Adoption of unified communications is growing in the enterprise. In a recent study, Infonetics Research estimates a 21.3% growth in the UC application segment in 2013. 51% of survey respondents currently using, or planning to use, UC technology also plan to increase related spending. This market is dominated by only a few players, who are aggressively digging existing enterprise moats deeper before more competitors come.
Transitioning from tradition
Companies are looking toward UC to improve response times, increase employee productivity, and reduce operational costs, according to Infonetics. The standard enterprise setup, which includes things like the traditional telephone, is disappearing, and telecommunications firms like AT&T know it.
In March, AT&T announced a partnership with Microsoft to expand its UC portfolio. The company will be integrating its global IP network with Microsoft Lync, which will allow customers to utilize real-time collaboration on documents, participate in high-definition video conferences and virtual meetings, and provide a "full range of enterprise voice capabilities." Lync will also allow AT&T business customers to "use instant messaging presence to quickly find and communicate with colleagues," according to a press release.
The deal is important for AT&T because it not only bolsters its overall UC portfolio, but also gives it credibility by partnering with a leader. According to Microsoft, "60% of enterprises (500+ seats) surveyed are deploying or planning to deploy Lync, including enterprise voice, up from 45% last year." AT&T now has very lucrative exposure to the rapidly growing Microsoft Lync, as well as further diversification in its business-centered offerings.
Microsoft finds its voice
Lync is growing much faster than its competitors in enterprise voice, according to Jeremy Duke of Synergy research. Duke told Eric Krapf of No Jitter that, while competitors are seeing flat or negative sales, Microsoft is seeing 60% growth on an annual basis. He also noted that the company is well on its way to surpassing Cisco , the current leader in overall collaboration sales, "very soon."
This all comes after Microsoft COO, Kevin Turner, openly claimed that his company "is shipping more enterprise voice lines on unified communications than any other technology company in the world." UC and enterprise tools such as Lync and Skype are instrumental in the company's recent success.
UC, and especially its enterprise voice aspect, is incredibly lucrative for Microsoft, as can be seen in Lync's 30% year-over-year revenue growth. In fact, it has now surpassed $1 billion in annual revenue. Lync is a fast-growing, successful part of Microsoft's business that doesn't get a lot of credit, but it is further entrenching it into the future of enterprise.
Cisco is the leader, and wants it to stay that way
When Kevin Turner announced Microsoft's lead in enterprise voice, he did so at Cisco's Collaboration Summit. The company is looking to continue to extend its lead, after announcing its new Intelligent Proximity technology.
The technology will allow users to link their personal mobile devices with on-premises products in the office, and will be first implemented in Cisco's Android-based DX650 Smart Desk Phone in November. Users will be able to sync Android or Apple smartphones to their desk phones, and will also be able to move a call already in progress from their mobile devices to the DX650. Contacts and call histories will also be able to be imported to the DX650.
Cisco is blurring the lines between personal and office devices by seamlessly syncing them together. This will further build on its current leadership position in enterprise collaboration, which already includes real-time collaboration, secure voice, instant messaging, and video communications. The company also utilizes Transport Layer Security, which is the same technology used to secure e-commerce transactions.
The bottom line
Unified communications, especially cloud-based voice and video, will continue to be adopted by enterprises going forward, providing growth for Microsoft and Cisco. The two companies are the most dominant forces in UC, and will continue to dig their moats deeper. Telecoms like AT&T will also receive growth from this trend as more cloud-based services are utilized and more data is used.
Cisco and Microsoft currently trade around 12 and 13 times earnings, respectively. Both companies are financially strong, carrying large cash balances that dwarf the amount of debt carried. Both companies offer value at current levels, especially for those looking to invest in the enterprise leaders of tomorrow. Strong UC portfolios, that compliment and expand on existing enterprise offerings, give Microsoft and Cisco a bright future in the work place.
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The article The Future of Workplace Communication originally appeared on Fool.com.Joseph Harry owns shares of AT&T, Microsoft, and Cisco Systems. The Motley Fool recommends Cisco Systems. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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