisco provides a role-based portal that enables IT administrators to manage employee accounts. Similarly, employees have a portal enabling simple modifications based on their work preferences.

Early indications are that larger organizations experience schedule bottlenecks during the front-end integration phase. Notable problem areas include recreating dialing plans and integrating parts of the legacy environment (for example, running in a hybrid environment with an existing on-premises voice mail system). Those businesses opting for a complete Cisco-centric telephony refresh experience a faster delivery. Cisco HCS does operate relatively well once the service is up and running. The integration hurdles just discussed are similar to what users have experienced when transitioning from CPE email to cloud email.

Technology Alternatives

Users with deep customization requirements are typically better served with dedicated platforms — often internally operated and managed. The shared cloud Cisco HCS value proposition loses steam for those organizations performing significant integration with legacy infrastructure, especially non-Cisco legacy infrastructure.

The Cisco HCS offering can also be configured in a private cloud architecture for large environments seeking stronger customization. While Gartner does not have the specific economic details on private cloud configurations (because there are few implementations to date), we believe they will be favorable for deployments above 25,000 endpoints.

Selection Guidelines

Potential Cisco HCS users should analyze the cloud licensing agreements. This is particularly true for existing Cisco CPE users — with Cisco Unified Workspace Licensing (CUWL) licenses — transitioning to the cloud.

Cisco recently introduced a program that provides channel partners with HCS licensing price discounts when the end customer is registered as a cloud migration customer (that is, an existing CUWL holder). The channel can then pass these savings to the customers (via rebates or monthly service discount fees), recognizing the intellectual property already purchased via CPE. The registration and ordering process for these migrations is now automated. This new cloud migration program is an improvement on Cisco's previous policy and should help accelerate HCS adoption. However, it is not a fully transparent process and users should analyze and negotiate the financial arrangements.

Gartner expects most contracts to be in the three-year, sometimes five-year, range. These longer contracts are because the transition to cloud VoIP is more complex than other cloud offerings, such as infrastructure as a service. Recreating dialing plans, configuring handsets, integrating mobile devices and matching users to template offerings are among the time-consuming installation activities.

Price Performance

Gartner now sees more consistent and competitive PUPM pricing for Cisco UCaaS. Pricing is approximately $15 to $20 for telephony. Additional packages are then $2 to $3 for unified messaging, $5 to $8 for mobility, and $5 to $15 for WebEx video and Web conferencing — yielding a cumulative price in the $15 to $45 PUPM range. The pricing for contact center is still maturing, because few deployments have included this newer capability as yet. Gartner expects contact center functionality to be in the range of $80 to $150 per agent per month.

These prices are market indicators, and will vary considerably based on the channel partner, contract size, contract duration and customer location. The price ranges of WebEx and contact center are inherently broad, because there are so many options for users to select from — each priced at an additional fee. For example, with WebEx there are teaching modules, event recording capabilities, and the ability to support thousands of attendees. Users may also opt for other bundled services delivered by the partner, such as SIP trunks and security.

Cisco encourages its partners to offer a set of tiered service pricing templates, typically from three to six. Based on the job role of each employee, he or she gets a matching UC service offering. Thus, a basic office worker procures a simple telephony package for $15 to $20 per month, while the executive team procures a full UC solution (including Web conferencing, video and mobility) at $35 to $45 per month (possibly more). Cisco's partners are largely supporting the spirit of this model. Each partner has the ability to brand its offering complemented with VAS. Thus, CSPs with a wireless offering are likely to emphasize mobility and IMS features.

Technology Providers

As of 3Q12, Gartner estimates that Cisco has 35 channel partners, with about 20 active across the geographies of North America, Europe and Asia/Pacific. Most cloud channel partners are also Cisco CPE UC channel partners; consequently, they include the major CSPs (AT&T, BT, Orange, NTT, Sprint, Verizon and Vodafone), global SIs (Accenture, ACS, CSC and West), and regional SIs (Fujitsu, NWN and En Pointe). Others, such as Intelliquent, participate as wholesalers. Gartner expects Cisco to secure a total of 100 or more channel partners to build an HCS deployment over the next three years, which is 5% to 10% of its existing CPE UC channels. Many remaining UC channels will likely resell the services of wholesalers such as Intelliquent. Cisco UCaaS channels will be supported by a parallel Cisco sales force, to provide technical UCaaS expertise.

Gartner expects UCaaS delivery to be a disruptive market force, with many channels exiting the business. This will happen not only with Cisco, but also with vendors such as Microsoft and ShoreTel. A segment of cloud UCaaS channels will fail to fulfill the increased demands of cloud delivery. Similarly, some CPE-only channels will lose too large a segment of their business to cloud UCaaS to survive.