State of the On-Premise Unified Communications

July 15th, 2024 by admin

Man working on digital diagram

NEC, a global leader in unified communications, has announced its plan to exit the on-premise unified communications market outside Japan over the coming years. "This change applies to all our on-premise UC products," the company stated. "Our NEC BLUE UCaaS (unified-communications-as-a-service) offerings will remain unaffected where these products are available," it wrote in a customer statement. Acknowledging the impact on a significant portion of its customer base, NEC confirmed it would honor existing contracts.

"We will not accept new purchase orders after December 31, 2024, nor will we enter into new commitments, renewals, or extensions beyond that date. We will not accept new orders with delivery dates beyond March 31, 2025, and will cease hardware and software support services after March 31, 2026, except for existing contractual obligations," the company announced. NEC added that by March 31, 2025, it would complete the final shipments for any accepted purchase orders and new commitments agreed upon between April 15, 2024, and December 31, 2024.

This move is expected to have significant implications for NEC partners outside Japan. John Pillow, president of Business Phone Systems, noted that this development was not a "complete shock" as the industry increasingly moves towards hosted voice systems. "Except for a few legacy vendors like Avaya and Mitel, most have made similar shifts," he told Channel Futures.

J Braun, president of Enterprise Governance Systems Corp., believes NEC won't be the last vendor to transition fully to cloud-based, hosted voice services. This news follows Avaya's strategic partnership with Zoom and Mitel's Unify acquisition, two companies whose businesses largely rely on on-premises unified communications users.

Moe Melki
ATEL’s Moe Melki

Explaining the shift for the channel, Moe noted that "as the industry sees a major transition towards platforms like Microsoft Teams, with around 320 million monthly active users, Zoom, and Webex, channel professionals are quickly adapting and shifting their strategies towards more sustainable revenue streams.

"The reality is stark: if a UC provider hasn't recognized the massive impact of Microsoft Teams, a wake-up call is imminent," Moe said. "With its unprecedented growth, Microsoft Teams is not just a player but a dominant market force, simplifying product accessibility from Operator Connect services to Microsoft's calling plans."

Businesses of all sizes are either considering or actively transitioning to Teams. Moe noted this signifies a rapid transformation in the UC sector, leading to executive decisions like NEC's. Moe also pointed to 8x8's recent move to join Operator Connect as indicative. "It's a tacit admission that the UC battle may be tipping in Microsoft's favor. Aligning with Microsoft and leveraging its vast user base to promote its contact center suite reflects the 'partner or perish' reality facing today’s UC providers."

Similarly, Moe observed that vendors making related moves are coming to terms with the declining viability of legacy cost models in delivering UC—a strategy he likened to "an exercise in futility." He also highlighted that this is not a “One size fits all type of approach”. There are many industries and use case where UCaaS is not suitable such as hospitality and government entities.

Posted in: Unified Communication