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Hot Topic Report: Hosted Messaging Update

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SKU: HT_12_2015_Messging_FINAL Category: Tag:

Executive Summary

Messaging is the one application – mostly third party – that has found success in the hosting service provider world as a direct retail service. It has been a logical add-on to standard hosting services and tends to be one of the rst appli- cations to go when an organization starts to use the OpEx-based SaaS/hosting model. Hosted messaging, in its early years, also had the advan- tage of limited competition. The IP owners, like Microsoft, did not have a service-based delivery model. Unsurprisingly, the hosted messaging market experienced years of healthy growth.

But things have changed. The hosted messaging market is in the midst of a signi cant transfor- mation phase and there are some interesting parallels with what is happening with cloud infra- structure. Like in cloud, massive-scale platforms have emerged and will soon be a permanent xture within the market. Platforms like O ce 365 and Google Apps have forced service pro- viders to change direction, head into new market segments, pivot hard into value-added services and focus more on product development and innovation.

Just like in cloud, there is also an emerging focus on performance. The large-scale platforms are enabling direct connection services to address one of the main stumbling blocks within the mid-tier and enterprise markets. With latency and performance addressed, and the bene ts of an OpEx model obvious, organizations increas- ingly are making the leap to hosted messaging.

And that leads us to the state of the market. Are the massive-scale platforms destined to take over messaging and collaboration? Or do service providers still have a role to play in this ecosys- tem? With a tightening competitive landscape and the low hanging fruit largely spoken for, how much more runway is left? The short answer is that we are looking at a brave but positive new world. Service providers will still play a role. But they will be more specialized than in the past and play up-market. They will support more than one platform and dabble in related services like man- aged hosting. Upside also persists, as evidenced by still modest attach rates and continued migration of communication services to a hosted delivery model.