Communications as a Service Poised for Growth

by Noreen Seebacher, GlobeSt.com

Communications as a service or CaaS could be the next big thing in technology. Stamford, CT-based research firm Gartner Inc. predicts CaaS will grow from a $251.9-million industry in 2007 to a $2.3-billion phenomenon by 2011.

Gartner defines CaaS as IP telephony that is located within a third-party data center and managed and owned by a third-party. In other words, it's communications technologies managed and hosted by off-site providers, freeing businesses and commercial property owners from the challenge and cost of providing state-of-the-art services.

CaaS produced $252 million in 2007, up 37.6% from a year earlier, Gartner notes. The industry is expected to hit $576.2 million this year and $742 million in 2009. But the largest growth for CaaS will occur between 2010 and 2011, when the market jumps from $1.2 billion to $2.3 billion.

Eric Goodness, research vice president at Gartner, expects the market to grow as providers that improve their marketing and businesses "realize they won't run the risks associated with having their own in-house communications systems."

"Users will begin to embrace CaaS more enthusiastically in 2009, attracted by predictable costs for fixed telecoms," Goodness says. "Users will also be attracted to CaaS as a means of shifting technology risk to the service provider. Technology obsolescence will be more easily managed by a scalable third-party."

Guy Fardone is COO of Evolve IP, a Philadelphia-based managed technology provider that offers managed telephony, managed network services, hosted applications and network security and compliance services. "Hosted communications technologies enable commercial property owners and managers to augment their existing services and provide necessary and in-demand amenities to existing and potential tenants," he explains. "These amenities will help their tenants move in and use new technology for a fraction of the cost and will provide a revenue stream at a much-needed time."

GlobeSt.com: How do these communication technologies add value to commercial properties?

Fardone: Communication technology, especially managed and remotely-hosted options, can provide in-demand amenities to tenants that increase productivity and simultaneously generate new revenue streams to commercial property managers. Many commercial properties provide high-speed Internet access to tenants. But newer, managed communication technologies can augment that service by also including hosted PBX services, various business applications and managed network services, which are cost-effective ways to leverage technology to increase productivity, reduce costs or gain a competitive advantage.

GlobeSt.com: What's the advantage of using hosted communications technologies?

Fardone: One is capital avoidance on telecommunication and data infrastructure. Many companies need to upgrade their telephone and data systems, particularly when they're moving, but don’t have the desire or the resources to allocate capital. For a 100-person company, it typically costs between $75,000 and $125,000 to install a new phone system. A managed technology provider has already invested in this infrastructure off-site and can provide it to tenants through property managers as part of their lease agreements, saving tenants the hassle of finding and managing multiple new providers, switching services and phone numbers, and meeting deadlines for services that aren't critical to their core business.

GlobeSt.com: Are there any other advantages?

Fardone: Hosted communications technologies dramatically reduce the time necessary to install services and applications and can also provide an expense reduction--more specifically, reductions on carrier services, hardware and software leases and maintenance contacts, as well as potential personnel reduction or reallocation. Hosted telephone, e-mail and data systems are already installed and ready to go. They just need to be customized to meet the tenants’ requirements. By converging voice, data, and applications, monthly costs are substantially less. In addition, a fully managed network solution results in lower demands on IT staff--any additions, changes or maintenance are handled by the technology provider.

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As originally appeared on GlobeSt.com: Communications as a Service Poised for Growth