More and more companies today are turning to the hosted model when it comes to telecommunications. Recent research from Frost & Sullivan (News - Alert) has found that last year, the North American hosted IP telephony and unified communications and collaboration (UCC) services user base grew by an impressive 30.5 percent to reach 5 million users. This represents 1.2 million net new users since the year before. Revenues were also way up, growing at a healthy rate of 32.9 percent in order to meet increased demand. According to the report, growth is expected to remain steady, with an average compound annual growth rate (CAGR) of 27.4 percent in terms of installed users and 29.2 percent in terms of revenues through the year 2020.

This isn’t to say there aren’t challenges ahead. According to Frost & Sullivan, concerns about data security prevent some from exploring the hosted telecom model. In addition, customer confusion owing to a fragmented competitive landscape with little differentiation among service provider offerings is putting some limits on the market, as is the lack of a strong market leader to “validate the value proposition of hosted IP communications,” said the report’s authors.

“The competitive landscape will remain fragmented for the next few years,” according to the report.  “Incumbent vendors and telcos will use hosted communications as both a defensive and an offensive strategy as evolving customer needs shift demand from premises-based solutions to the cloud, and from legacy telco services to next-generation IP-based communications.”

Some business functions are having an easier time “validating the value” than others. The contact center has embraced the hosted model for years now, attracted to the ability to use remote or home-based workers, scale to changing seasonal needs (such as ramping up during the winter holidays) and keeping costs down. Another compelling use for hosted call center platforms is the need for companies to offer expansive multichannel contact options (sometimes called “omnichannel”) to customers who expect them. These multiple channels, including Web, mobile app, telephone, SMS and chat, cannot be well managed and integrated in old-fashioned legacy systems, and this has spurred the contact center’s adoption of hosted over premise-based solutions.

Going forward, smart service providers, says Frost & Sullivan, will strive to differentiate themselves through high quality and easily understandable user interfaces and the ability to integrate easily with third-party communications and productivity applications. Customers today expect communications with the company with which they do business to be easier than ever. Increasingly, contact centers will be attracted to the hosted solutions that make it easy for them to offer the best possible service to customers.