UCaaS users to grow, but available market falling

02 April 2024

The global Unified Communications as a Service (UCaaS) market is set to grow to over 131 million users by the end of 2028, with a compound annual growth rate (CAGR) of 10.3% over the next five years, according to new research from Cavell.

The findings also reveal that mobile UCaaS services are growing in importance, now accounting for over 15% of the market. However, the total available market is reducing because the same number of on-premise PBX (private branch exchange) users are not moving to become cloud PBX users. Instead, many enterprises are putting some or all their employees on collaboration-only licenses without an external PSTN (public switched telephone network) functionality.

Meanwhile, 62% of providers are diversifying their portfolio to ensure the resilience and adaptability of their telecommunications business; 48% are building AI capabilities into their products - to drive cost reduction in operators businesses; and 33% of users will be Microsoft Teams voice enabled by the end of 2028. Cavell has also noted a reduction in both margin and revenue streams relating to traditional cloud communication and UCaaS services for more than 36 months. This has been acknowledged by more than 40% of respondents in the latest research who have recognised a decrease in UCaaS revenue.

“Historically, providers won new users by migrating from on-premise solutions. However, as the market has matured this has changed as there are fewer on-premise deployments to migrate. This will drive more competition and the need for providers to differentiate whilst also potentially starting pricing consolidation,” said Dominic Black, director of research services at Cavell. “Indeed, we have seen from our research that the proportion of customers being won from a competitor’s UCaaS solutions has been increasing steadily in the last few quarters. Our latest research shows that nearly half (49%) of cloud communications providers have won the majority of their customers from competitors, which is the first time this figure has matched the percentage won by migrating from on-premise solutions.”