Here comes 'CaaS'

Communications as a Service, or 'CaaS', could be the next wave in communications.

Communications-as-a-Service, or CaaS, is starting to take hold worldwide and will rope in a total of $US251.9 million by year's end, according to recent forecasts released by Gartner Inc.

The $US251.9 million total is a jump of 37.6% over last year and an indicator that the market for CaaS will continue to climb as providers learn more of the particulars. Gartner predicts that the CaaS market will hit a whopping $US2.3 billion by 2011, representing a compound annual growth rate of more than 105% for the period.

One reason CaaS isn't exploding out of the starting gate, however, is lack of provider knowledge. According to the report, providers are still trying to determine to whom to define, package and market services as a value-added IP telephony offering.

In the report, titled "Emerging Communications Services (Hosted IP Telephony, IP Centrex and CaaS), Worldwide, 2006-2001," Gartner defines CaaS as IP telephony that is located within a third-party data center and managed and owned by a third party. The assets are not carrier-grade, the service is not in the network, and the assets are multi-tenant in terms of usage, Gartner says.

But the growth of CaaS within corporations will take off once users find its true usability, according to Eric Goodness, research vice president at Gartner. It will grow further as companies 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 said. "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."

The largest growth for CaaS will occur between 2010 and 2011, when the market jumps from $US1.2 billion to $US2.3 billion. In the years leading up to the market's boom, CaaS will grow gradually, hitting $US576.2 million in 2008 and $US742 million in 2009.

CaaS's slow start will be compounded by a longer sales cycle, Goodness said, as customers need time to get used to higher, but better consolidated, pricing.

"A single bill that consolidates telecom services with equipment infrastructure will gain acceptance," he said. "Providers are bullish about CaaS's potential because of the opportunity to bundle more new features and capabilities to avoid service commoditisation."


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