Published: July 8, 2020
The 451 Take
Organizations across all industries have experienced different levels of disruption as a result of the COVID-19 outbreak during the first half of 2020. While many are slowing down IT initiatives in several areas, our research shows that digital transformation will remain a priority. CPaaS was already expanding beyond its core user base of developers and digital-native companies, and increasingly gaining traction in the mainstream enterprise segment. This trend could accelerate as a result of the COVID-19 outbreak, but will require vendors to ramp up capabilities such as reliability, security and support to address enterprise-grade requirements for embedded real-time communications.
COVID-19 Could Accelerate CPaaS Enterprise Adoption
451 Research has followed the evolution of the CPaaS segment over several years. The term refers to a platform-based approach to business communications, and encompasses a wide range of vendors that provide APIs, SDKs, and libraries intended to allow developers and enterprises to integrate real-time voice, video and messaging communications into their web and mobile applications. Initially pioneered by developer-focused providers such as Twilio and Nexmo (now Vonage), this approach is increasingly being adopted by vendors across the different layers of the communications technology stack. Our latest CPaaS Market Monitor report maintains an estimate and forecast for 46 vendors, including the network, API and application layers.
In the past five years, CPaaS providers have expanded beyond their core base of developers and digital-native companies and into the mainstream enterprise segment. This trend could now accelerate as a result of the COVID-19 outbreak, which is creating a sense of urgency for the digitalization of the customer experience. For many organizations, digital channels have been the only ones to remain operational during this period, and have proven critical for business continuity. 451 Research expects this will accelerate the digitalization of customer and employee experiences, two trends that were already growing strongly prior to the outbreak. By enabling more effective ways for organizations to engage with their customers and employees, CPaaS could emerge as a critical component for digital transformation and business continuity.
Conducted in late May and early June, 451 Research's Voice of the Enterprise: Coronavirus Flash Survey June 2020 shows that, even though organizations are slowing down IT initiatives in several areas in response to the pandemic, digital transformation remains a priority. Survey results show that 62% of respondents expect that overall digital transformation initiatives will remain unaffected or even accelerate, as shown below in Figure 1. Furthermore, most respondents (66%) expect that digital transformation initiatives related to shifting to digital delivery of the customer experience in their organizations will remain unaffected or accelerate, while only 7% report that these initiatives have been delayed.
COVID-19 Will Lead to Near-term Uncertainty, Followed by Solidifying Demand
As previously noted, digital transformation initiatives and the shift to digital delivery of the customer experience could result in increased demand for embedded real-time communications. While this will drive increased demand, 451 Research anticipates that, in the near term, the overall CPaaS market growth will fall below our initial projection.
Despite near-term uncertainty, indicators of the state of play from leading vendors point to a stronger-than-expected 2020. Vendors with a large percentage of digital-native companies in their customer bases will be better positioned to withstand the economic crisis, while those focused on vulnerable verticals – such as travel and hospitality – could experience a downturn. Overall, the expectation is that the pandemic will have a net positive effect for the CPaaS segment, as shown in Figure 2.
Raúl Castañón-Martínez is a senior analyst based in Boston focusing on business communications and collaboration technologies such as enterprise messaging, voice, bots, speech recognition and unified communications. Before 451 Research, he was a product manager at EMOSpeech, analyzing emotion recognition technology.
Brenon Daly oversees the financial analysis of 451 Research's Market Insight and KnowledgeBase products, having covered more than a quarter-trillion dollars' worth of deal flow for both national publications and research firms.
As an Analyst in 451 Research’s Information Security Channel, Patrick Daly covers emerging technologies in