In Short:
During the COVID-19 pandemic, cloud communications gained popularity, but demand has slowed as companies shift to hybrid working. Organizations are now seeking unified platforms for employee and customer communication to enhance workflow. Despite challenges, the UC&C market grows, driven by AI integration. However, concerns exist regarding specific AI use cases and the digital divide in rural areas affecting cloud communication adoption.
NEW DELHI: The landscape of cloud communications, which gained traction during the COVID-19 pandemic, is undergoing a significant transformation, with a growing number of companies embracing a hybrid model. Organizations are increasingly in search of unified platforms that seamlessly integrate employee collaboration with customer experience (CX) solutions. Analysts suggest that this approach can enhance workflow management and deliver consistent user experiences.
Jitesh Gera, Research Manager for Unified Communications & Collaboration at International Data Corporation (IDC), stated, “Hybrid working is now the norm globally – businesses primarily expect their UC&C (unified communications and collaboration) platforms to facilitate better workflow management between employees at both the front end and back end. They are gradually transitioning towards unified platforms for both employee and customer communications.”
The surge in video conferencing usage during the pandemic provided a significant boost to the cloud collaboration industry, favoring major players like Cisco Webex, Zoom, Microsoft Teams, Google Meet, and Avaya‘s Aura. However, as countries, including India, started to recover from the pandemic, the cloud communications market witnessed a downturn, leading many enterprises to either revert to in-office operations or adopt a hybrid working model. This shift has resulted in decreased demand for collaboration solutions.
For example, Zoom announced the layoff of 150 employees this year, following a reduction of 1,300 workers—or approximately 15% of its global workforce—in 2023, due to weak market sentiments and an unpredictable economic outlook.
Market Dynamics
Despite these challenges, the broader UC&C industry exhibits steady growth, according to industry executives. Vivek Kar, Global Product Management Head at Tata Communications, attributed this growth to ongoing digital transformation efforts and the integration of AI and Generative AI (GenAI) capabilities, which continue to drive investment in cloud technologies as businesses shift away from on-premises systems.
US-based Avaya, a major player in the call center and cloud communications sectors, noted that both the contact center and unified communications markets are thriving. Phil Zammit, Vice President of the APAC Theatre at Avaya, remarked that employee experience is crucial for enhancing customer experience and confirmed the company’s commitment to further investment in the region.
As of Q1 2024, the UC&C market remains dominated by Microsoft, which holds a substantial market share of 45%. According to Gera, Microsoft’s success is largely due to its strong presence in the office productivity applications domain, allowing it to integrate effectively with various work applications. The analyst highlighted that Microsoft has been particularly innovative in its use of AI.
The Role of AI
With the recent surge in AI applications across various sectors, UC&C has emerged as another industry experiencing significant advancements through this technology. Enterprises are increasingly willing to invest in AI and GenAI features. IDC’s research revealed that across markets such as the US, UK, Australia, India, and Brazil, AI capabilities are top-ranked features sought by enterprises when considering UC&C solutions. Desired features include automated meeting summaries, notes, transcriptions, as well as advanced video functionalities.
In India, businesses express a particular interest in AI functionalities such as chat summaries, real-time discussion prompts, call transcriptions, and meeting summaries. Furthermore, many organizations show a strong inclination to invest in additional GenAI capabilities.
IDC forecasts that the broader Asia Pacific region, including Japan, will see a mid-single digits compound annual growth rate (CAGR) from 2024 to 2028, reflecting a slight deceleration compared to the rapid growth experienced during the pandemic.
Zammit emphasized the importance of aligning customer experience (CX) and employee experience (EX) for fostering business growth and maximizing customer value. He noted that AI has significantly contributed to sector growth, with organizations increasingly experimenting with AI to enhance customer experience and reduce operational costs.
Conversely, some industry professionals express skepticism regarding the practicality of AI, citing a lack of specific use cases where its application may be most beneficial. Concerns also arise about inconsistent access to high-speed internet in rural areas.
Sathesh Murthy, Managing Director & Engineering Head at RingCentral India, indicated that although there is considerable enthusiasm surrounding large language models and AI, the industry still needs to identify specific use cases relevant to messaging, video conferencing, and customer experience.
While usage of cloud collaboration solutions has markedly increased since pre-pandemic times, Tata Communications’ Kar noted that many enterprises remain hesitant to transition from on-premise solutions to cloud-based alternatives while preserving their existing infrastructure.
He further pointed out that while urban areas generally benefit from high-speed internet access, many rural and semi-urban regions remain underserved, inhibiting the effective deployment of cloud communication solutions.
To promote cloud adoption and subsequently enhance the usage of cloud collaboration tools, industry leaders advocate for improved digital infrastructure, particularly in rural and semi-urban areas. They also emphasize the need for a favorable regulatory environment for business operations.
