I've been watching the Unified Communications market since it began two years ago, and one of the things that everybody's been trying to figure out is how to quantify the market and characterize how fast it's moving and where it might be headed. This week, Blair Pleasant of COMMfusion and UCstrategies.com delivered a great contribution to this emerging body of knowledge. The executive summary and TOC are here, and Blair's been blogging about it here, here, and here. After reading these various items, my takeaway is that the UC market is quite small, at least as of now.Blair explains that methodology is tricky in quantifying the UC market, because UC is made up of a cluster of technologies (IP-PBXs, presence, various forms of messaging) that may be implemented individually and discretely (i.e., not with the aim of providing "Unified Communications" to users), or may be implemented in an integrated fashion that does, indeed, aim to provide UC capabilities to enterprise users. Her response was to provide an overall number that tallies up the markets for all the various UC piece-parts, characterizing this as the "gross" or "UC-capable" market. Blair's study sizes this marke as $9.52 billion for 2007, growing at 51.5%, to $15.9 billion by 2012. [corrected: Originally read, "growing annually"]
Blair then determined what subset of this "gross/UC-capable market" was actually being purchased for use in Unified Communications, yielding a "net" or "true UC" figure:
[Net/True UC] is estimated using a formula to identify the revenues and seat shipment that are attributed to a UC solution, rather than being used as a standalone or non-integrated product. The Net or "True" UC market is forecast to grow from $200.8 million in 2007 to $2.433 billion by 2012. In addition, professional services will increase the product revenues by 18% in 2007, and will add on 40% of product revenues in 2012.
First, I think Blair is spot-on when it comes to her treatment of the market. Breaking it down into gross/net, "capable" vs. "true" is a very important distinction, one that cuts through the kind of numbers games that vendors already are starting to play in this space, as she notes. An IP-PBX is not, inherently, a Unified Communications system. It may or may not be used as part of a Unified Communications implementation, but the notion of UC becomes meaningless if everybody who's bought an IP-PBX since 1997 is now grandfathered in as a UC customer -- or even if the UC label is only added from this day forward.
Which leads to the second point: The UC market, today, is tiny: $200 million is a pittance in absolute terms, and it's a very small share -- just 2% -- of the total "UC-capable" market. Blair's projection calls for the net UC share to increase to 15% by 2012.
Still, even at that point, you're talking about a $2.433 billion market, which isn't gigantic. To me, it's more impressive that the "gross" market -- all the communications gear that's eligible for UC but may not be implemented in a UC way -- is projected to grow at more than 50% annually and reach almost $16 billion by 2012.
Partly, I imagine that's because as we go forward, essentially every addition to the installed base of communications gear will be UC capable, and will most likely be replacing a piece of TDM equipment that isn't UC capable, or at least isn't a very good candidate for UC-enabling.
The other thing to note is Blair's projection that professional services will add more revenue to the market on top of the equipment/software sales. It's axiomatic that UC will require more systems integration work, and that the role of VARs and systems integrators will expand in the UC future. That would potentially bulk up the "true" UC number relative to the "UC-capable" total.
What I think this study reflects, above all, is that the transition to UC is going to be very gradual. Remember, 2012 is only four years away, meaning we'll be only six years into the whole UC evolution at that point. In the voice/real-time communications market, six years isn't terribly long.