Is Cisco's Cloud-Based Unified Communications Solution a Good Match for Your Business?

18 March 2014 ID:G00261475
Analyst(s): Daniel O'Connell, Megan Marek Fernandez, Bern Elliot

VIEW SUMMARY

Cisco provides its Hosted Collaboration Solution, a cloud-based unified communications platform, through authorized channel partners. This analysis evaluates the Cisco cloud UC ecosystem to assist IT leaders in deciding whether it is a good fit for their users, business and IT environment.

Overview

Key Challenges

  • Delivering cloud unified communications (UC) is a complex task requiring an experienced channel partner and a robust UC platform. Cisco and its cloud UC channel partners have been learning valuable, sometimes painful, lessons over the past four years. Businesses are starting to receive quality user experiences that can now expand across multiple geographic regions.
  • Larger enterprises often have customization requirements that make cloud UC too complex, which in turn can destroy the cloud business case (such enterprises are better served with traditional premises-based deployments).
  • Users are not consistently getting the automated self-service portals that they would like. Cisco and its channel partners have focused on offering the core UC functions, which has delayed the IT-user and end-user portal maturity.

Recommendations

IT leaders looking for a UC solution:

  • Consider Cisco cloud UC for core UC requirements driven by telephony, unified messaging, instant messaging (IM) and presence.
  • Review UC requirements early in the vendor exploration phase to identify if a Cisco solution meets current and expected business needs. Many prospects with a cloud UC objective have so many customization requirements that they eventually destroy the cloud business case.
  • Perform due diligence on Cisco cloud UC channel partners (there are approximately 60 across the globe). The maturity and sophistication of a channel partner is vital to securing a high-quality user experience.
  • Do not expect the Cisco UC cloud to offer the lowest cost. There are lower-cost options on the market. Consider Cisco if you have a track record of Cisco IT infrastructure, want a rich suite of UC services, or are looking for a branded vendor cloud solution with a strong UC road map.

Table of Contents

Introduction

Cisco offers a cloud UC platform branded as Hosted Collaboration Solution (HCS) that is based on Cisco hardware, software, and cloud technology. In general, Cisco's goal is to provide end-user experience with UC functionality, whether delivered by traditional premises-based equipment, through the cloud, or in a mixed cloud/on-premises hybrid environment. The advantages of the Cisco cloud UC offering are broadly similar to that of any cloud offering.

We summarize the top five for inclusiveness:

  • Operational expense payment model.
  • Reduced internal staffing requirements.
  • Evergreen technology refreshes as new capabilities are offered.
  • Flexibility to add and subtract users (for instance, for seasonality).
  • Strong business case for geographically distributed organizations.

Users do not typically secure Cisco cloud UC directly from Cisco, but rather from an authorized Cisco channel partner. As of 1Q14, Cisco has approximately 60 cloud UC channel partners. Different channel partners offer a national, regional or global focus.

A sampling of some of the Cisco HCS channel partners include:

  • Allstream
  • AT&T
  • BT
  • CDW
  • CSC
  • Fujitsu
  • Ingram Micro (wholesale partner)
  • KCOM
  • NTT Communications
  • NWN
  • Orange
  • Sprint
  • Telefonica
  • Telstra
  • Verizon
  • Vodafone
  • West

Cisco provides the cloud UC infrastructure (including applications, data center service and management tools), and the channel partners are tasked to:

  1. Operate the UC infrastructure.
  2. Market and sign up new accounts (often jointly with Cisco support).
  3. Deliver UC services to business customers.

The Cisco HCS architecture provides each end-user organization with a separate software instance, as compared to a multitenant architecture (Microsoft Lync Online, for example) where all organizations share a common software instance. Users prefer the separate software instance for reasons of security, privacy, and "limited" customization. In contrast, the multitenant approach is less complex and easier for the provider to deploy, manage and support.

Cisco's cloud UC offering has been available for over three years. In this time frame, Cisco has been successful in recruiting channel partners, but less successful in getting these partners to activate customers. While activations have been below initial expectations, Cisco has nonetheless stayed the course and continues to incrementally resolve encountered problems while also investing in new functionality (the eighth release of HCS is scheduled for 2Q14) .

Latest Gartner estimates suggest that there were approximately 600,000 business employees supported by Cisco cloud UC at the end of 2013. We expect another 600,000 to be onboarded over the course of 2014. This 2014 accelerated uptake is due to the backlog of signed customers that Gartner expects will be going through a larger activation cycle.

Cisco provides users with the flexibility to leverage their existing Cisco premises-based licenses for cloud deployment. While this can reduce costs, the user must negotiate these discounts into the terms of the contract with the Cisco HCS channel partner.

Analysis

Consider Cisco Cloud UC for Core UC Requirements

Cisco markets its HCS platform as offering deep UC functionality driven by telephony, unified messaging, IM and presence. While technically true, tight integration is now mature only in a select base of UC functions. Gartner's view of the offering is summarized in Figure 1.

Figure 1. Cisco HCS Architecture: Maturity of UC Functions and Support Capabilities
Figure 1.Cisco HCS Architecture: Maturity of UC Functions and Support Capabilities

HCS = Hosted Collaboration System; IM = instant messaging; UC = unified communications; VPN = virtual private network

Source: Gartner (March 2014)

Users and channel partners have reported satisfaction with telephony, unified messaging, IM and presence (via the Jabber client). The Jabber client is also useful for multiparty desktop video. There is also good integration with Microsoft Outlook, Exchange and Active Directory.

The Jabber client is, however, cumbersome to use in mobility deployments (using Apple and Google smartphones and tablets, for example) as it requires a VPN connection. Cisco is committed to removing this VPN dependency in the middle of 2014 as part of the Cisco Expressway capability. A new version release typically means that such capabilities will be available from partners to users between six months and a year later (this will vary by partner). Note that selected mobile service provider channel partners offer direct mobile integration with their smartphones and therefore do not require the Jabber client on the device.

The Cisco HCS contact center now has increased functionality that includes support for 4,000 simultaneous cloud contact center agents and multichannel communications (voice, chat and email) — nearing feature parity with Cisco's full premises-based Contact Center Enterprise version. Selected Cisco HCS channel partners that have deferred on the cloud contact center offering until now are now taking a second look. Users can therefore expect Cisco-based cloud contact center solutions to be more widely available in 2H14. Gartner's experience is that the Cisco contact center offering works best with agents equipped with Cisco Internet Protocol (IP) handsets.

Some channel partners offering Cisco HCS Enterprise Contact Center primarily focus only on the contact center offering (as opposed to both the full UC offering plus the contact center) for two reasons:

  1. The management, operation and administration of the UC and contact center capabilities are not integrated across the Cisco architecture (Gartner expects more orchestrated integration between UC and contact center to be available from channel partners in two years).
  2. Larger enterprises, particularly those over 5,000 employees, often purchase their UC and contact center services separately.

While WebEx is very successful as a separate Web conferencing service, its integration with the core Cisco HCS UC functions (telephony, unified messaging, IM/presence and desktop video) is limited (no single sign-on, for example). Hence, combined WebEx and Cisco HCS deployments remain limited as the market awaits tighter integration.

Similarly, Cisco's premium-end videoconferencing capability known as CTX is offered as part of the Cisco HCS solution. However, the integration between HCS's core UC functions and this premium video conferencing capability is still maturing (Cisco HCS does integrate with an array of Cisco HD video devices). Consequently few Cisco HCS users have adopted the CTX capability.

In addition to these discussed capabilities, the Cisco road map includes interoperability with non-Cisco video endpoints (including Lync) and APIs to leading IT applications, including salesforce.com. Assuming that the channel partner adopts these capabilities by 2H14, they will begin to roll out to end users starting in 2015.

Summary: Cisco HCS users are currently focused on the core UC capabilities of telephony, unified messaging, IM and presence. They are most anxious for Cisco to resolve the Jabber mobility VPN issue to enable a better user experience with smartphones and tablets.

Review Your UC Requirements Early in the Vendor Exploration Phase

Cisco HCS deployments are well suited to distributed organizations with between 1,000 and 10,000 employees. Channel partners with a midmarket focus support smaller deployments in the 250 to 500 employee range, though Gartner believes there is a higher internal cost structure at this level (Cisco has announced that its mid-2014 release will make the offering more price competitive down to the 100 employee range). Gartner research indicates that, at about 20,000 employees, the cloud cost structure is no less expensive than a dedicated on-premises solution (though there are other reasons why cloud is attractive, including the ability to scale the number of users up or down).

Provisioning improvements in 2012 and 2013 made it possible for organizations to replicate their existing telephony four- and five-digit dialing plans. In addition, Cisco cloud UC can integrate with many legacy and IP PBXs for organizations opting for a phased transition to the cloud.

Nonetheless, Gartner continues to hear from frustrated channel partners as well as frustrated potential customers. Many organizations start with a cloud UC objective, but then layer on a series of customization requirements that destroy the cloud UC business model. This is an industrywide concern and not specific to Cisco cloud UC.

Examples of "death by customization" include requirements to support arcane PBX features (a derivation of Call Park, for example), older Digital Enhanced Cordless Telecommunications (DECT) phones or homegrown CRM systems. As a general rule — the larger the organization, the more likely that a confluence of customization requirements will evolve — particularly with IT organizations that are consensus based. Customizations tend to become more acute once an organization reaches 5,000 employees.

Summary: Evaluate your user community as to what is a "must-have" versus a "nice-to-have" customization requirement, including requirements for backward voice compatibility. Users seeking cloud UC should minimize the "must haves" and bring them to a potential cloud channel partner early on in the discussion phase. In addition, corporate IT should focus on the benefits of a UC offering in terms of click to call, unified messaging, mobility and IM/presence, along with a long-term cloud UC road map.

Perform Due Diligence on Your Cisco Cloud UC Channel Partner

Over the past four years, Gartner research indicates that Cisco has approximately 60 cloud UC channel partners. Of these, roughly 45 are actively delivering services (the other 15 are newer channel partners now in the process of testing and rolling out their services). While Gartner expects Cisco to continue signing up new channel partners, its primary focus in 2014 and 2015 is on helping existing channel partners to activate new accounts.

Delivering cloud UC is a complex endeavor that requires the channel partner to have patience, experience and make investments (in employee training, network management tools, order processing and customer support centers, for example). The Cisco HCS architecture has many moving parts so it is vital to have a channel partner that is well versed in these challenges. In particular, the Cisco cloud UC provisioning toolset continues to evolve and mature. Channel partners unable to master such challenges — in provisioning new users, monitoring call quality and developing customer portals, for example — will in turn be unable to deliver an acceptable end-user experience.

Gartner believes that it takes a channel partner three years or more to mature its cloud UC offering complete with strong SLAs, automated portals and consistently good customer service. There is also significant competition among the Cisco cloud UC channel partners along with cloud UC applications specialists like BroadSoft partners, Google and Microsoft. It is therefore reasonable to expect some consolidation and even failure among Cisco's cloud UC channel partners over the next three years.

Gartner has seen a capability variance across the base of Cisco cloud UC channel partners. Some are cautiously waiting for the market to mature, while others are aggressively investing in global rollouts. A select base of channel partners can now support customers in North America, Europe, Asia/Pacific and even Latin America (sometimes homed to North American infrastructure) across multiple languages and currencies. Other channel partners are focusing on a specific country's market or even just the Cisco HCS contact center function.

Many Cisco HCS channel partners are service providers, such AT&T, BT, NTT, Orange, Sprint, Telefonica, Telstra, Verizon and Vodafone. Such channel partners emphasize their ability to package discounted voice and data network services. Gartner recommends that users opting for network service provider cloud UC consider a backup network provider to supply a combination of resilience and competitive pricing in their supply chain.

Summary: Selecting the correct Cisco UC channel partner is the most critical factor in having a successful deployment. Look for a partner that supports organizations with a similar size and geographic location. Check for references, conduct a trial and evaluate the user portal.

Do Not Expect the Cisco UC Cloud Offering to Be the Lowest-Cost Option

Many businesses have unrealistic expectations of how much a Cisco cloud UC solution should cost.

Selected examples include:

  • Some public-sector clients have TDM Centrex pricing below $10 per user per month. However, this is a 30-year-old technology that will not see any future product development and is being phased out by service providers.
  • Some larger deployments based on the BroadSoft platform can be in the range of $10 to $15 per user per month. However, many of these implementations are focused on voice over IP (VoIP).
  • A few of the cloud VoIP/UC packages from applications specialists (including 8x8, RingCentral, Jive Communications, Star2Star and Broadview Networks) can offer aggressive pricing, though they may not match Cisco's functionality. These applications specialists are both the service provider and platform provider, and hence do not have to pay vendor royalties.
  • A new generation of "freemium" products offer a basic conferencing service, with more feature-rich offerings (suitable for business use) available for an extra fee. Examples include Google, Biba and Zoom.

In general, Gartner believes that Cisco cloud UC pricing comes at a slight market premium. Typical costs are roughly $14 to $20 (€11 to €14) per use per month for voice/voice mail offerings. More feature-rich UC offerings will be in the $20 to $30 (€14 to €23) range (note that these are broad pricing estimates, and can vary significantly depending on the channel partner, size of the deployment, and centralization/distribution of business locations). Those deployments that include full WebEx and telepresence video can well exceed the $30 (€24) mark.

Summary: While the Cisco cloud UC offerings have a market premium charge associated with them, they offer rich features and are backed by a road map for future development. Competition from Microsoft, Google and BroadSoft — as well as the range applications specialists and freemium offers — will force Cisco to maintain prices close to market levels.

Believe in the Cisco Cloud UC Road Map, but Maybe Not the Dates

The Cisco cloud UC offering can be viewed from either an optimistic or a pessimistic perspective.

Optimistic: Cisco has a deep base of cloud UC channel partners across the globe that are expected to support over a million combined subscribers by the end of 2014. Selected partners have proven ability to support enterprises that span multiple global regions, with a core UC functionality that spans voice, unified messaging and desktop IM/presence and video.

Pessimistic: The Cisco HCS offering has been around for over three years, with many channel partners not reaching their business objectives in such areas as revenue, seats sold and geographies served. In addition, Cisco cloud UC product road map schedules have slipped in the past relative to features, functions and management tools.

Both of these views are correct. Cisco had an ambitious cloud UC vision centered on offering a rich mix of highly integrated Cisco UC functionality. But pulling all this together has taken more time and has been more complex than originally anticipated, resulting in schedule delays. One area that has been especially difficult is cloud UC management, especially in the areas of activating and provisioning new users, and integrating the core UC applications with Web conferencing, contact center and telepresence.

These Cisco cloud UC provisioning complexities have required channel partners to perform more manual processes than initially envisioned, which in turn has resulted in slower (sometimes mistake-prone) deployments. Nonetheless, Cisco channel partners report that provisioning improvements are occurring incrementally each year (being able to replicate four- and five-digit dialing plans, for example). Channel partners do, however, wish that the pace of simplification was accelerated, which in turn would help them offer stronger IT and end-user portals.

Summary: Gartner is reasonably confident that Cisco will continue with semiannual enhancements to its cloud UC platform. In 2014 we expect Jabber mobility problems with VPNs to be resolved along with an architectural improvement to enable cost-effective deployments to smaller businesses of approximately 100 employees. It will not likely be until 2015, however, that these enhancements are installed in the partner data centers and are ready for customer deployment. It may be two years or more before tighter integrations with Web conferencing, telepresence and contact center are achieved and implemented by Cisco HCS channel partners.

Do Not Hold Cisco Cloud UC Solutions to Unreasonable Expectations

The Cisco cloud UC platform has experienced its fair share of bumps in the road over the past three years. Nonetheless, it is a capable cloud UC option that can support a combination of deep telephony features, market confidence (because of its strong brand) and global delivery.

The other top three vendors also have their limitations:

  • Google — does not offer native enterprise telephony, nor has it announced plans to do so. It requires middleware partnerships (Esna and gUnify, for example) that enable voice integration with premises- and cloud-based UC platforms. In fact, Esna's middleware can enable Cisco HCS telephony to integrate with the Google Apps for Business portfolio.
  • Microsoft — the Lync Online offering, available as part of Microsoft Office 365, only provides a peer-to-peer voice capability suitable for internal communications. Microsoft states that a business-grade telephony feature set will be available for Lync Online in 2015. A more feature-rich version based on the full Lync platform is now offered by channel partners. However, the channel partners must build their own cloud enablement platform, so the market is still maturing.
  • BroadSoft — this platform has been available in the market for over a decade. It is well entrenched across the globe with a deep base of channel partners. However, most deployments are for small and midsize businesses. While BroadSoft now supports a richer UC feature set, many channel partners continue to focus on the voice side.

There are also numerous cloud UC applications specialists like 8x8, RingCentral, Thinking Phone, iCore Networks, Evolve IP, Jive Communications and Star2Star. Some of these support multiple global regions, have a reputation for strong customer service and support over 100,000 endpoints. Despite these attributes, larger enterprises still prefer branded solutions from mainstream vendors.

Summary: This analysis has highlighted the strengths, weaknesses and evolution of the Cisco cloud UC offering. It is important, however, to understand that delivering cloud UC is a complex process in a maturing market, and that other vendor solutions also have their limitations and challenges.

Case Studies

Gartner has worked with dozens of Cisco HCS channel partners over the past four years. Over this time frame we have witnessed selected success stories from selected channel partners.

AT&T offers Cisco cloud UC under the brand name of AT&T UC Services. This solution is available globally and AT&T has installed local infrastructure. AT&T markets MNCs that have a significant U.S. presence. They also have a strong public-sector focus — particularly at federal and state levels — and now have a platform dedicated to public-sector clients. In many cases, AT&T will start with a specific function (voice mail, for example) to initiate the customer to UC Services (which uses Cisco cloud UC applications). AT&T will then seek to expand the functionality to include telephony, IM, presence and mobility. AT&T does significant co-marketing with Cisco. Presently AT&T does not support the Cisco cloud contact center capability.

KCOM markets the brand KCOM Workplaces for its Cisco HCS suite of cloud UC and contact center services. Primarily targets enterprises based in the U.K. (including support for their European regional offices) and the U.K. public sector. Many Cisco HCS prospects come from the installed base of Cisco managed services customers with "end-of-life" UC and contact center investment decisions. KCOM is now building an indirect channel partner business with system integrators and managed service providers. In 1Q14 KCOM announced an HCS contact center contract for a U.K. central government client involving 8,000 agents.

Orange — offers Cisco HCS globally, with infrastructure now in North America, Europe and Asia/Pacific. Orange's key differentiators are its ability to support cloud UC deployments that span multiple and single regions, a good self-service IT portal and the ability to integrate with existing UC environments. The company's focus is on accounts in the 1,000 to 10,000 employees-per-region range. It also focuses on pan-European accounts. In addition, Orange uses Cisco HCS internally, with plans to support approximately 80,000 of its employees (many based in France).

West — attained more than a decade of cloud VoIP/UC expertise via its acquisition of Smoothstone in 2011. West has leveraged and exploited Smoothstone's management practices, customer support and Network Operations Center (NOC) ecosystem to become a strong Cisco cloud UC provider. West has a reputation for good customer service and has been enhancing the customer portal for more self-service automation. For its Cisco HCS offering, West now supports global deployments and emphasizes accounts that are in the 250 to 5,000 employee range, and that tend to not require too much customization.

Evidence

This research has been led by primary research across end users, Cisco channel partners, competitors, and Cisco over the past four months. The team of analysts leading this research has five years of cloud UC experience and has covered the Cisco HCS platform for four years.