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InfoTrack for

Unified Communications

Impact of Microsoft Lync on the

Enterprise Voice Market—2014

June 2014

A T3i Group Market Intelligence Program

Focused on Unified Communications

Enterprise and SMB Markets

IP Telephony

Systems

UC

Applications

Converged

Services

InfoTrack for Unified Communications: Microsoft Lync Market Impact Analysis

Copyright 2014 T3i Group. All rights reserved June 2014 Page 2 of 85

InfoTrack for Unified Communications: Impact of Microsoft Lync on the Enterprise Voice Market—2014

A T3i Group Series of Primary Research Studies on the Market Demand for Unified Communications Infrastructure and Applications

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Copyright 2014 T3i Group All rights reserved June 2014 Page 3 of 85


TABLE of Contents

Page

LIST of EXHIBITS .............................................................................................................................................. 5

1. EXECUTIVE SUMMARY .............................................................................................................................. 8 How Have Plans to Trial Microsoft Lync Changed Since A Year Ago? ........................................................ 8 Do the Trials of Microsoft Lync Include Enterprise Voice? ........................................................................... 9 What Is the Anticipated Adoption Rate of Lync Enterprise Voice? ............................................................ 10 Why are Businesses Deploying Lync with Enterprise Voice? ..................................................................... 11 How Did Actual Costs Compare with Expectations for Implementation of Lync EV? .............................. 13 How Extensively Are Firms Planning to Deploy Lync Enterprise Voice? .................................................. 13 What is the Actual Penetration of Lync EV Licenses Within Employees of U.S. Enterprises? ................ 14 What is the Actual Penetration of Lync EV Licenses Within Employees of U.S. SMBs? ......................... 13 What is the Projected Penetration of Lync EV Licenses Over the Next Few Years? ................................ 11 Where Does Microsoft Rate Among Preferred Vendors for IP-PBXs? ........................................................ 15 Where Does Microsoft Rate Among Preferred Vendors for UC Apps? ........................................................ 18

2. INTRODUCTION AND METHODOLOGY .............................................................................................. 19 Scope of InfoTrack for Unified Communications (IUC) ............................................................................... 19 Program Leadership ....................................................................................................................................... 19 Primary Research Methodology .................................................................................................................... 19

3. ANALYSIS OF ENTERPRISE PLANS FOR MICROSOFT LYNC ENTERPRISE VOICE ............ 20 Demographics of Enterprise Survey Participants ........................................................................................ 20 Distribution of Participating Enterprises by Type of Decision Maker ....................................................... 21 Distribution of Participtaing Enterprises by Type of Industry ................................................................... 22 Enterprise Position on Microsoft Software Products and Services ............................................................. 23 Enterprise Status on Trialing Microsoft Lync .............................................................................................. 24 Percent of Enterprise Microsoft Lync Trials that Include Enterprise Voice .............................................. 25 Enterprise Perception of Microsoft Capabilities for Enterprise Voice ........................................................ 26 Performance of Enterprise Voice during Microsoft Lync Trials .................................................................. 27 Enterprise Perspective on Startup Costs of Implementing Lync with Enterprise Voice .......................... 28 Enterprise Perspective on Ongoing Costs of Implementing Lync with Enterprise Voice ......................... 29

Enterprise Plans for Deploying Lync with Enterprise Voice Beyond Trials .............................................. 30

Enterprises' Top Reasons for Deploying Lync with Enterprise Voice Beyond Trials ................................ 31

Factors that Fell Short of Enterprises’ Expectations in Deploying Lync with Enterprise Voice ............. 32

Enterprise Problems in Scaling Lync with Enterprise Voice ...................................................................... 33

Current Status of Licenses for Lync with Enterprise Voice—Medium Enterprise ................................... 34

Current Status of Licenses for Lync with Enterprise Voice—Large Enterprise ....................................... 35

Enterprise Projected Deployment of Licenses for Microsoft Lync with Enterprise Voice ......................... 36

Enterprise Scope of Planned Deployment of Microsoft Lync with Enterprise Voice ................................. 37

Enterprise Organization Responsible for Decision to Deploy Lync with Enterprise Voice ....................... 38

Enterprise Ratings of Microsoft Dealers in Terms of Voice Expertise ....................................................... 39

Resources Used Extensively During Deployment of Lync with Enterprise Voice ..................................... 40

Enterprise Familiarity with Enhancements to Microsoft Lync .................................................................. 41

Perception of Whether Enhancements Meet Enterprise Needs .................................................................. 42

Likelihood of Enterprises Implementing Enhancements to Microsoft Lync .............................................. 43

Effect of Skype Acquisition on Decision to Implement Lync with Enterprise Voice ................................. 44

Likelihood of Implementing Skype Functions during Next Few Years ...................................................... 45

Enterprise Plans for Replacing/Retaining Existing Telephony Systems During Lync Deployment ........ 46

Enterprise Distribution of Endpoints on Deployed Lync Systems with Enterprise Voice ........................ 47



Primary Method for Enterprises Connecting to the PSTN for Lync with Enterprise Voice ..................... 48

Agreement Regarding Use of 3rd Party Session Border Controllers/Enhanced Gateways ........................ 49

Enterprise Plans for Voicemail on Lync with Enterprise Voice .................................................................. 50

Enterprise Preferred Vendors for IP-PBXs—Before Microsoft Entered the Enterprise Voice Market

vs. Currently ................................................................................................................................................... 51

Enterprise Preferred Vendors for UC Apps—Before Microsoft Entered the Enterprise Voice Market

vs. Currently ................................................................................................................................................... 52

4. ANALYSIS OF SMB PLANS FOR MICROSOFT LYNC ENTERPRISE VOICE .............................. 53 Demographics of SMB Survey Participants ................................................................................................. 53 Distribution of Participating SMBs by Type of Decision-Maker ................................................................. 54 Distribution of Participating SMBs by Industry .......................................................................................... 55 SMB Position on Microsoft Software Products and Services ...................................................................... 56 SMB Status on Trialing Microsoft Lync ....................................................................................................... 57 Percent of SMB Microsoft Lync Trials that Include Enterprise Voice ....................................................... 58 SMB Perception of Microsoft Capabilities for Enterprise Voice ................................................................. 59 Performance of Enterprise Voice during SMB Trial of Microsoft Lync ...................................................... 60 SMB Perspective on Startup Costs of Implementing Lync with Enterprise Voice .................................... 61 SMB Perspective on Ongoing Costs of Implementing Lync with Enterprise Voice ................................... 62 SMB Plans for Deploying Microsoft Lync with Enterprise Voice Beyond Trials ....................................... 63

SMB Top Reasons for Deploying Lync with Enterprise Voice Beyond Trials ............................................ 64

Factors that Fell Short of SMBs’ Expectations in Deploying Lync with Enterprise Voice ....................... 65

SMB Problems in Scaling Lync with Enterprise Voice ................................................................................ 66

Current Status of Licenses for Lync with Enterprise Voice—Small Business .......................................... 67

Current Status of Licenses for Lync with Enterprise Voice—Medium Busines ........................................ 68

Projected SMB Deployment of Licenses for Microsoft Lync with Enterprise Voice .................................. 69

Scope of Planned SMB Deployment of Microsoft Lync with Enterprise Voice ........................................... 70

SMB Organization Responsible for Decision to Deploy Lync with Enterprise Voice ................................ 71

SMB Ratings of Microsoft Dealers in Terms of Voice Expertise ................................................................. 72

Resources Used Extensively During Deployment of Lync with Enterprise Voice ..................................... 73

SMB Familiarity with Enhancements to Microsoft Lync ............................................................................ 74

Perception of Whether Enhancements Meet SMB Needs ........................................................................... 75

Likelihood of SMBs Implementing Enhancements to Microsoft Lync ........................................................ 76

Effect of Skype Acquisition on SMB Decision to Implement Lync with Enterprise Voice ........................ 77

Likelihood of SMBs Implementing Skype functions during Next Few Years ............................................ 78

SMB Plans for Replacing/Retaining Existing Telephony Systems During Lync Deployment .................. 79

Distribution of Endpoints on SMB Deployed Lync Systems with Enterprise Voice .................................. 80

Primary Method for SMBs Connecting to the PSTN for Lync with Enterprise Voice ............................... 81

SMB Agreement on Use of 3rd Party Session Border Controllers/Enhanced Gateways ............................ 82

SMB Plans for Voicemail on Lync with Enterprise Voice ........................................................................... 83

SMB Preferred Vendor for IP-PBXs—Before Microsoft Entered the Enterprise Voice Market

vs. Currently ................................................................................................................................................... 84

SMB Preferred Vendor for UC Apps—Before Microsoft Entered the Enterprise Voice Market

vs. Currently ................................................................................................................................................... 85



LIST of EXHIBITS

Page

Exhibit ES-1 Current Status of Microsoft Lync Trials vs. a Year Ago ............................................................ 8

Exhibit ES-2 Microsoft Lync Trials that Include Enterprise Voice vs. a Year Ago ........................................ 9

Exhibit ES-3 Current Plans for Deploying Lync with Enterprise Voice Beyond Trials vs. a Year Ago ...... 10

Exhibit ES-4 Top Reasons for Deploying Lync with Enterprise Voice Beyond Trials .................................. 11

Exhibit ES-5 Perspective on the Costs of Implementing Lync with Enterprise Voice ................................. 12

Exhibit ES-6 Scope of Planned Deployment of Lync Enterprise Voice vs. a Year Ago ................................. 13

Exhibit ES-7 Penetration of Lync EV Licenses in the Enterprise Market vs. a Year Ago ........................... 14

Exhibit ES-8 Penetration of Lync EV Licenses in the SMB Market vs. a Year Ago ..................................... 15

Exhibit ES-9 Projected Penetration of Lync EV Licenses ............................................................................... 16

Exhibit ES-10 Preferred Vendor for IP-PBXs – Before Microsoft Entered the Market

vs. Currently ................................................................................................................................ 17

Exhibit ES-11 Preferred Vendor for UC Apps – Before Microsoft Entered the Market

vs. Currently ................................................................................................................................ 18

Exhibit 1 Distribution of Participating Enterprises by Size..................................................................... 20

Exhibit 2 Distribution of Participating Enterprises by Type of Decision-Maker .................................... 21

Exhibit 3 Distribution of Participating Enterprises by Type of Industry ................................................ 22

Exhibit 4 Enterprise Position on Microsoft Software Products and Services.......................................... 23

Exhibit 5 Current Status of Enterprise Trials of Microsoft Lync ............................................................ 24

Exhibit 6 Percent of Enterprise Microsoft Lync Trials that Include Enterprise Voice........................... 25

Exhibit 7 Enterprise Perception of Microsoft Capabilities for Enterprise Voice .................................... 26

Exhibit 8 Performance of Enterprise Voice during Microsoft Lync Trials .............................................. 27

Exhibit 9 Enterprise Perspective on Startup Costs of Implementing Lync with Enterprise Voice ....... 28

Exhibit 10 Enterprise Perspective on Ongoing Costs of Implementing Lync with Enterprise Voice ...... 29

Exhibit 11 Enterprise Plans for Deploying Lync with Enterprise Voice Beyond Trials ........................... 30

Exhibit 12 Enterprises’ Top Reasons for Deploying Lync with Enterprise Voice Beyond Trials ............. 31

Exhibit 13 Factors that Fell Short of Enterprises’ Expectations in Deploying Lync with EV ................. 32

Exhibit 14 Enterprise Problems in Scaling Lync with Enterprise Voice ................................................... 33

Exhibit 15 Current Status of Licenses for Lync with Enterprise Voice—Medium Enterprise ................ 34

Exhibit 16 Current Status of Licenses for Lync with Enterprise Voice—Large Enterprise .................... 35

Exhibit 17 Enterprise Projected Deployment of Licenses for Microsoft Lync with Enterprise Voice ...... 36

Exhibit 18 Enterprise Scope of Planned Deployment of Microsoft Lync with Enterprise Voice .............. 37

Exhibit 19 Enterprise Scope of Planned Deployment of Microsoft Lync with Enterprise Voice .............. 38

Exhibit 20 Enterprise Ratings of Microsoft Dealers in Terms of Voice Expertise .................................... 39

Exhibit 21 Resources Used Extensively During Deployment of Lync with Enterprise Voice .................. 40

Exhibit 22 Enterprise Familiarity with Enhancements to Microsoft Lync ............................................... 41

Exhibit 23 Perception of Whether Enhancements Meet Enterprise Needs ............................................... 42



Exhibit 24 Likelihood of Enterprises Implementing Enhancements to Microsoft Lync ........................... 43

Exhibit 25 Effect of Skype Acquisition on Decision to Implement Lync with Enterprise Voice .............. 44

Exhibit 26 Likelihood of Implementing Skype functions during Next Few Years .................................... 45

Exhibit 27 Enterprise Plans for Replacing/Retaining Existing Telephony Systems During Lync

Deployment .................................................................................................................................. 46

Exhibit 28 Enterprise Distribution of Endpoints on Deployed Lync Systems with Enterprise Voice ..... 47

Exhibit 29 Primary Method for Enterprises Connecting to the PSTN for Lync with Enterprise Voice .. 48

Exhibit 30 Agreement Regarding Use of 3rd Party Session Border Controllers/Enhanced Gateways .... 49

Exhibit 31 Enterprise Plans for Voicemail on Lync with Enterprise Voice............................................... 50

Exhibit 32 Enterprise Preferred Vendors for IP-PBXs—Before Microsoft Entered the Enterprise

Voice Market vs. Currently ........................................................................................................ 51

Exhibit 33 Enterprise Preferred Vendors for UC Apps—Before Microsoft Entered the Enterprise

Voice Market vs. Currently ........................................................................................................ 52

Exhibit 34 Distribution of Participating SMBs by Size .............................................................................. 53

Exhibit 35 Distribution of Participating SMBs by Type of Decision-Maker ............................................. 54

Exhibit 36 Distribution of Participating SMBs by Industry....................................................................... 55

Exhibit 37 SMB Position on Microsoft Software Products and Services ................................................... 56

Exhibit 38 SMB Status on Trialing Microsoft Lync .................................................................................... 57

Exhibit 39 Percent of SMB Microsoft Lync Trials that Include Enterprise Voice .................................... 58

Exhibit 40 SMB Perception of Microsoft Capabilities for Enterprise Voice .............................................. 59

Exhibit 41 Performance of Enterprise Voice during SMB Trial of Microsoft Lync ................................... 60

Exhibit 42 SMB Perspective on Startup Costs of Implementing Lync with Enterprise Voice ................ 61

Exhibit 43 SMB Perspective on Ongoing Costs of Implementing Lync with Enterprise Voice ............... 62

Exhibit 44 SMB Plans for Deploying Microsoft Lync with Enterprise Voice Beyond Trials ................... 63

Exhibit 45 SMB Top Reasons for Deploying Lync with Enterprise Voice Beyond Trials ......................... 64

Exhibit 46 Factors that Fell Short of SMBs’ Expectations in Deploying Lync with Enterprise Voice .... 65

Exhibit 47 SMB Problems in Scaling Lync with Enterprise Voice ............................................................ 66

Exhibit 48 Current Status of Licenses for Lync with Enterprise Voice—Small Business ....................... 67

Exhibit 49 Current Status of Licenses for Lync with Enterprise Voice—Medium Business ................... 68

Exhibit 50 Projected SMB Deployment of Licenses for Microsoft Lync with Enterprise Voice ............... 69

Exhibit 51 Scope of Planned SMB Deployment of Microsoft Lync with Enterprise Voice ....................... 70

Exhibit 52 SMB Organization Responsible for Decision to Deploy Lync with Enterprise Voice ............. 71

Exhibit 53 SMB Ratings of Microsoft Dealers in Terms of Voice Expertise .............................................. 72

Exhibit 54 Resources Used Extensively During Deployment of Lync with Enterprise Voice .................. 73

Exhibit 55 SMB Familiarity with Enhancements to Microsoft Lync ......................................................... 74

Exhibit 56 Perception of Whether Enhancements Meet SMB Needs ........................................................ 75

Exhibit 57 Likelihood of SMBs Implementing Enhancements to Microsoft Lync .................................... 76

Exhibit 58 Effect of Skype Acquisition on SMB Decision to Implement Lync with Enterprise Voice ..... 77

Exhibit 59 Likelihood of SMBs Implementing Skype functions during Next Few Years ......................... 78

Exhibit 60 SMB Plans for Replacing/Retaining Existing Telephony Systems During Lync Deployment79



Exhibit 61 Distribution of Endpoints on SMB Deployed Lync Systems with Enterprise Voice .............. 80

Exhibit 62 Primary Method for SMBs Connecting to the PSTN for Lync with Enterprise Voice ........... 81

Exhibit 63 SMB Agreement on Use of 3rd Party Session Border Controllers/Enhanced Gateways ........ 82

Exhibit 64 SMB Plans for Voicemail on Lync with Enterprise Voice ........................................................ 83

Exhibit 65 SMB Preferred Vendor for IP-PBXs—Before Microsoft Entered the

Enterprise Voice Market vs. Currently ..................................................................................... 84

Exhibit 66 SMB Preferred Vendor for UC Apps—Before Microsoft Entered the

Enterprise Voice Market vs. Currently ..................................................................................... 85



38%

34%

23%

5%

14%

28%

52%

6%

Have completed trial

Currently conducting trial

Planning to conduct trial

No plans to conduct trial

Enterprise

Current A year ago

16%

18%

46%

20%

8%

21%

52%

19%





SMB

Current A year ago

1. EXECUTIVE SUMMARY

How Have Plans to Trial Microsoft Lync Changed Since A Year Ago? In February 2012, T3i Group published the first in-depth primary research and analysis of the potential impact of Microsoft Lync on the market for Enterprise Voice (EV) systems. That report framed the two opposing sides of the ongoing debate regarding Microsoft Lync:

“Microsoft has the opportunity to dominate the UC market and take a significant share of the voice IP-PBX market via Lync”

“Many businesses may be trialing Lync EV, but actual implementation of Lync will be mainly IM and Presence”

That report analyzed the implementation plans of more than 300 Enterprises and SMBs and concluded that Microsoft Lync should be recognized as a significant risk to incumbent IP-PBX vendors. In June 2013, we published our second research study on Microsoft Lync, which clearly confirmed the findings in the first report. For this 2014 study, we again surveyed over 300 IT and business leaders who are involved in the decision process regarding the adoption and usage of Lync. In this Executive Summary, we compare the results of the current 2014 study with those of the second study from last year.

Currently, 72% of the participating U.S. Enterprises, companies with 500+ employees, were either conducting or had completed trials of Microsoft Lync. That was a huge increase compared to 42% of U.S. Enterprises that were in that position a year ago. Only 5% of the Enterprises indicated they had no plans to trial Lync.

Among U.S. SMBs (Small/Medium Businesses with 5 to 499 employees), there was just a modest increase, with 34% having completed those trials or currently conducting them, compared to 29% a year ago. However, we could see a significant increase next year, with almost half of the SMBs indicating that they were planning to conduct a trial of Microsoft Lync.

Exhibit ES-1 Current Status of Microsoft Lync Trials vs. A Year

Ago

Source: InfoTrack: End-user Primary Research, 2Q2014




Do the Trials of Microsoft Lync Include Enterprise Voice?

The previous exhibit indicated significant increased interest in Microsoft Lync as a potential platform for UC applications, but what about Enterprise Voice? We asked the survey respondents that were trialing Lync whether Enterprise Voice was being included in their trials. With Enterprise Voice, Lync can provide the type of important telephony features that are generally available on current IP-PBXs.

As shown in Exhibit ES-2, 89% of the U.S. Enterprises indicated that Enterprise Voice had been or will be included in their Lync trials. That represents a 13 point increase from 76% a year ago. Among U.S. SMBs, 63% said that their trials of Lync included Enterprise Voice, up from 54% last year.

Microsoft and its partners make it relatively easy to trial Lync with Enterprise Voice. Firms are provided Lync-certified SIP phones or softphones on a temporary basis and do not have to install Lync servers for the trials. That is one of the reasons why such a high percentage of trials include Enterprise Voice.

Exhibit ES-2 Microsoft Lync Trials that Include Enterprise

Voice vs. a Year Ago

89%76%

11%24%

Current A year ago

Enterprise

No, Trials Do Not Include Enterprise Voice

Yes, Trials Include Enterprise Voice

63%54%

37%46%

Current A year ago

SMB






What Is the Anticipated Adoption Rate of Lync Enterprise Voice?

The decision-makers in this research were also asked about their plans for actually deploying Lync with Enterprise Voice (EV). Exhibit ES-3 depicts their responses.

Last year, 15% of U.S. Enterprises had begun to deploy Lync with Enterprise Voice beyond the trial stage, and another 44% were in the planning stages of deployment. It appears that more than half of those that were in the planning stages last year have actually begun their deployment, thus increasing the current total to 44%, tripling the 15% from a year ago. Only 21% of the Enterprises were either waiting for the results of their trials before deciding whether to deploy Lync EV or had no plans to deploy. That represents a 20 point reduction in the percent of “Undecideds” or “No Plans” from last year. Only 4% of the U.S. Enterprises we surveyed indicated that they had no plans to implement Microsoft Lync Enterprise Voice.

The percent of SMBs that were actually deploying Lync EV beyond trials also increased in the past year, but only from 9% to 12%. 31% of SMBs were currently planning to deploy Lync with Enterprise Voice, up from 27% last year. 57% were either undecided awaiting trial results, or don’t plan to deploy, compared to 64% a year ago.

It is extremely significant that almost half of U.S. Enterprises have begun to deploy Lync EV. This is the market segment in which Microsoft has traditionally developed the strongest relationships with IT decision-makers. These results show that those relationships are paying off.

Exhibit ES-3 Current Plans for Deploying Lync with Enterprise

Voice Beyond Trials vs. A Year Ago

44%

35%

17%

4%

15%

44%

34%

7%

Currently deploying

Planning to deploy

Undecided; depends on results of trial

No plans to deploy Microsoft Lync for Enterprise Voice

Enterprise

Current A year ago

12%

31%

43%

14%

9%

27%

48%

16%

Currently deploying

Planning to deploy



SMB

Current A year ago




Why are Businesses Deploying Lync with Enterprise Voice? We asked the decision-makers who were currently deploying Lync EV or planning to deploy, to rank the top reasons for that decision. The results are shown in Exhibit ES-4.

The number one reason among both Enterprises and SMBs was that Lync Enterprise Voice’s total cost of ownership (TCO) is lower than PBX based solutions. This was also the top reason provided in last year’s survey responses. Microsoft prices Lync very attractively for firms that use other Microsoft applications. Licenses for access to Lync are bundled in the Enterprise CAL Suite with licenses of other popular Microsoft applications including Exchange, SharePoint and Windows. Firms who want to add Enterprise Voice can upgrade for an additional incremental charge. Microsoft’s Enterprise Agreement offers volume pricing discounts for licenses, as well.

The effectiveness of Microsoft’s bundling strategy is reflected in the second reason both Enterprises and SMBs gave for moving to Lync Enterprise Voice -- Facilitates voice feature integration with other Microsoft applications.

The next three reasons demonstrate the effectiveness of Microsoft’s incremental pricing strategy: We have already adopted Microsoft Lync for IM and Presence We have already adopted Microsoft Lync for Web Conferencing Lync EV is a natural extension of our commitment to Lync for UC

The Microsoft IP-PBX competitors may argue that Enterprises are mainly implementing Microsoft Lync just as a platform for UC, simply because they were already using Microsoft for IM or web conferencing. But IP-PBX vendors face an even greater risk if Enterprises adopt Lync for UC, because Exhibit ES-4 shows that Enterprises will implement Microsoft Lync as a platform for Enterprise Voice, largely because they had already begun using Microsoft Lync for UC.

Exhibit ES-4 Top Reasons for Deploying Lync with Enterprise

Voice Beyond Trials Among Enterprises & SMBs Deploying/Planning to Deploy Lync with Enterprise Voice

Top Reasons ENT SMB

Total cost of ownership (hardware, software, service support) is lower than

PBX based solutions1 1

Facilitates voice feature integration with other Microsoft applications, e.g.,

Sharepoint, Exchange, Office2 2

We have already adopted Microsoft Lync for IM and Presence 3 4

We have already adopted Microsoft Lync for Web Conferencing 4 3

Lync Enterprise Voice is a natural extension of our commitment to Microsoft

Lync for UC5 5

The Lync Client is superior to the user interface provided by other UC vendors 6 6




How Did Actual Costs Compare with Expectations for Implementation of Lync EV?

In the preceding Exhibit, Enterprises and SMBs both indicated that their number one reason for implementing Microsoft Lync for Enterprise Voice was because its Total Cost of Ownership (TCO) was lower than PBX based solutions. But were they really considering all of the costs or were they focused primarily on start-up costs? In the early stages, the costs may be lower because much of the initial cost of Lync EV was an incremental extension to the investment that they had already made in implementing a broader suite of Microsoft applications.

In this year’s survey we asked the respondents to distinguish between start-up costs and ongoing costs. Half of the Enterprises that were currently deploying Lync EV or preparing to deploy it indicated that the start-up costs were in line with what they had expected. Almost as many, 42%, said the same thing about ongoing costs. One-third of the Enterprises admitted that there were some additional ongoing costs that they had not anticipated. But that was only slightly more than the 28% who said the same thing about the start-up costs. 19% of Enterprises felt that the ongoing costs were actually lower than they had expected, versus 15% who felt that way about start-up costs.

A significant percentage of Enterprises encountered some surprises with both the ongoing costs of deploying Lync EV and the start-up costs. Interestingly, the attitude of SMBs toward ongoing costs vs. start-up costs was almost identical to that of their Enterprise counterparts. However, despite these unanticipated additional costs, the scope of deployment of Microsoft Lync with Enterprise Voice is continuing to increase, as shown in the next exhibit.

Exhibit ES-5 Perspective on the Costs of Implementing Lync

with Enterprise Voice

50%

28%

15%

7%

42%

32%

19%

7%

The costs are in line with what we had expected

There were some additional costs that we had not anticipated

So far the costs are lower than we had expected

It is too early in the process to make a determination on costs

Enterprise

Startup Costs Ongoing costs

58%

26%

12%

4%

55%

31%

14%

0%

The costs are in line with what we had expected


So far the costs are lower than we had expected

It is too early in the process to make a determination on costs

SMB

Startup Costs Ongoing costs



7%

24%

29%

24%

16%

7%

27%

34%

15%

17%

Selected individuals

At selected locations as the need arises (e.g., replace outdated PBX)

Throughout specific departments or business units

Throughout your home country

Globally

Enterprise

Current A year ago

14%

22%

31%

33%

0%

23%

17%

28%

25%

7%





Globally

SMB

Current A year ago

How Extensively Are Firms Planning to Deploy Lync Enterprise Voice?

We asked the firms that were deploying or planned to deploy Lync Enterprise Voice to characterize the scope of their deployment from an array of five approaches that range from enabling selected individuals to full-scale global deployment. Among the current/future implementers in last year’s study, 32% of those Enterprises were planning a company-wide deployment of Lync Enterprise Voice that would cover either their U.S. operations (15%) or their entire global Enterprise (17%). That represented 19% of all Enterprises that took part in last year’s study. Certainly, that could have a substantial impact on the PBX market both within the U.S. and globally.

Since then, Enterprises have begun to deploy Lync 2013 which offered significant improvements over Lync 2010. As a result, the percent of projected company-wide deployments among the current/future implementers has jumped to 40% (24% nationwide and 16% globally). Measured against a base of 79% of Enterprises which are currently deploying or planning to deploy, that represented 32% of all Enterprises that participated in this year’s study.

33% of U.S. SMBs that are currently deploying or plan to deploy Lync Enterprise Voice expect nation-wide or global deployment. That is just one point higher than the 32% of the SMBs in last year’s study. These SMBs planning company-wide deployment represent 14% of all SMBs that participated in this study, up slightly from 12% of SMBs last year.

In the 2013 InfoTrack for Unified Communications (IUC) forecast report, we estimated that Microsoft had achieved a 14.9% market share of IP Telephony shipments to U.S. Enterprises in 2012 and 3.6% share for SMBs. Based on the results of this study, we can expect to see a significant increase in Microsoft’s Enterprise market share for 2013, with perhaps a flat or declining share in the SMB market.

Exhibit ES-6 Scope of Planned Deployment of Lync EV vs. A

Year Ago Among Current/Future Implementers





What is the Actual Penetration of Lync EV Licenses Within All Employees of U.S.

Enterprises? To measure the penetration of Lync Enterprise Voice licenses that are actually in use in the U.S. Enterprise segment of the market, we asked the decision-makers the following series of questions about the number and status of their Lync licenses in the U.S.:

How many total Lync licenses does your company have? Of those, how many are Plus CAL for Enterprise Voice? What % of those are in actual use by employees? What is your company’s total number of employees in the U.S.?

As noted earlier, Enterprises may have a number of Lync licenses that were bundled as part of Microsoft’s Enterprise CAL Suite of licenses. In this year’s study, the total Lync licenses represented 15% of their employees in the U.S., up sharply from 11% a year ago. 45% of those licenses were Plus CAL for Enterprise Voice, somewhat more than last year. The percent of Plus CAL licenses that had been activated for actual use was also about the same as last year, 51% vs. 54%. These active Plus CAL licenses represent 3.4% of total U.S. Enterprise employees, a significant increase from 2.5% in last year’s study.

Exhibit ES-7 Penetration of Lync EV Licenses in the Enterprise

Market vs. a Year Ago

Current

15%

45% 51%

3.4%

11%

42%54%

2.5%

A year ago

Lync licenses as % of total

employees

Plus CAL as % of Lync Licenses

% Plus CAL licenses in actual use

Lync Enterprise Voice licenses in use as % of total

employees




What is the Actual Penetration of Lync EV Licenses Within Employees of U.S. SMBs?

To measure the penetration of Lync Enterprise Voice licenses that are actually in use in the U.S. SMB market, we used the same methodology that was described on the preceding page and applied it to the responses of the SMB participants in this year’s survey.

The total Lync licenses among the SMBs this year represented 15% of their employees in the U.S., compared to 11% a year ago. 50% of those licenses were Plus CAL for Enterprise Voice, down somewhat from 53% last year. The percent of Plus CAL licenses that had been activated for actual use by SMB employees was 35%, about the same as the 37% a year ago. These active Plus CAL licenses represent 2.6% of total U.S. SMB employees, up from 2.2% in last year’s study.

Exhibit ES-8 Penetration of Lync EV Licenses in the SMB

Market vs. A Year Ago

Current

15%

50%35%

2.6%

11%

53%37%

2.2%

A year ago


employees




employees




What is the Projected Penetration of Lync EV Licenses Over the Next Few Years? We asked the study participants a similar set of questions about their future deployment plans in order to calculate the projected penetration of Lync EV Licenses.

Among U.S. Enterprises, the projected penetration of active plus CAL licenses was 5.7% by the end of 2015. That was up significantly from the 3.4% penetration at the end of 2013, as presented in Exhibit ES-7. By the end of 2017, the penetration of active Plus CAL licenses was projected to reach 8.3% of U.S. Enterprise employees. Penetration of Lync EV licenses in the U.S. SMB market was projected to lag that of the U.S. Enterprise market. By the end of 2015, the projected penetration of active plus CAL licenses was 3.6% of U.S. SMB employees. That was a significant increase from the 2.6% penetration computed for the end of 2013. The rate of SMB penetration was expected to accelerate over the following two years, reaching 4.6% of SMB employees by the end of 2017.

Exhibit ES-9 Projected Penetration of Lync EV Licenses

3.4%

5.7%

8.3%

2.6%

3.6%

4.6%

2013 2015 2017

Enterprise SMB



27%

52%

0%

4%

17%

15%

34%

38%

4%

9%

Avaya

Cisco

Microsoft

Cloud-based Hosted Service Provider

Other

Vendors

Enterprise

Before Currently

30%

20%

0%

6%

44%

26%

16%

15%

6%

37%

Avaya

Cisco

Microsoft


Other

Vendors

SMB

Before Currently


Where Does Microsoft Rate Among Preferred Vendors for IP-PBXs? Participants in this study were asked to identify the one company that was currently their preferred vendor for IP-PBXs or the functionality of IP-PBXs. They were also asked to identify who that preferred vendor was before Microsoft entered the Enterprise Voice market. The responses to these questions have been summarized in Exhibit ES-10.

About half of the U.S. Enterprises indicated that Cisco was their Preferred Vendor for IP-PBXs before Microsoft entered the Enterprise Voice market. This was followed by Avaya with 27%. 17% of the Enterprises preferred one of the other telephony systems vendors.

In response to the question regarding their current Preferred Vendor for IP-PBXs, 38% of the Enterprises selected Microsoft. This was substantially higher than the 25% in last year’s study. It was somewhat surprising that the percentage of Enterprises that picked Microsoft was higher than Cisco. On the other hand, we noted in Exhibit ES-3 that 44% of the Enterprises were currently deploying Microsoft Lync with Enterprise Voice. And in Exhibit ES-6, we saw that 40% of Enterprises expected company-wide deployment of Microsoft Lync EV. We should note that the format of this question in the survey limited Enterprises to one selection for Preferred Vendor currently. So of the Enterprises that had begun to deploy Microsoft Lync but still had mostly Cisco IP-PBXs, some could have decided to pick Microsoft as their one response to this question. As a result, Cisco dropped from 52% to 34%, while preferences for Avaya declined 12 points to 15%.

Among SMBs, 15% selected Microsoft as their currently preferred IP-PBX vendor. SMBs that preferred Avaya declined from 30% to 26%, while preferences for other telephony systems vendors went from 44% to 37%. Cisco dropped from 20% to 16% among these SMB decision-makers.

Exhibit ES-10 Preferred Vendor for IP-PBXs – Before Microsoft

Entered the Market vs. Currently




Where Does Microsoft Rate Among Preferred Vendors for UC Apps? Participants in this study were also asked to identify the one company that is currently their preferred vendor for UC applications. In addition, they were asked to identify who that preferred vendor was before Microsoft entered the Enterprise Voice market. The responses to these questions have been summarized in Exhibit ES-11.

43% of the U.S. Enterprises indicated that Cisco was their Preferred Vendor for UC Apps before Microsoft entered the Enterprise Voice market. At that point in time, Microsoft was already considered to be the Preferred Vendor for UC Apps by 27% of the Enterprises, followed by Avaya at 15%.

In response to the question regarding their current Preferred Vendor for UC Apps, 40% of the Enterprises selected Microsoft. This was a gain of 13 points for Microsoft, while Cisco dropped 7 points to 36%, which put them in 2nd place behind Microsoft. Avaya declined 6 points to 9%.

Among SMBs, before Microsoft entered the Enterprise Voice market they were the 3rd most popular vendor for UC apps. But currently, 29% of the SMBs chose Microsoft as their Preferred Vendor for UC Apps, a gain of 17 points. That put them ahead of Avaya which declined from 23% to 17%, and Cisco which dropped from 20% to 17% among these SMB decision-makers.

The bottom line here is that Microsoft is now the highest rated vendor for both UC Apps (40%) and IP-PBXs (38%) among U.S. Enterprises that participated in this survey. They have also moved into the top spot as Preferred Vendor for UC Apps among SMBs (29%).

Exhibit ES-11 Preferred Vendor for UC-Apps – Before Microsoft

Entered the Market vs. Currently

15%

43%

27%

2%

13%

9%

36%

40%

3%

12%

Avaya

Cisco

Microsoft


Other

Vendors

Enterprise

Before Currently

23%

20%

12%

9%

36%

17%

17%

29%

11%

26%

Avaya

Cisco

Microsoft


Other

Vendors

SMB

Before Currently



2. INTRODUCTION AND METHODOLOGY

Scope of InfoTrack for Unified Communications (IUC)

InfoTrack for Unified Communications is a research program that addresses demand for evolving communications technologies and the impact of significant market shifts. Our analysis focuses on understanding decision-makers’ perceptions of the solutions being marketed to them, and their resulting buyer behaviors.

In the first half of 2014 we published reports on 1) New Trends and Changes in Customers’ UC Buying Behavior and 2) Transformative Technologies – Enterprise and SMB Outlook on how UC can Transform how they do Business. This current report is the 3rd annual report on the Market Impact of Microsoft Lync.

In June 2014 we will publish our annual in-depth forecast of the IP Telephony and Unified Communications (UC) application markets.

Program Leadership

The program directors for IUC are Ken Dolsky ([email protected]) and Terry White ([email protected]). They are responsible for all primary research involving the market demand for unified communications among U.S. and international businesses and institutions. To support these primary research efforts, T3i Group has established two research panels, one consisting of more than 7,000 Enterprise decision-makers and a second panel with more than 6,000 SMB decision-makers.

Primary Research Methodology

Analyses presented in this study were driven by comprehensive primary research, which was conducted specifically for this report. This primary research included a mix of web-based surveys and telephone interviews, with key industry players, including:

Decision-makers for both IP Telephony and UC applications

Leading suppliers of IP Telephony systems and UC apps.

The research covered both Enterprises (entities with 500 or more employees) and SMBs (entities with 5 to 499 employees). Results for each group are provided in separate sections.

mailto:[email protected]




3. ANALYSIS OF ENTERPRISE PLANS FOR MICROSOFT LYNC

ENTERPRISE VOICE

Demographics of Enterprise Survey Participants

The exhibits in this section of the report are based on responses from U.S. business and institutional entities with 500 or more employees. IUC refers to these entities as Enterprises. During April 2014, surveys were completed with over 150 qualified Enterprise managers who are key decision-makers or key influencers regarding adoption and usage of Microsoft Lync. The same survey also received responses from 150 managers at SMB sized companies (499 employees or less) with the same responsibilities. The results from the SMB managers are described later in Section 4.

Exhibit 1 below shows the distribution of the participating U.S. Enterprises based upon their size. 23% of the respondents represented Enterprises with 500 to 999 employees, and 27% were Enterprises with 1,000 to 2,499 employees. Throughout the analysis, these two size categories, comprising 50% of the respondents, are referred to as Medium Enterprises (ME).

36% of the respondents were from Enterprises with between 2,500 and 9,999 employees. Enterprises with 10,000 or more employees accounted for 14% of the Enterprise participants. These two size segments comprise the Large Enterprise (LE) segment, representing 50% of the respondents.

Exhibit 1 Distribution of Participating Enterprises

by Size

23%

27%

36%

14%

500 – 999

1,000 – 2,499

2,500 – 9,999

10,000 +

U.S. Enterprises




Distribution of Participating Enterprises by Type of Decision Maker

Exhibit 2 contains two graphs that show the distribution of titles and decision-making responsibilities among the Enterprise decision-makers who participated in this study.

44% were Executives who are responsible for business decisions, including CEOs, CFOs, COOs and Line of Business Managers. These executives are becoming more involved in the UC decision process, which justified their significantly higher representation in this year’s survey.

CIOs, Information Systems Managers and Applications Managers, who are responsible for IT (information technology) decision-making, accounted for 49% of the participants in this study.

The remaining 7% were Telecom Managers and Data Network Managers whose primary decision-making responsibilities involve communications systems and networks.


by Type of Decision Maker

44%

49%

7%

Business

Information

Communications1%

6%

1%

33%

15%

12%

13%

19%

Telecom Manager

Data Network Manager

Applications Manager

Info Systems Manager

CIO

LoB Manager

CFO or COO

CEO




Distribution of Participating Enterprises by Type of Industry

Exhibit 3 shows the industry segment distribution of the Enterprise decision-makers who participated in this study. The participants represented 10 different industries.

The top three industries accounted for almost half of the Enterprise respondents, led by Manufacturing with 20%, Retail/Wholesale at 15% and Professional Services at 10%.

The next five industries represented roughly 40%of the total, including Healthcare, Telecommunications, Business Services, Financial Services/Insurance and Education.


by Type of Industry

20%

15%

10%

9%

9%

8%

7%

6%

5%

2%

9%

Manufacturing

Retail/Wholesale

Professional Services

Healthcare

Telecommunications

Business Services

Financial Services/Insurance

Education

Government

Utilities

Other




Enterprise Position on Microsoft Software Products and Services

Exhibit 4 shows the position taken by Enterprises toward Microsoft as a provider of products and services. Enterprises surveyed were strongly inclined toward reliance on the company, with 96% of Large Enterprises and 94% of Medium Enterprises describing themselves as “Microsoft shops” for at least some software.

Of those, MEs were more likely to depend primarily on Microsoft for key products and services (72% of MEs versus 63% of LEs), while LEs were more likely to buy only selected products and services from Microsoft (33% of LEs versus 22% of MEs). Among those few that characterized themselves as not a Microsoft shop were 4% of LEs and 6% of MEs.

Exhibit 4 Enterprise Position on Microsoft Software

Products and Services

72%

22%

6%

63%

33%

4%

Our company is primarily a “Microsoft shop” for key software products

and services

Our company is a “Microsoft shop” for

selected software products and services

Our company is NOT a “Microsoft shop” for key software products and

services

Medium Enterprise Large Enterprise




Enterprise Status on Trialing Microsoft Lync

As in last year’s report, Enterprise decision-makers were then asked about their plans to trial Microsoft Lync without reference to any specific functionality. Exhibit 5 shows the results.

72% of the Medium Enterprises have trialed or are currently trialing Microsoft Lync. This figure is up from 40% last year. As a result, the percent of MEs who said they were Planning to conduct a trial decreased from 52% last year to 22% this year. The category with the largest increase was Have completed trial which is now 33%, up from 10% last year.

Similarly, 72% of the Large Enterprises indicated they have trialed or are trialing Microsoft Lync. Last year the figure was 43%. Consequently, the percent of LEs who said they were Planning to conduct a trial decreased from 52% last year to 24% this year. Once again, the largest increase was in the Have completed trial category which increased from 17% last year to 43% this year.

Microsoft trials are very accessible, which may be the reason for the high interest. Microsoft channel partners can use Microsoft’s Proof of Concept and secure Web access to enable trials of Lync Enterprise Voice. Firms are offered softphones or Lync-certified SIP phones on a temporary basis and do not have to install Lync servers for the trials.

Exhibit 5 Current Status of Enterprise Trials of

Microsoft Lync

33%

39%

22%

6%

10%

30%

52%

8%





Medium Enterprise

Currently A year ago

43%

29%

24%

4%

17%

26%

52%

5%





Large Enterprise





Percent of Enterprise Microsoft Lync Trials that Include Enterprise Voice

Exhibit 6 shows the percentages of completed, current and planned Enterprise Microsoft Lync trials that included Enterprise Voice. As shown previously in Exhibit ES-2, 89% of the U.S. Enterprises who have trialed or are currently conducting trials or plan to trial indicated that Enterprise Voice had been, is or will be included in their Lync trials. That represents a 13 point increase from 76% a year ago.

88% of MEs said their trials include or will include Enterprise Voice. This compares with 68% who said this in last year’s report.

Similarly, 90% of LEs said they have trialed or will trial Enterprise Voice. This compares with 84% who said this in last year’s report.

Both segments of Enterprises have shown a significant increase in their interest in trialing Lync Enterprise Voice, especially among MEs.

Microsoft and its partners make it relatively easy to trial Lync with Enterprise Voice. Firms are provided Lync-certified SIP phones or softphones on a temporary basis and do not have to install Lync servers for the trials.

Exhibit 6 Percent of Enterprise Microsoft Lync Trials

that Include Enterprise Voice Among those who have completed, are currently trialing or plan to trial

88%68%

12%32%

Current A year ago

Medium Enterprise



90% 84%

10% 16%

Current A year ago

Large Enterprise






Enterprise Perception of Microsoft Capabilities for Enterprise Voice

Exhibit 7 shows how trials affected Enterprises’ perception of the capabilities of Lync Enterprise Voice.

For Large Enterprises, trialing led to an improvement in the perception of the capabilities of Lync Enterprise Voice. Those believing that Microsoft is better than most traditional voice system manufacturers increased from 43% before trials to 57% after. The 14% that changed their views were accounted for by 7% of those that had previously believed Microsoft was as good as the competition and 7% who no longer believed it was worse. Trialing had a very positive effect on the perceptions of LEs.

The perceptions of Microsoft’s Enterprise Voice capabilities were equally as positive among Medium Enterprises, with 57% believing that Microsoft is better than most traditional voice system manufacturers after the trials, up from 50% before trials.

This was a significant turnaround for the ME segment. A year ago we reported that 15% of the ME respondents had revised their perception downward, from “better than most” to “as good as any,” post-trial. This year 7% of the MEs revised their perception upward after the trial from “as good as” to “better than.” This indicates that Microsoft had significantly improved their Enterprise voice capabilities in their new release of Lync 2013, compared to the previous Lync 2010 (or at least managed to change customers’ perceptions).

Exhibit 7 Enterprise Perception of Microsoft

Capabilities for Enterprise Voice

50%

48%

2%

57%

43%

0%

Microsoft is better than most traditional voice system manufacturers

Microsoft is as good as any of thetraditional voice system manufacturers

Microsoft is not up to par withtraditional voice system manufacturers

Medium Enterprise

Pre-Trial Post-Trial

43%

46%

11%

57%

39%

4%




Large Enterprise





Performance of Enterprise Voice during Microsoft Lync Trials

This increased satisfaction with the Enterprise Voice capabilities of Microsoft Lync was further confirmed in Exhibit 8. We asked the Enterprise decision-makers about the performance of Enterprise Voice during Microsoft Lync trials. 100% of the Medium Enterprises (ME) and 98% of the Large Enterprises (LE) said it had met or exceeded their expectations.

59% of the Large Enterprises (LE) indicated that the performance of Enterprise voice had exceeded their expectations, as did 43% of Medium Enterprises (ME).

Only LEs expressed any degree of dissatisfaction, with 2% noting that it did not meet their expectations during the trials.

Exhibit 8 Performance of Enterprise Voice during Microsoft

Lync Trials

43%

59%

57%

39%

0% 2%


Exceeded expectations Met expectations Did not meet expectations




Enterprise Perspective on Startup Costs of Implementing Lync with Enterprise Voice

Exhibit 9 shows enterprises’ views on the relationship between the startup costs of implementing Lync with Enterprise Voice and their expectations about those costs.

Roughly half of the Enterprises indicated that the startup costs were in line with what they had expected. 14% of Medium Enterprises and 16% of Large Enterprises actually felt that the startup costs were lower than they had expected. However, approximately twice that many -- 29% (ME) and 27% (LE) -- admitted there were some additional costs that they had not anticipated.

The next Exhibit examines the ongoing costs of implementing Microsoft Lync with Enterprise Voice.

Exhibit 9 Enterprise Perspective on Startup Costs of

Implementing Lync with Enterprise Voice

5%

14%

29%

52%

It is too early in the process to make a determination on startup costs

So far the startup costs are lower than we had expected


The startup costs are in line with what we had expected

Medium Enterprise

9%

16%

27%

48%





Large Enterprise




Enterprise Perspective on Ongoing Costs of Implementing Lync with Enterprise Voice

We also asked the Enterprise decision-makers about the ongoing costs of operating and managing Lync with Enterprise Voice. Exhibit 10 provides a view of their responses.

A little over 40% of the Enterprises indicated that the ongoing costs were in line with what they had expected. But almost as many Large Enterprises (38%) revealed there were some additional costs that they had not anticipated. 26% of Medium Enterprises agreed that there were additional ongoing costs, but that was only slightly more than the 23% of MEs that actually felt the ongoing costs were lower than they had expected. 14% of LEs also said they had encountered lower ongoing costs than they had expected.

The results in Exhibits 9 and 10 indicate some improvements regarding the Enterprise perspective on costs compared to the results of the study we conducted a year ago. In that study, only 10% of MEs and none of the LEs experienced lower total costs than expected. While 42% of LEs and 25% of MEs expressed concerns that there were additional costs that they had not anticipated. In that study, the vast majority of MEs (65%) and LEs (58%) felt that the total costs were in line with what they had expected.

Exhibit 10 Enterprise Perspective on Ongoing Costs of


10%

23%

26%

41%

It is too early in the process to make a determination on ongoing costs

So far the ongoing costs are lower than we had expected


The ongoing costs are in line with what we had expected

Medium Enterprise

5%

14%

38%

43%





Large Enterprise




Enterprise Plans for Deploying Lync with Enterprise Voice Beyond Trials

Exhibit 11 shows the plans of all Enterprises surveyed regarding the deployment of Lync with Enterprise Voice currently compared to a year ago.

In last year’s study, almost equal percentages of LEs (43%) and MEs (44%) were planning to deploy Lync EV. But this year, those are the type of percentage of LEs (49%) and MEs (39%) who are actually deploying Lync EV. Last year, only 18% of LEs and 11% of MEs had started deploying Microsoft Lync with Enterprise voice. Thus, there has been a huge increase in the percent of U.S. Enterprises that are now deploying Lync EV.

In addition, 37% of MEs and 33% of LEs indicated that they were currently in the planning stages of deploying Lync with Enterprise Voice and had proceeded beyond the trial stage.

24% of the Enterprises and 18% of the Large Enterprises were either waiting for the results of their trials before deciding whether to deploy Lync EV or had no plans to deploy. This represents a 21 point reduction in the percent of “Undecideds” or “No Plans” from last year.

It appears that the positive results that Enterprises are experiencing during their trials of Lync EV have had a significant impact on their plans to move forward with deployment.

Exhibit 11 Enterprise Plans for Deploying Lync with

Enterprise Voice Beyond Trials (Among all Enterprises)

39%

37%

20%

4%

11%

44%

38%

7%

Currently deploying

Planning to deploy



Medium Enterprise

Current A year ago

49%

33%

14%

4%

18%

43%

31%

8%

Currently deploying

Planning to deploy



Large Enterprise

Current A year ago




ME LE

Ranking

1

2

3

4

8

5

7

1

2

3

4

5

6

7

10 8

6 9

11 10

9 11

ME LE

Weighted Average

Total cost of ownership (hardware, software, service support) is lower than PBX based solutions

6.1 5.5

4.6 4.6Facilitates voice feature integration with other Microsoft

applications, e.g., Sharepoint, Exchange, Office

3.3 4.1We have already adopted Microsoft Lync for IM and Presence

1.2 1.9Lync is available as both a premises system and a hosted service

3.0 2.6Lync Enterprise Voice is a natural extension of our

commitment to Microsoft Lync for UC

1.6 2.8The Lync Client is superior to the user interface

provided by other UC vendors

3.3 3.0We have already adopted Microsoft Lync for Web Conferencing

2.4 2.6We have already invested in the Enterprise CAL Suite

1.6 0.7Ease of implementation and telephony system management

1.2 1.1Connectivity with Skype

2.5 1.6Lync Enterprise Voice has all the voice functionality we need

Enterprises’ Top Reasons for Deploying Lync with Enterprise Voice Beyond Trials

The Enterprises implementing Microsoft Lync for Enterprise Voice were asked why they decided to implement Lync. Exhibit 12 ranks their responses.

Both Medium and Large Enterprises most frequently cited lower total cost of ownership with Microsoft Lync Enterprise Voice than with PBX-based solutions. Microsoft’s pricing structure bundles access to Lync in the Enterprise CAL Suite with access to popular applications, including Windows, Exchange and Sharepoint, so the incremental cost to add Lync functionality from a license standpoint is attractive. This is a key point because the second most important reason for both MEs and LEs was Facilitates voice feature integration with other Microsoft applications.

We have already adopted Microsoft Lync for IM and Presence was third most important for both Enterprise segments, followed by we have already adopted Microsoft Lync for web conferencing.

Lync Enterprise Voice is a natural extension of our commitment to Microsoft Lync for UC was cited as the fifth most important reasons for MEs, and the 6th most important for LEs.

The majority of the top-rated reasons indicate that once MEs and LEs adopt Microsoft Lync as their preferred platform for UC Apps, such as IM & presence and web conferencing, they are very likely to take the next step and implement Lync Enterprise Voice.

Exhibit 12 Enterprises’ Top Reasons for Deploying Lync with

Enterprise Voice Beyond Trials Among Enterprises Deploying or Planning to Deploy Lync with Enterprise

Voice




Factors that Fell Short of Enterprises’ Expectations in Deploying Lync with Enterprise

Voice

In our survey, we gave the Enterprises that were deploying Lync EV another opportunity to identify any factors that fell short of their expectations. However, the top-rated answer was None of these; Lync with Enterprise Voice has MET or EXCEEDED all of our expectations.

There was still a group of Enterprises, particularly in the LE segment, that believe that Microsoft Lync’s Total Cost of Ownership (TCO) was NOT lower than PBX based solutions. These Enterprises were among those that earlier noted that there were some additional costs in implementing Lync EV that they had not anticipated.

Another factor that fell short of the expectations of the LE decision-makers was Lync Enterprise Voice is NOT supported by Lync Online, which is Microsoft’s hosted version of Lync. This did not rate as a major determent among MEs, perhaps because there are several Microsoft partners that offer a hosted Lync service that does include the full Enterprise Voice capability.

Some ME decision-makers expressed concern that Lync does NOT integrate easily with our existing voice system. Others had some concerns about the Lync support for Mobility. But overall, it appears that as Microsoft continues to enhance the features of Microsoft Lync EV, Enterprises are finding fewer concerns.

Exhibit 13 Factors that Fell Short of Enterprises’

Expectations in Deploying Lync with Enterprise Voice Among Enterprises Currently Deploying Lync with Enterprise Voice

ME LE

Ranking

1

2

4

6

9

3

8

1

2

3

4

5

6

7

7 8

5 9

ME LE

Weighted Average

None of these; Lync with Enterprise Voice has MET or EXCEEDED all of our expectations

3.9 4.1

2.2 4.1Total cost of ownership (hardware, software, service support)

is NOT lower than PBX based solutions

0.9 1.9Lync Enterprise Voice is NOT supported by Lync Online

1.8 0.6Lync does NOT provide ease of implementation and

telephony system management

2.0 1.0Lync does NOT integrate easily with our existing voice system

1.8 1.4Lync support for Mobility does NOT meet our needs

1.0 1.5Lync does NOT facilitate telephony feature integration with other

Microsoft applications, e.g., Sharepoint, Exchange, Office

1.7 0.7Lync Enterprise Voice does NOT have all the voice

functionality we need

0.8 0.3The Lync Client is NOT superior to the user interface

provided by other UC vendors




Enterprise Problems in Scaling Lync with Enterprise Voice

Exhibit 14 shows the degree to which enterprises saw or anticipated problems in scaling Lync with Enterprise Voice. The population answering this question included those who had deployed, are currently deploying and those that plan to deploy Lync with Enterprise Voice.

About half (51% of MEs and 52% of LEs) found some problems but nothing major, while a somewhat smaller group (38% for MEs and 40% for LEs) found no problems scaling. More serious concerns expressing considerable problems were more prevalent among MEs than LEs (8% versus 5%), while only 3% of MEs and LEs were not able to scale as necessary.

Overall, more than half of the enterprises had some degree of scaling difficulty while deploying or their planning efforts indicated they were likely to have some problem with scaling. However, the percentage that indicated that scaling was a significant problem was about a third less than in last year’s study

Exhibit 14 Enterprise Problems in Scaling Lync with

Enterprise Voice

3%

8%

51%

38%

Have not been able to scale as necessary

Considerable problems

Some but nothing major

None

Medium Enterprise

3%

5%

52%

40%




None

Large Enterprise




Current Status of Licenses for Lync with Enterprise Voice—Medium Enterprise

The IUC research asked several questions about the number of Lync licenses that have been purchased, grandfathered and activated. In addition to understanding the potential impact of Microsoft on voice system demand, InfoTrack also publishes shipment and installed base market share information, and began tracking Microsoft deployments of Lync with Enterprise Voice in 2011. This research, therefore, enables corroboration of InfoTrack for Enterprise Communication’s installed base estimates.

Exhibit 13 reflects the Medium Enterprises’ current implementation status of Microsoft Lync and Enterprise Voice licenses.

17% of the Medium Enterprises’ employees have Lync licenses, up from 13% last year. 49% of the Lync licenses are Plus CALs (Plus CAL licenses are required for Enterprise Voice) versus 50% last year, and 49% of the Medium Enterprises’ Plus CAL licenses are activated, compared with 51% last year. (These numbers represent the current view of installed base, not annual shipments/implementations).

Overall, 4.1% of the Medium Enterprise segment employees have activated Lync Plus CAL licenses, up substantially from 3.3% last year.

Note that the demographics stated above and elsewhere in this report are based on the survey respondent populations and have a confidence interval of at least ±10%.

Exhibit 15 Current Status of Licenses for Lync with

Enterprise Voice—Medium Enterprise

Current

17%

49% 49%

4.1%

13%

50% 51%

3.3%

A year ago


employees




employees




Current Status of Licenses for Lync with Enterprise Voice—Large Enterprise

Exhibit 16 depicts Large Enterprises’ current implementation status of Microsoft Lync and Enterprise Voice licenses.

14% of employees in Large Enterprises have Lync licenses, up from 11% last year. 44% of those Lync licenses are Plus CALs (required for Enterprise Voice), compared with 40% last year. 52% of employees’ Plus CAL licenses are in use for Enterprise Voice, compared to 55% last year.

Overall, 3.2% of Large Enterprise employees have activated Lync Plus CAL licenses. This is significant considering the short time that Lync Enterprise Voice has been available, and it represents an increase from last year, when the figure was 2.4%. (These numbers represent the current view of installed base, not annual shipments/ implementations).


Enterprise Voice—Large Enterprise

Current

14%

44%52%

3.2%

11%

40%55%

2.4%

A year ago


employees




employees




Enterprise Projected Deployment of Licenses for Microsoft Lync with Enterprise Voice

Exhibit 17 shows Enterprises’ projections of Enterprise Voice licenses as a percentage of the total number of employees, for the years 2015 and 2017.

Substantial growth is projected in each of those years, with percentages increasing from 4.1% to 6.5% and 9.0% among Medium Enterprises and from 3.2% to 5.4% and then 8.1% among Large Enterprises.

As in 2013 (figures also shown in Exhibits 15 and 16, above), Medium Enterprises plan to deploy proportionally more licenses than Large Enterprises by a factor of 20% in 2015 and 11% in 2017.

Exhibit 17 Enterprise Projected Deployment of Licenses for

Microsoft Lync with Enterprise Voice

4.1%

6.5%

9.0%

3.2%

5.4%

8.1%

2013 2015 2017





Enterprise Scope of Planned Deployment of Microsoft Lync with Enterprise Voice

Exhibit 18 shows how extensively Enterprises plan to deploy Lync with EV (among those who stated they plan to implement or are currently implementing).

44% of MEs indicated their most likely method of deployment was throughout specific departments or business units, which was the same percentage as last year. However, 38% now intend to deploy Lync EV company-wide (20% throughout home country and 18% Globally), which was a significant increase compared to 27% company-wide one year ago.

Among the LEs, one-third planned deployments at selected locations as the need arises, which was about the same as last year. However, the company-wide deployments have increased from 38% last year to 40% currently (26% throughout home country and 14% Globally).

Selected individuals was the least popular deployment option for both MEs and LEs.

The projected increase in company-wide deployments of Lync with Enterprise Voice is a key predictor of future increases in market share.

Exhibit 18 Enterprise Scope of Planned Deployment of

Microsoft Lync with Enterprise Voice Among Current/future Implementers

5%

13%

44%

20%

18%

9%

20%

44%

12%

15%





Globally

Medium Enterprise

Current A year ago

10%

33%

17%

26%

14%

5%

32%

25%

18%

20%





Globally

Large Enterprise

Current A year ago




Enterprise Organization Responsible for Decision to Deploy Lync with Enterprise Voice

Exhibit 19 shows which organizations within enterprises were responsible for the decision to deploy Lync EV.

Two-thirds of the Large Enterprises identified their IT organization as the primary decision-maker, led by the IT organization responsible for Unified Communications at 39%, followed by the IT organization responsible for Telephony at 20%. Multi-department committees accounted for 18% of the LE decisions, ahead of C-level Executives at 16%.

It was a similar picture of decision-making responsibility among the Medium Enterprises, 54% of whom identified their IT organization as the primary decision-maker, led by the IT organization responsible for Unified Communications at 28%, followed by the IT organization responsible for Telephony at 14%. Multi-department committees were next, accounting for 36% of the ME decisions, with the C-level Executives lagging at 10%.

This implies that at this stage in the Lync life cycle, adoption among Enterprises is not being driven by either line of business managers or C level executives but rather by the technical organizations responsible for finding and implementing UC solutions. These groups are generally part of the CIO organization, but since C-level executives were not identified as major players in these decisions it is assumed that it is more the mid-level technical managers that are responsible.

Exhibit 19 Enterprise Organization Responsible for

Decision to Deploy Lync with Enterprise Voice

14%

28%

12%

18%

8%

10%

10%

IT organization responsible for Telephony

IT organization responsible for Unified Communications

IT organization responsible for Desktop Applications

Multi-department committee responsible for Telephony

Multi-department committee responsible for Unified Communications

Multi-department committee responsible for Desktop Applications

C-Level Executive

Medium Enterprise

20%

39%

8%

12%

2%

4%

16%







C-Level Executive

Large Enterprise




Enterprise Ratings of Microsoft Dealers in Terms of Voice Expertise

Exhibit 20 shows how Enterprise decision-makers rated Microsoft dealers in terms of voice expertise.

More than 90% of the Enterprises rated their Microsoft dealers as either “Good” or “Excellent” in terms of voice expertise, led by Large Enterprises at 96% and Medium Enterprises at 92%. It should be noted that the ratings for “Excellent” exceeded those of “Good” in the ME segment, 47% vs. 45%. Those top two scores each accounted for 48% of the ratings in the LE segment.

This is a significant improvement over the ratings of Microsoft dealers a year ago. In our report last year, 78% of the LEs rated their Microsoft dealers as either “Good” or “Excellent” in terms of voice expertise, but only 16% received “Excellent” ratings, with 62% judged to be “Good.” In this case, the “Excellent” ratings tripled in just one year. There was similar improvement in the ME segment with “Excellent“ ratings jumping from 26% a year ago to 47% currently.

Overall, these ratings dispel one of the industry’s challenges to the success of MS Lync with EV which was that dealers would not be able to satisfy customers’ expectations for management and support of voice systems.

Exhibit 20 Enterprise Ratings of Microsoft Dealers in Terms

of Voice Expertise

47% 48%

45% 48%

8% 4%


Excellent Good Fair Poor




Resources Used Extensively During Deployment of Lync with Enterprise Voice

In our survey, we asked the Enterprise decision-makers about the extent to which they had used support resources during their deployment of Microsoft Lync with Enterprise Voice. Exhibit 21 shows the percentage of Enterprises that indicated “Extensive Use.”

Local or Regional Partners had the highest score for “Extensive Use” from 59% of the LEs and 42% of the MEs. Internal Resources received the second highest score with 49% of the LEs and 42% of the MEs indicating that they had made “Extensive Use” of their internal IT resources in deploying Lync EV.

The next group of three support resources – National or Global Partner/Systems Integrator; Local or Regional Service Provider and National or Global Service Provider – all received similar scores. Between 37% and 39% of MEs replied that they had made “Extensive Use” of these three resources during the deployment of Lync EV. To a lesser extent, 22% to 24% of LEs utilized these three resources “Extensively.”

It is interesting that a significant percentage of Enterprises made “Extensive Use” of more than one of these types of support resources, in addition to their own internal resources. Apparently, some Enterprises were using Service Providers to support the implementation of a Hosted version of Lync EV for some of their locations and other dealers or systems integrators for Lync EV deployment at other locations.

Exhibit 21 Resources Used Extensively During Deployment of

Lync with Enterprise Voice Among Current/future Implementers

42%

39%

37%

39%

42%

8%

Local or Regional Partner

National or Global Partner/Systems Integrator

Local or Regional Service Provider

National or Global Service Provider

Internal Resources

Other

Medium Enterprise

59%

24%

22%

22%

49%

14%





Internal Resources

Other

Large Enterprise




Enterprise Familiarity with Enhancements to Microsoft Lync

Exhibit 22 shows the degree of familiarity among Medium and Large Enterprises with the enhancements to Lync which Microsoft has introduced in the past 12 months.

At least 90% of Large Enterprises were “Extremely Familiar” or “Very Familiar” with recent enhancements to Lync in five categories. The two categories whose enhancements had the highest percentage of “Extremely Familiar” ratings were Videoconferencing (55%) and Lync Online (49%). Enhancements to Lync Client apps and Connectivity with Skype were next, each with an “Extremely Familiar“ rating of 47%. LEs were least familiar (30%) with enhancements to Mobile Endpoints.

In the ME segment, at least 80% were “Extremely Familiar” or “Very Familiar” with recent enhancements to Lync in the five categories. The category whose enhancements had the highest percentage of “Extremely Familiar” ratings was again Videoconferencing (65%), but Skype Connectivity was a strong second at 55%. Then there was a significant drop off in ME familiarity with enhancements in the other three categories, each of which received an “Extremely Familiar” rating of 31% to 33%.

The next two exhibits will examine whether Enterprises believe these enhancements meet their needs and the likelihood that they will implement these enhancements.

Exhibit 22 Enterprise Familiarity with Enhancements to

Microsoft Lync

65%

33%

33%

55%

31%

20%

49%

37%

29%

53%

Videoconferencing

Lync Client (Interface App onDesktop and Mobile devices)

Mobile Endpoints (Lync support for a variety of Mobile devices)

Skype Connectivity (Supports callsbetween Lync and any Skype user)

Lync Online (Microsoft’s version of Hosted IP Telephony)

Medium Enterprise

% Extremely Familiar % Very Familiar

55%

47%

30%

47%

49%

40%

47%

60%

45%

49%

Videoconferencing





Large Enterprise





Perception of Whether Enhancements Meet Enterprise Needs

Exhibit 23 shows the extent to which Medium and Large Enterprises believe that the enhancements to Lync which Microsoft has introduced in the past 12 months will meet their needs.

At least 85% of Large Enterprises believed that the recent enhancements to Lync would “Fully Meet” or “Mostly Meet” their needs in those five categories. The two categories whose enhancements had the highest percentage of “Fully Meets Needs” ratings were Videoconferencing (60%) and Skype Connectivity (60%). Enhancements to Lync Online were next, with a “Fully Meets Needs” rating of 49%. Enhancements to the Lync Client App and Mobile Endpoints had the lowest LE rating for “Fully Meets Needs” at 34%.

In the ME segment, at least 70% felt that the recent enhancements to Lync would “Fully Meet” or “Mostly Meet” their needs in those five categories. The category whose enhancements had the highest percentage of “Fully Meets Needs” ratings among MEs was again Videoconferencing (57%), with Skype Connectivity in second at 41%. Enhancements in the other three categories, received “Fully Meets Needs” ratings ranging from 33% to 39%.

Although Lync Online still does not support Enterprise Voice even with these enhancements, that does not appear to be a significant issue among Enterprise decision-makers, as they are most likely using it for its non-voice applications.

Exhibit 23 Perception of Whether Enhancements Meet

Enterprise Needs

57%

35%

33%

41%

39%

29%

49%

37%

37%

41%

Videoconferencing





Medium Enterprise

% Whose Needs Are Fully Met % Whose Needs Are Mostly Met

60%

34%

34%

60%

49%

36%

60%

55%

26%

45%

Videoconferencing





Large Enterprise


57%

35%

33%

41%

39%

29%

49%

37%

37%

41%

Videoconferencing





Medium Enterprise





Likelihood of Enterprises Implementing Enhancements to Microsoft Lync

Exhibit 24 displays the likelihood that Medium and Large Enterprises will implement the enhancements to Lync which Microsoft has introduced in the past 12 months.

At least 90% of Large Enterprises were “Extremely Likely” or “Very Likely” to implement the recent enhancements to Lync in five categories. The two categories which had the highest percentage of “Extremely Likely” ratings were Videoconferencing (45%) and Lync Online (34%). Enhancements to Lync Client apps were next with an “Extremely Likely “ rating of 32%. LEs were least likely to implement the enhancements to Mobile Endpoints and Skype Connectivity, each of which received an “Extremely Likely” rating of 30%.

In the ME segment, at least 80% were “Extremely Likely” or “Very Likely” to implement the recent enhancements to Lync in the five categories. Once again, the category whose enhancements received the highest percentage of “Extremely Likely” ratings was Videoconferencing (57%), and Skype Connectivity was second at 41%. Then there was a significant drop off in ME Likelihood with the enhancements in the other three categories. In these three cases, the “Extremely Likely” rating ranged from 22% for Mobile Endpoints to 29% for Lync Online and the Lync Client app.

Overall, the category whose enhancements received the highest ratings from Enterprise decision-makers was Videoconferencing. At the other end of the spectrum, the enhancements in the Mobile Endpoints category received the lowest overall Enterprise ratings.

Exhibit 24 Likelihood of Enterprises Implementing

Enhancements to Microsoft Lync

57%

29%

22%

41%

29%

35%

59%

65%

41%

59%

Videoconferencing





Medium Enterprise

% Extremely Likely % Very Likely

45%

32%

30%

30%

34%

55%

66%

62%

68%

62%

Videoconferencing





Large Enterprise





Effect of Skype Acquisition on Decision to Implement Lync with Enterprise Voice

In 2011, Microsoft acquired Skype, an IP Telephony service targeted primarily at the consumer market. Then in late 2012, Microsoft transferred the Lync organization out of the Microsoft Office business unit into the Skype business unit. In mid-2013, Microsoft introduced an enhancement to Lync which enabled Lync users to make phone calls over Skype. In our survey, we asked Enterprises whether Microsoft’s acquisition of Skype had any effect on the Enterprise’s decision to implement Lync with Enterprise Voice. Exhibit 25 shows the Enterprise responses to that question.

90% of the Enterprises responded that the Skype acquisition had a positive effect on their decision regarding Lync. The other 10% said it had no effect on their decision to implement Lync. None of the Enterprise decision-makers felt that Skype had any negative effect on their Lync decision.

Both LE (47%) and ME (39%) decision-makers felt that the most positive effect of the Skype acquisition was that it demonstrated Microsoft’s commitment to the Voice market.

25% of the MEs and one-third of the LEs acknowledged that the effect was positive because they currently utilized Skype in their companies.

18% of the MEs and LEs noted the positive effect due to the integration of Lync and Skype.

Exhibit 25 Effect of Skype Acquisition on Decision to

Implement Lync with Enterprise Voice Among Current/future Implementers

39%

33%

18%

10%

0%

0%

Positive effect because it demonstratedMicrosoft’s commitment to the voice market

Positive effect because we currently utilize Skype in our company

Positive effect because of the potential integration of Lync and Skype

No effect because Skype was not part of our decision whether to deploy Lync

Negative effect because enhancing Skype may divert resources away from Lync

Negative effect if we were required to implement Skype along with Lync

Large Enterprise

47%

25%

18%

10%

0%

0%







Medium Enterprise




Likelihood of Implementing Skype Functions during Next Few Years

Exhibit 26 shows the percent of Enterprises which are deploying Lync

that were Extremely Likely to implement various Skype functions

during the next few years.

53% of Large Enterprises and 45% of Medium Enterprises said that their Lync users were “Extremely Likely” to utilize Skype for making and receiving voice calls. Almost as many LEs (43%) and MEs (39%) were “Extremely Likely” to utilize Skype for making and receiving video calls.

When asked whether the Skype calling would focus on consumer customers or business customers/suppliers, it was a virtual tie, with each receiving about a 40% “Extremely Likely” response.

Overall, the Enterprise decision-makers seemed quite positive on the synergy between Lync and Skype and the opportunity to utilize Skype for business purposes while potentially reducing their public network costs for voice and video calling.

Exhibit 26 Likelihood of Implementing Skype functions

during Next Few Years Among Current/future Implementers

45%

39%

35%

39%

37%

Making and receiving voice calls

Making and receiving video calls

Skype calling with your business customers or suppliers

Skype calling with your consumer customers

Skype calling among the employees of your company

Medium Enterprise

53%

43%

41%

39%

33%






Large Enterprise

32%

34%

24%

16%

13%






Small Business

% Extremely Likely




Enterprise Plans for Replacing/Retaining Existing Telephony Systems During

Lync Deployment

Exhibit 27 shows Enterprise plans for replacing or retaining existing telephony systems during Lync deployment among current and future implementers.

The most popular option among both MEs and LEs was to retain existing telephony systems and services while replacing existing deskphones on a gradual or life-cycle replacement basis. This approach is expected to be followed by 51% of MEs and 52% of LEs. However, a sizable percentage in both segments (41% of MEs and 36% of LEs) plan on one of the two options for accelerated replacement of existing deskphones, either by replacing telephony systems immediately (26% of MEs and 29% of LEs) or by retaining those systems but replacing deskphones on an accelerated basis (15% of MEs and 7% of LEs).

A very small number (8% of MEs and 12% of LEs) planned to retain their existing telephony systems so that they could continue to use their existing voice mail until they were ready to migrate to MS Exchange for unified messaging.

Exhibit 27 Enterprise Plans for Replacing/Retaining

Existing Telephony Systems During Lync Deployment Among Current/future Implementers

26%

51%

15%

8%

Replace existing telephony systems/services and deskphones immediately

Retain existing telephony systems/services while existing deskphones are replaced on a gradual or life-cycle replacement basis

Retain existing telephony systems/services while existing deskphones are replaced on an accelerated basis

Retain existing telephony system so we can useour existing voice mail system until we are ready to migrate to Exchange Unified Messaging

Medium Enterprise

29%

52%

7%

12%





Large Enterprise




Enterprise Distribution of Endpoints on Deployed Lync Systems with Enterprise Voice

Exhibit 28 shows the planned distribution of endpoints among enterprise users of Lync EV.

The first finding from this data is that there is surprisingly little migration of endpoints between the end of the first year of implementation and two years after that. The configurations and terminal type populations implemented in the first year are seen as more or less remaining in place for the next few years.

At the end of the first year of Lync deployment by Medium Enterprises, existing deskphones would account for 23% of the total endpoints, with the remaining 77% fairly evenly divided among the other three types. After the third year, existing deskphones were projected to decline to 17%, with Lync-certified SIP phones gaining 4 points from 25% to 29%. Lync PC clients and Lync Mobile clients were only expected to see a very slight increase during that time period.

In the Large Enterprise segment, existing deskphones would account for 20% of the total endpoints after the first year, with the remaining 80% fairly evenly divided among the other three types. After the third year, existing deskphones were projected to decline by only one point to 19%, while Lync-certified SIP phones declined 2 points from 26% to 24%. Lync PC clients and Lync Mobile clients were only expected to increase by one to two points during that time period.

Both Lync PC clients with headsets and Lync Mobile Client accounted for 25% to 30% of the endpoints, but neither one gained more than a point or two in penetration over the time period discussed. This implies that the people who really need these tools are likely to receive them as part of the initial implementation and unless these types of employees grow as a percent of total employees the distribution is unlikely to change much.

Exhibit 28 Enterprise Distribution of Endpoints on Deployed

Lync Systems with Enterprise Voice

23%

25%

25%

27%

17%

29%

26%

28%

Existing deskphones

Lync-certified SIP phones

Lync PC clients plus headsets

Lync Mobile Client

Medium Enterprise

After the 1st year After the 3rd year

20%

26%

27%

27%

19%

24%

29%

28%

Existing deskphones



Lync Mobile Client

Large Enterprise


20%

26%

27%

27%

19%

24%

29%

28%

Existing deskphones



Lync Mobile Client

Large Enterprise





Primary Method for Enterprises Connecting to the PSTN for Lync with Enterprise Voice

Exhibit 29 shows the methods that enterprises expect to use to connect the Lync EV servers with the PSTN (Public Switched Telephone Network).

The most popular method was to utilize direct SIP connections from the servers to Enhanced Gateways (EGs) or Session Border Controllers (SBCs) which would provide connectivity to the PSTN. 57% of MEs and 53% of LEs would use this method.

One-third of the MEs and 40% of the LEs indicated a preference for connecting the Lync EV servers to their existing IP-PBXs and using them as Gateways to the PSTN.

The remaining 10% of MEs and 7% of LEs planned to utilize SIP trunks to connect directly to an Internet Telephony Service Provider.

The next exhibit discusses why EGs and SBCs are so popular and more insight into how they would be utilized.

Exhibit 29 Primary Method for Enterprises Connecting to the

PSTN for Lync with Enterprise Voice

53%

40%

7%

Direct SIP connections to Enhanced Gateways or Session Border Controllers

Direct SIP connections to a PBX or IP-PBX

SIP Trunking to an InternetTelephony Service Provider

Large Enterprise

57%

33%

10%




Medium Enterprise



50%

33%

47%

28%

28%

47%

53%

36%

53%

61%

SBCs and EGs make it relatively easy to trial Microsoft Lyncwithout disrupting our existing telephony systems/services and deskphones

SBCs and EGs let us accelerate the deployment of Lync with Enterprise Voice while gradually phasing out our existing telephony systems/services and deskphones

SBCs and EGs let us gradually add Enterprise Voice to Microsoft Lync because we can still use our existingtelephony systems/services and deskphones for voice

SBCs and EGs can support our existing IP phones so we canaccelerate the deployment of Lync with Enterprise Voice to replace our existing telephony systems/services

SBCs and EGs facilitate the migration from our existing telephony systems/services and deskphones to a hybridenvironment with Lync On-Premises serving some locations and cloud-based Lync Online serving other locations

Medium Enterprise

% Strongly Agree % Generally Agree

33%

33%

50%

23%

50%

53%

53%

40%

70%

47%






Large Enterprise



Agreement Regarding Use of 3rd Party Session Border Controllers/Enhanced Gateways

Exhibit 30 provides five statements about the use of SBCs and EGs. Our survey asked the Enterprise decision-makers about their level of agreement with those statements

More than 80% of MEs and 85% of LEs said that they “Strongly Agree” or Generally Agree” with all five statements. The last four statements focused on how the SBCs and EGs were likely to be used. Of those four, the following statement had the highest percentage of “Strongly Agree” responses – LE (50%) and ME (47%):

SBCs and EGs let us gradually add Enterprise Voice to Microsoft Lync because we can still use our existing telephony systems/services and deskphones for voice.

50% of LEs also “Strongly Agreed” with one other statement. This statement also had the highest combined percentages of “Strongly Agree” and “Generally Agree” among LEs (97%) and MEs (89%).

SBCs and EGs facilitate the migration from our existing telephony systems/services and deskphones to a hybrid environment with Lync On-Premises serving some locations and cloud-based Lync Online serving other locations.

The large agreement with the above two statements further confirms that Enterprises favor a more gradual migration to Lync EV from their existing IP-PBXs than the more accelerated approaches represented in the other two statements, which received lower levels of agreement.

Exhibit 30 Agreement Regarding Use of 3rd Party Session

Border Controllers/Enhanced Gateways




Enterprise Plans for Voicemail on Lync with Enterprise Voice

Exhibit 31 shows enterprise plans for voice mail on Lync with EV.

Among the MEs, only 20% plan to continue using their current voicemail systems or service. 44% of MEs plan to migrate to Exchange UM (Unified Messaging) in conjunction with Microsoft Lync. The remaining 36% indicated that they were already migrating to Exchange UM.

It was just the reverse among the LE segment, where 36% plan to continue using their current voicemail systems or service. Only 31% of LEs are planning to migrate to Exchange UM (Unified Messaging) in conjunction with Microsoft Lync. The remaining 33% were already migrating to Exchange UM.

Overall, it is clear that existing voice mail systems in the Lync EV environments are being phased out, with MEs leading the way.

Exhibit 31 Enterprise Plans for Voicemail on Lync with

Enterprise Voice

44%

36%

20%

31%

33%

36%

Plan to migrate to Exchange UM in conjunction with Microsoft Lync

Already migrating to Exchange UM and will continue

Plan to continue using my current voicemail system or service





Enterprise Preferred Vendors for IP-PBXs—Before Microsoft Entered the Enterprise Voice

Market vs. Currently

Exhibit 32 shows the changes in preferred IP-PBX vendor choices among Enterprises once Microsoft entered the Enterprise Voice market.

Before Microsoft entered the Enterprise Voice Market, Cisco was the number one preferred vendor for IP-PBXs among 55% of LEs and half of the MEs. Avaya was second with 28% of LEs and 25% of MEs. The choice of preferred vendor has changed dramatically since Microsoft entered the market. Currently, 41% of LEs and 35% of MEs now view Microsoft as their preferred vendor for IP-PBXs. In our report a year ago, the percentage of Enterprises that had preferred Microsoft was about 25%.

Consequently, the percentage that preferred Cisco has dropped from 50% to 35% among MEs and from 55% to 33% among LEs. The percentage that preferred Avaya dropped from 25% to 11% among MEs and from 28% to 20% among LEs.

Cloud-based Hosted Service Providers were preferred by 6% of MEs and 2% of LEs, and those percentages have not changed since Microsoft’s entry into the market.

Preferences for Other Vendors have also declined sharply since Microsoft entered the market, with MEs decreasing from 19% to 13% and LEs dropping even faster, from 15% to 4%.

The gain in the popularity of Microsoft Lync EV among Enterprises in just a few years is remarkable.

Exhibit 32 Enterprise Preferred Vendors for IP-PBXs—Before

Microsoft Entered the Enterprise Voice Market vs. Currently

25%

50%

0%

6%

19%

11%

35%

35%

6%

13%

Avaya

Cisco

Microsoft


Other

Vendors

Medium Enterprise

Before Currently

28%

55%

0%

2%

15%

20%

33%

41%

2%

4%

Avaya

Cisco

Microsoft


Other

Vendors

Large Enterprise

Before Currently




Enterprise Preferred Vendors for UC Apps—Before Microsoft Entered the Enterprise Voice


Exhibit 33 shows the changes in the choices of preferred UC Application vendors among Enterprises since Microsoft entered the Enterprise Voice market.

Among MEs, the preference for Microsoft increased from 25% to 38%, and among LEs it increased from 28% to 43%. The company’s entry into the Voice market significantly increased its support among Enterprises as a UC app provider.

The biggest impact Microsoft’s entry had on other vendors was the decline of preference for Cisco among MEs, from 42% to 33% with a smaller decline from 44% to 39% among LEs. Avaya also has undergone a sharp decline as Preferred UC App vendor dropping 8 points among LEs from 17% to 9% and 4 points from 12% to 8% among MEs.

Other UC App vendors and Cloud-based Hosted Service Providers did not experience substantial declines.

Exhibit 33 Enterprise Preferred Vendors for UC Apps—

Before Microsoft Entered the Enterprise Voice Market vs.

Currently

12%

42%

25%

2%

19%

8%

33%

38%

4%

17%

Avaya

Cisco

Microsoft


Other

Vendors

Medium Enterprise

Before Currently

17%

44%

28%

2%

9%

9%

39%

43%

2%

7%

Avaya

Cisco

Microsoft


Other

Vendors

Large Enterprise

Before Currently




4. ANALYSIS OF SMB PLANS FOR MICROSOFT LYNC

ENTERPRISE VOICE

Demographics of SMB Survey Participants

The exhibits in this section of the report are based on responses from

U.S. business and institutional entities with 5 to 499 employees. IUC

refers to these entities as Small or Medium Businesses (SMBs).

During April 2014, surveys were completed with over 150 qualified

SMB managers or executives who are key decision-makers or key

influencers regarding adoption and usage of Microsoft Lync.

Exhibit 34 shows the distribution of the participating U.S. SMBs

based upon their size. 36% of the respondents represented businesses

with 5 to 49 employees and 14% were businesses with 50 to 99

employees. Throughout the analysis, these two size categories,

comprising 50% of the respondents, are referred to as Small

Businesses (SBs).

17% of the respondents were from businesses with between 100 and

249 employees. Businesses with 250 to 499 employees accounted for

33% of the SMB participants. These two size segments comprise the

Medium Business (MB) segment, representing the other 50% of the

respondents.

Exhibit 34 Distribution of Participating SMBs by Size

36%

14%

17%

33%

5 – 49

50 – 99

100 – 249

250 – 499

U.S. SMBs

36%

14%

17%

33%

5 – 49

50 – 99

100 – 249

250 – 499

U.S. SMBs




Distribution of Participating SMBs by Type of Decision-Maker

Exhibit 35 contains two graphs that show the distribution of titles and

decision-making responsibilities among the SMB decision-makers who

participated in this study.

57% were Executives who are responsible for business decisions,

including CEOs, CFOs, COOs and Line of Business Managers. This

was significantly higher than the 44% of Enterprises, indicating that

SMB executives are more involved than their Enterprise counterparts

in decision-making for IP Telephony and UC (Unified

Communications).

CIOs and Information Systems Managers, who are responsible for IT

decision-making, accounted for 40% of the participants in this study.

This degree of representation by IT decision-makers is not surprising

as the scope of the research was quite technical and focused on

Microsoft rather than process-oriented applications.

The remaining 3% were Telecom Managers and Data Network

Managers whose primary decision-making responsibilities involve

communications systems and networks.

Exhibit 35 Distribution of Participating SMBs by Type of

Decision-Maker

57%

40%

3%

Business

Information

Communications1%

2%

7%

28%

5%

16%

12%

29%

Telecom Manager

Data Network Manager

Applications Manager

Info Systems Manager

CIO

LoB Manager

CFO or COO

CEO




Distribution of Participating SMBs by Industry

Exhibit 36 shows the industry segment distribution of the SMB

decision-makers who participated in this study. The participants

represented at least 10 different industries.

As in last year’s report, Professional Services was the most frequently

represented segment, with 20% of the respondents. Business Services

was in second place—with 19% of the survey participants. Rounding

out the top three was Manufacturing, which accounted for 18% of the

responses.

The next four industries represented one-quarter of the respondents

with Retail at 8%, Healthcare at 6%, followed by Wholesale and

Financial Services/Insurance with 5% each. Education was next with

4%, one point more than Telecommunications and Utilities at 3% each.

Exhibit 36 Distribution of Participating SMBs by Industry

20%

19%

18%

8%

6%

5%

5%

4%

3%

3%

9%

Professional Services

Business Services

Manufacturing

Retail

Healthcare

Wholesale

Financial Services/Insurance

Education

Utilities

Telecommunications

Other




SMB Position on Microsoft Software Products and Services

Exhibit 37 shows the position taken by SMBs toward Microsoft as a provider of products and services. SMBs were strongly inclined toward reliance on the company, with 76% of Medium Businesses and 80% of Small Businesses describing themselves as “Microsoft shops” for at least some software.

Of those, MBs were more likely to depend primarily on Microsoft for key products and services (49% of MBs versus 45% of SBs). But SBs were more likely to buy only selected products and services from Microsoft (35% of SBs versus 27% of MBs). Among those that characterized themselves as not a Microsoft shop, MBs were slightly more represented at 24% versus 20% among SBs.

Compared to Enterprises, SMBs are somewhat less likely to buy from Microsoft.

Exhibit 37 SMB Position on Microsoft Software Products and

Services

45%

35%

20%

49%

27%24%

Our company is primarily a “Microsoft shop” for key software products

and services

Our company is a “Microsoft shop” for

selected software products and services

Our company is NOT a “Microsoft shop” for key software products and

services

Small Business Medium Business




SMB Status on Trialing Microsoft Lync

In Exhibit 38, SMB decision-makers were asked about their plans to conduct a trial of Microsoft Lync without identifying any specific functionality.

31% of Small Businesses (SB) have no plans to conduct a trial of Microsoft Lync, up from 26% last year. 20% have completed or are currently conducting a trial, down slightly from 23% last year. 49% of SBs plan to trial Lync but have not yet started, as compared to 51% last year.

Medium Businesses indicated greater interest in Lync than the Small Businesses. Only 8% of Medium Businesses (MB) have no trial plans, down somewhat from last year, when it was 13%. Almost half of MBs have either completed or are conducting trials, up significantly from 35% last year. 43% of MBs are planning to conduct trials of Microsoft Lync, although the trials have not yet started. Last year that figure was 52%.

Microsoft trials are very accessible, which may be the reason for the high interest. Microsoft channel partners can use Microsoft’s Proof of Concept and secure Web access to enable trials of Lync Enterprise Voice. Firms are offered softphones or Lync-certified SIP phones on a temporary basis and do not have to install Lync servers for the trials.

Exhibit 38 SMB Status on Trialing Microsoft Lync

6%

14%

49%

31%

6%

17%

51%

26%





Small Business


27%

22%

43%

8%

10%

25%

52%

13%





Medium Business





Percent of SMB Microsoft Lync Trials that Include Enterprise Voice

SMB decision-makers who are trialing or plan to trial Lync were then asked whether they plan to include Enterprise Voice in their trials of Microsoft Lync. Exhibit 40 shows the results.

47% of the Small Businesses that have trialed, are trialing or plan to trial Microsoft Lync will include Enterprise Voice in their evaluations. This figure is up slightly from 44%last year.

Of the MBs that indicated they have trialed or will trial Microsoft Lync, 76% also plan to include Enterprise Voice. Last year the figure was 60%.

Exhibit 39 Percent of SMB Microsoft Lync Trials that

Include Enterprise Voice

47% 44%

53% 56%

Current A year ago

Small Business



76%60%

24%40%

Current A year ago

Medium Business






SMB Perception of Microsoft Capabilities for Enterprise Voice

Exhibit 40 shows how trials affected SMBs’ perception of the capabilities of Lync with Enterprise Voice.

For both SBs and MBs, trialing led to an improvement in the perception of the capabilities of Lync with Enterprise Voice. Those believing that Microsoft is better than most traditional voice system manufacturers increased after trials, from 31% to 44% among SBs, and from 38% to 44% among MBs. At least half of the SBs and MBs felt that Microsoft is as good as any of the traditional voice system manufacturers.

The percentage of SBs who felt that Lync with EV was not up to par with traditional voice system manufacturers dropped from 6% before the trials to zero after the trials. Among MBs the percentage declined from 9% pre-trial to 6% post-trial.

Exhibit 40 SMB Perception of Microsoft Capabilities for

Enterprise Voice

31%

63%

6%

44%

56%

0%




Small Business


38%

53%

9%

44%

50%

6%




Medium Business





Performance of Enterprise Voice during SMB Trial of Microsoft Lync

This increased SMB satisfaction with the Enterprise Voice capabilities of Microsoft Lync was further confirmed in Exhibit 41. We asked the SMB decision-makers about the performance of Enterprise Voice during Microsoft Lync trials. 100% of the Small Businesses (SB) and Medium Businesses (MB) said it had met or exceeded their expectations.

44% of the Small Businesses (SB) indicated that the performance of Enterprise voice had exceeded their expectations, as did 38% of Medium Businesses (MB).

Exhibit 41 Performance of Enterprise Voice during SMB

Trial of Microsoft Lync

44%38%

56%62%

0% 0%


Exceeded expectations Met expectations Did not meet expectations




SMB Perspective on Startup Costs of Implementing Lync with Enterprise Voice

Exhibit 42 shows SMBs’ views on the relationship between the startup costs of implementing Lync with Enterprise Voice and their expectations about those costs.

More than half of the SMBs indicated that the startup costs were in line with what they had expected. 6% of Small Businesses and 15% of Medium Businesses actually felt that the startup costs were lower than they had expected. However, a significant percentage -- 31% (SB) and 23% (MB) -- admitted there were some additional costs that they had not anticipated.

The next Exhibit examines the ongoing costs of implementing Microsoft Lync with Enterprise Voice.

Exhibit 42 SMB Perspective on Startup Costs of


57%

31%

6%

6%





Small Business

59%

23%

15%

3%





Medium Business




SMB Perspective on Ongoing Costs of Implementing Lync with Enterprise Voice

We also asked the SMB decision-makers about the ongoing costs of operating and managing Lync with Enterprise Voice. Exhibit 43 provides a view of their responses.

About half of the SMBs indicated that the ongoing costs were in line with what they had expected. But a significant group of SBs (36%) revealed there were some additional costs that they had not anticipated. 29% of Medium Businesses agreed that there were additional ongoing costs, but 13% of MBs actually felt the ongoing costs were lower than they had expected. 18% of SBs also said they had encountered lower ongoing costs than they had expected.

The results in Exhibits 42 and 43 indicate some improvements regarding the SMB perspective on costs from the results of the study we conducted a year ago. In that study, only 6% of SBs and MBs experienced lower total costs than expected. While 69% of SBs and 34% of MBs expressed concerns that there were additional costs that they had not anticipated. In that study, only 19% of SBs along with 44% of MBs felt that the total costs were in line with what they had expected.

Exhibit 43 SMB Perspective on Ongoing Costs of


46%

36%

18%

0%


There were some additional costs we had not anticipated



Small Business

58%

29%

13%

0%


There were some additional costs we had not anticipated



Medium Business




SMB Plans for Deploying Microsoft Lync with Enterprise Voice Beyond Trials

Exhibit 44 shows SMB’s plans to deploy Lync with Enterprise Voice.

18% of MBs and 6% of SBs are currently deploying Lync EV compared to 14% of MBs and 4% of SBs one year ago. The percentage of MBs that were planning to deploy Lync EV, was up sharply compared to last year (45% vs. 27%). However, among SBs only 16% were planning to deploy Lync EV, a significant reduction from 27% a year ago.

77% of the SBs were either waiting for the results of their trials before deciding whether to deploy Lync EV or had no plans to deploy. That represents an 8 point increase from last year, mostly among the “Undecideds.” Just the opposite occurred among the MBs where 37% were either Undecided or had No Plans to implement Microsoft Lync Enterprise Voice, down from 59% in just one year.

SMBs appear to be more cautious than Enterprises. As seen earlier in Exhibit ES-3, only 17% of all Enterprises were Undecided about deploying Lync EV after trialing, while among SMBs 43% were Undecided.

Exhibit 44 SMB Plans for Deploying Microsoft Lync with

Enterprise Voice Beyond Trials Among all SMBs

6%

16%

55%

22%

4%

27%

46%

23%

Currently deploying

Planning to deploy



Small Business

Current A year ago

18%

45%

31%

6%

14%

27%

49%

10%

Currently deploying

Planning to deploy



Medium Business

Current A year ago




SMB Top Reasons for Deploying Lync with Enterprise Voice Beyond Trials

The SMBs implementing Microsoft Lync for Enterprise Voice were asked why they decided to implement it. Exhibit 45 ranks their responses.

Both SBs and MBs most frequently cited lower total cost of ownership with Microsoft Lync Enterprise Voice than with PBX-based solutions. Microsoft’s pricing structure bundles access to Lync in the Enterprise CAL Suite with access to popular applications, including Windows, Exchange and Sharepoint, so the incremental cost to add Lync functionality from a license standpoint is attractive. This was confirmed by the 2nd choice among both SBs and MBs, Facilitates voice feature integration with other Microsoft applications.

We have already adopted Microsoft Lync for IM and Presence is often cited as the entry point for the adoption of Lync, prior to adding Enterprise Voice, but that only ranked 4th or 5th in importance.

Another key factor often cited is We have already invested in the Enterprise CAL suite, but that ranked only 11th among SBs and 7th among MBs as an important reason, indicating that licensing may not be such a major cost concern.

As with Enterprises, TCO was the top reason for deployment, followed by integration with other MS software.

Exhibit 45 SMB Top Reasons for Deploying Lync with

Enterprise Voice Beyond Trials Among SMBs Deploying or Planning to Deploy Lync with Enterprise Voice

SB MB

Ranking

1

2

9

5

8

3

11

1

2

3

4

5

6

7

7 8

4 9

6 10

10 11

SB MB

Weighted Average

Total cost of ownership (hardware, software, service support) is lower than PBX based solutions

6.5 4.8

3.1 4.5Facilitates voice feature integration with other Microsoft

applications, e.g., Sharepoint, Exchange, Office

1.6 4.4We have already adopted Microsoft Lync for Web Conferencing

2.0 2.1Lync is available as both a premises system and a hosted service

3.1 3.2Lync Enterprise Voice is a natural extension of our

commitment to Microsoft Lync for UC

1.8 3.5The Lync Client is superior to the user interface provided by

other UC vendors

2.9 3.5We have already adopted Microsoft Lync for IM and Presence

1.5 2.1We have already invested in the Enterprise CAL Suite

1.6 1.6Lync Enterprise Voice has all the voice functionality we need

2.5 1.7Ease of implementation and telephony system management

3.1 1.9Connectivity with Skype




Factors that Fell Short of SMBs’ Expectations in Deploying Lync with Enterprise Voice

In our survey, we gave the SMBs that were deploying Lync EV another opportunity to identify any factors that fell short of their expectations. However the top-rated answer was None of these; Lync with Enterprise Voice has MET or EXCEEDED all of our expectations.

There was still a group of SMBs, particularly in the MB segment, that believe that Microsoft Lync’s Total Cost of Ownership (TCO) was NOT lower than PBX based solutions. These SMBs were among those that earlier noted that there were some additional costs in implementing Lync EV that they had not anticipated.

Another factor that fell short of the expectations of the SMB decision-makers was Lync support for Mobility does NOT meet our needs, which ranked 2nd among SBs and 4th with MBs.

Some SMB decision-makers expressed concern that Lync Enterprise Voice does NOT have all the voice functionality we need. But overall, it appears that as Microsoft continues to enhance the features of Microsoft Lync EV, SMBs are finding fewer concerns.

Exhibit 46 Factors that Fell Short of SMBs’ Expectations in

Deploying Lync with Enterprise Voice Among SMBs currently deploying Lync with Enterprise Voice

SB MB

Ranking

1

4

6

2

3

8

9

1

2

3

4

5

6

7

7 8

5 9

SB MB

Weighted Average

None of these; Lync with Enterprise Voice has MET or EXCEEDED all of our expectations

7.3 5.1

0.9 2.8Total cost of ownership (hardware, software, service support)

is NOT lower than PBX based solutions

0.5 1.9The Lync Client is NOT superior to the user interface provided

0.4 1.3Lync does NOT facilitate telephony feature integration with other

Microsoft applications, e.g., Sharepoint, Exchange, Office

0.2 1.4Lync Enterprise Voice is NOT supported by Lync Online

1.5 1.6Lync Enterprise Voice does NOT have all the voice

functionality we need

2.0 1.7Lync support for Mobility does NOT meet our needs

0.2 1.4Lync does NOT integrate easily with our existing voice system

0.7 0.9Lync does NOT provide ease of implementation and

telephony system management




SMB Problems in Scaling Lync with Enterprise Voice

Exhibit 47 shows the degree to which SMBs saw or anticipated problems in scaling Lync with Enterprise Voice. The population answering this question included those who had deployed, are currently deploying and those that plan to deploy Lync with Enterprise Voice.

About half (55% of SBs and 49% of MBs) found no problems scaling, while a slightly smaller group (45% for SBs and 49% for MBs) found some problems but nothing major.

As expected, scaling was not a serious concern among SMBs.

Exhibit 47 SMB Problems in Scaling Lync with Enterprise

Voice

55%

45%

0%

0%

None




Small Business

49%

49%

2%

0%

None




Medium Business




Current Status of Licenses for Lync with Enterprise Voice—Small Business

The IUC research included several questions on the number of Lync licenses and whether they are being used. This information was used both to understand the potential demand picture and corroborate InfoTrack for Enterprise Communications shipment and installed base market share estimates for Microsoft.

Exhibit 48 reflects the Small Businesses’ current implementation status of Microsoft Lync and Enterprise Voice licenses.

Only 13% of the Small Businesses’ employees currently have Lync licenses, up from 10% last year. 48% of the Lync licenses are Plus CALs (required for Enterprise Voice) compared to 52% last year. 33% of the Small Businesses’ Plus CAL licenses are activated with users, down slightly from 35% a year ago.

Overall, about 2.1% of Small Business employees have activated Lync Enterprise Voice licenses, a small increase over 1.8% last year.

(These numbers represent current installed base, not annual shipments/implementations).


Enterprise Voice—Small Business

Current

13%

48%33%

2.1%

10%

52%35%

1.8%

A year ago


employees




employees




Current Status of Licenses for Lync with Enterprise Voice—Medium Business

Exhibit 49 depicts Medium Businesses’ current implementation status of Microsoft Lync licenses.

18% of Medium Business employees have Lync licenses, up from 13% last year. 54% of those Lync licenses are Plus CALs and 39% of the Plus CAL licenses are activated, both about the same as a year ago. .

Overall, 3.8% of Medium Business employees have activated Lync Plus CAL licenses. This is quite high considering the short time that Lync Enterprise Voice has been available, and it represents an increase from last year, when the figure was 2.9%. (These numbers represent the current view of installed base, not annual shipments/ implementations).

Note that the demographics stated above and elsewhere in this report are based on the survey respondent populations and have a confidence interval of at least ±10%.


Enterprise Voice—Medium Business

Current

18%

54%39%

3.8%

13%

55%40%

2.9%

A year ago


employees




employees




Projected SMB Deployment of Licenses for Microsoft Lync with Enterprise Voice

Exhibit 50 shows SMBs’ projections of Enterprise Voice licenses as a percentage of the total number of employees, for the years 2015 and 2017.

A small amount of growth is projected among Small Businesses in each of those years, with percentages increasing from 2.1% to 2.8% and 3.4%. Medium Businesses expect somewhat higher growth from 3.8% to 5.5% and then 7.5%.

As in 2013 (figures also shown in Exhibits 48 and 49, above), Medium Businesses plan to deploy proportionally more licenses than Small Businesses by a factor of about two in each of the forecasted years.

Exhibit 50 Projected SMB Deployment of Licenses for

Microsoft Lync with Enterprise Voice

2.1%2.8%

3.4%3.8%

5.5%

7.5%

2013 2015 2017





Scope of Planned SMB Deployment of Microsoft Lync with Enterprise Voice

Exhibit 51 shows how extensively SMBs plan to deploy Lync with EV (among those who stated they plan to implement).

SBs’ most likely deployment plans were

selected individuals, throughout specific departments business units and at selected locations as the need arises.

These were equally likely at 27% each, the same as last year. Throughout your home country was the next most preferred plan.

MBs’ most likely plan was throughout your home country, with almost 40% of MBs selecting this course of action, up from 32% last year. while throughout specific departments or business units was a close second with 32%. At selected locations as the need arises was third at 19% up from 12%. Selected individuals was fourth at 10%, down by half from 20% a year ago.

Overall, the MB plans for deploying Lync EV looked a lot more like those of the Enterprise segments than those of the smaller SB segment.

Exhibit 51 Scope of Planned SMB Deployment of Microsoft


27%

27%

27%

19%

0%

27%

27%

27%

13%

6%





Globally

Small Business

Current A year ago

10%

19%

32%

39%

0%

20%

12%

28%

32%

8%





Globally

Medium Business

Current A year ago




SMB Organization Responsible for Decision to Deploy Lync with Enterprise Voice

Exhibit 52 shows which organizations within SMBs were responsible for the decision to implement Lync EV.

C-level Executives ranked first among SBs, while the IT organization responsible for Unified Communications had the highest ranking among MBs. Among both the SBs and MBs, the multi-department committee responsible for Telephony ranked 2nd and the IT organization responsible for Desktop Applications placed 3rd.

In general, the percentages for the other lower ranking organizations, tracked fairly closely with each other across the two segments of SB and MB.

Compared to the Enterprise organizations, C-level executives within SMBs are much more involved and responsible for the decisions to deploy these solutions.

Exhibit 52 SMB Organization Responsible for Decision to

Deploy Lync with Enterprise Voice

6%

10%

14%

21%

6%

6%

29%

8%







C-Level Executive

Other

Small Business

10%

35%

12%

19%

8%

2%

8%

6%







C-Level Executive

Other

Medium Business




SMB Ratings of Microsoft Dealers in Terms of Voice Expertise

Exhibit 53 shows how SMB decision-makers rated Microsoft dealers in terms of voice expertise.

More than 80% of the SMBs rated their Microsoft dealers as either “Good” or “Excellent” in terms of voice expertise, led by Medium Businesses at 91% and Small Businesses at 84%.

For the MB segment, this is a significant improvement over the ratings of Microsoft dealers a year ago. In our report last year, 79% of the LEs rated their Microsoft dealers as either “Good” or “Excellent” in terms of voice expertise, with 34% receiving the “Excellent” ratings and 45% judged to be “Good.” The “Excellent” ratings increased by 14 percentage points in just one year.

There was no improvement in the SB segment with “Excellent” ratings actually dropping from 24% a year ago to 21%, currently.

Exhibit 53 SMB Ratings of Microsoft Dealers in Terms of

Voice Expertise

21%

48%

63%

43%

13%7%

3% 2%


Excellent Good Fair Poor Don’t know




Resources Used Extensively During Deployment of Lync with Enterprise Voice

In our survey, we asked the SMB decision-makers the extent to which they had used support resources during their deployment of Microsoft Lync with Enterprise Voice. Exhibit 54 shows the percentage of SMBs that indicated “Extensive Use.”

Local or Regional Service Providers had the highest score for “Extensive Use” from 50% of the SBs and 48% of the MBs. Half of the SBs also said they received extensive support from Local or Regional Partners. This group received the second highest score from MBs at 44%.

Internal Resources received the 3rd highest score with 40% of the SBs and 37% of the MBs indicating that they had made “Extensive Use” of their internal IT resources in deploying Lync EV.

It is interesting that a significant percentage of SMBs made “Extensive Use” of more than one of these types of support resources. Apparently half SMBs were using Service Providers along with internal resources to support the implementation of a Hosted version of Lync EV, while the other half were using Partners plus internal resources to support premises-based versions of Lync EV.

Exhibit 54 Resources Used Extensively During Deployment of


50%

10%

50%

0%

40%

0%





Internal Resources

Other

Small Business

44%

22%

48%

4%

37%

0%





Internal Resources

Other

Medium Business




SMB Familiarity with Enhancements to Microsoft Lync

Exhibit 55 shows the degree of familiarity among Small and Medium Businesses with the enhancements to Lync which Microsoft has introduced in the past 12 months.

At least 70% of Medium Businesses were “Extremely Familiar” or “Very Familiar” with recent enhancements to Lync in five categories. The two categories whose enhancements had the highest percentage of “Extremely Familiar” ratings were Videoconferencing (52%) and Skype Connectivity (43%). Enhancements to Lync Client apps and Lync Online were next, with “Extremely Familiar“ ratings of 30% and 28%. MBs were least familiar (24%) with enhancements to Mobile Endpoints.

In the SB segment, at least 40% were “Extremely Familiar” or “Very Familiar” with recent enhancements to Lync in the five categories, except Mobile Endpoints (37%). The category whose enhancements had the highest percentage of “Extremely Familiar” ratings was Skype Connectivity (26%), but Videoconferencing was a strong second at 24%. There was a significant drop off in SB familiarity with enhancements in the other three categories, each of which received an “Extremely Familiar” rating of only 8% to 16%.

The next two exhibits will examine whether SMBs believe these enhancements meet their needs and the likelihood that they will implement these enhancements.

Exhibit 55 SMB Familiarity with Enhancements to Microsoft

Lync

24%

16%

13%

26%

8%

34%

24%

24%

21%

34%

Videoconferencing





Small Business


52%

30%

24%

43%

28%

39%

48%

48%

43%

46%

Videoconferencing





Medium Business





Perception of Whether Enhancements Meet SMB Needs

Exhibit 56 shows the extent to which Small and Medium Businesses believe that the enhancements to Lync which Microsoft has introduced in the past 12 months will meet their needs.

At least 70% of Medium Businesses believed that the recent enhancements to Lync would “Fully Meet” or “Mostly Meet” their needs in those five categories. The category whose enhancements had the highest percentage of “Fully Meets Needs” ratings was Videoconferencing (48%). Enhancements to Lync Client App (37%) and Skype Connectivity (35%) had the next highest ratings for “Fully Meets Needs”. Enhancements to the Mobile Endpoints and Lync Online had the lowest MB rating for “Fully Meets Needs” at 30% and 26% respectively.

In the SB segment, at least half felt that the recent enhancements to Lync would “Fully Meet” or “Mostly Meet” their needs in those five categories. The category whose enhancements had the highest percentage of “Fully Meets Needs” ratings was Lync Online (24%), with Videoconferencing and Skype Connectivity in second at 21%. Enhancements in the other two categories, received “Fully Meets Needs” ratings of only 11% to 16%.

Although Lync Online still does not support Enterprise Voice even with these enhancements, that does not appear to be a significant issue among SMB decision-makers, as they are most likely using it for its non-voice applications.

Exhibit 56 Perception of Whether Enhancements Meet SMB

Needs

21%

16%

11%

21%

24%

50%

45%

39%

37%

37%

Videoconferencing





Small Business


21%

16%

11%

21%

24%

50%

45%

39%

37%

37%

Videoconferencing





Small Business


48%

37%

30%

35%

26%

39%

43%

48%

37%

50%

Videoconferencing





Medium Business





Likelihood of SMBs Implementing Enhancements to Microsoft Lync

Exhibit 57 displays the likelihood that Small and Medium Businesses will implement the enhancements to Lync which Microsoft has introduced in the past 12 months.

At least 70% of Medium Businesses were “Extremely Likely” or “Very Likely” to implement the recent enhancements to Lync in five categories, except for Lync Online at 55%. The two categories which had the highest percentage of “Extremely Likely” ratings were Videoconferencing (74%) and Lync Client apps (65%). Enhancements to Skype Connectivity were next with an “Extremely Likely“ rating of 61%. MBs were least likely to implement the enhancements to Mobile Endpoints and Lync Online, which received “Extremely Likely” ratings of 52% and 33%.

In the SB segment, at least 50% were “Extremely Likely” or “Very Likely” to implement the recent enhancements to Lync in the five categories. The category whose enhancements received the highest percentage of “Extremely Likely” ratings was Skype Connectivity (42%), and Lync Online and the Lync Client app were second at 39% each. The two enhancements with the lowest SB “Extremely Likely” rating were Mobile Endpoints at 26% and Videoconferencing at 34%.

The category whose enhancements received the highest combination of “Extremely Likely” and “Very Likely” ratings from SB decision-makers was Videoconferencing. However, SBs gave it the second to lowest “Extremely Likely” rating, which is probably more indicative of the actual SB likelihood of implementation.

Exhibit 57 Likelihood of SMBs Implementing Enhancements

to Microsoft Lync

34%

39%

26%

42%

39%

39%

24%

32%

26%

26%

Videoconferencing





Small Business


74%

65%

52%

61%

33%

13%

11%

22%

20%

22%

Videoconferencing





Medium Business





Effect of Skype Acquisition on SMB Decision to Implement Lync with Enterprise Voice

In 2011, Microsoft acquired Skype, an IP Telephony service targeted primarily at the consumer market. Then in late 2012, Microsoft transferred the Lync organization out of the Microsoft Office business unit into the Skype business unit. In mid-2013, Microsoft introduced an enhancement to Lync which enabled Lync users to make phone calls over Skype. In our survey, we asked SMBs whether Microsoft’s acquisition of Skype had any effect on the SMB’s decision to implement Lync with Enterprise Voice. Exhibit 58 shows the SMB responses to that question.

85% of the MBs and 76% of SBs responded that the Skype acquisition had a positive effect on their decision regarding Lync. The other 15% of MBs and 24% of SBs said it had no effect on their decision to implement Lync. None of the SMB decision-makers felt that Skype had any negative effect on their Lync decision.

Both SB (40%) and MB (32%) decision-makers felt that the most positive effect of the Skype acquisition was because they currently utilized Skype in their companies.

30% of the MBs and 18% of the SBs felt that it demonstrated Microsoft’s commitment to the Voice market.

18% of the SBs and 23% of the MBs noted the positive effect due to the potential integration of Lync and Skype.

Exhibit 58 Effect of Skype Acquisition on SMB Decision to

Implement Lync with Enterprise Voice Among Current/future Implementers

18%

40%

18%

24%

0%

0%







Small Business

30%

32%

23%

15%

0%

0%







Medium Business




Likelihood of SMBs Implementing Skype Functions During the Next Few Years

Exhibit 59 shows the percent of SMBs which are deploying Lync that

were Extremely Likely to implement various Skype functions during

the next few years.

33% of Medium Businesses and 34% of Small Businesses said that their Lync users were “Extremely Likely” to utilize Skype for making and receiving video calls. Almost as many SBs (32%) and MBs (28%) were “Extremely Likely” to utilize Skype for making and receiving voice calls.

When asked whether the Skype calling would focus on consumer customers or business customers/suppliers, the MBs were more likely to use Skype calling with consumer customers (33%) vs. business customers (24% ). SBs had the opposite opinion, 24% vs. 16% in favor of business customers.

Overall, the SMB decision-makers were not as positive as their Enterprise counterparts on the synergy between Lync and Skype and the opportunity to utilize Skype for business purposes.

Exhibit 59 Likelihood of SMBs Implementing Skype

functions during Next Few Years Among Current/future Implementers

32%

34%

24%

16%

13%






Small Business

% Extremely Likely

28%

33%

24%

33%

30%






Medium Business

% Extremely Likely

32%

34%

24%

16%

13%






Small Business

% Extremely Likely




SMB Plans for Replacing/Retaining Existing Telephony Systems During Lync

Deployment

Exhibit 60 shows SMB plans for replacing or retaining existing telephony systems during Lync deployment.

The most popular option among both SBs and MBs was to replace existing telephony systems/services and deskphones immediately (each with 36%). This was followed by retain existing telephony systems/services while deskphones are replaced on an accelerated basis (27% of SBs and 32% of MBs). A significant percentage in both segments (28% of SBs and 29% of MBs) still preferred a more gradual approach by retaining existing telephony systems and services while replacing existing deskphones on a gradual or life-cycle replacement basis. This more gradual approach was favored by a majority of the Enterprise implementers of Lync EV.

3% of MBs and 9% of SBs planned to retain their existing telephony systems so that they could continue to use their existing voice mail until they are ready to migrate to MS Exchange messaging.

Exhibit 60 SMB Plans for Replacing/Retaining Existing

Telephony Systems During Lync Deployment Among Current/future Implementers

36%

28%

27%

9%





Small Business

36%

29%

32%

3%





Medium Business




Distribution of Endpoints on SMB Deployed Lync Systems with Enterprise Voice

Exhibit 61 shows the distribution of endpoints among SMB users of Lync EV.

The first finding from this data is that more than half of the MB users of Lync EV and about 40% of SB users do not expect to be using a phone as their preferred endpoint after the first year of implementing Lync EV. Instead of using either their existing deskphone or a new Lync-certified SIP phone, they plan to use either the Lync Mobile Client on their smartphone or the Lync client app and softphone on their PC.

The second finding is the surprisingly modest migration of endpoints over time. Between the end of the first year and the end of the third year, SMBs only plan to replace an additional 5% of the existing deskphones.

Exhibit 61 Distribution of Endpoints on SMB Deployed Lync

Systems with Enterprise Voice

31%

30%

17%

22%

26%

29%

21%

24%

Existing deskphones



Lync Mobile Client

Small Business


22%

25%

26%

27%

17%

25%

28%

30%

Existing deskphones



Lync Mobile Client

Medium Business


22%

25%

26%

27%

17%

25%

28%

30%

Existing deskphones



Lync Mobile Client

Medium Business





Primary Method for SMBs Connecting to the PSTN for Lync with Enterprise Voice

Exhibit 62 shows the methods that SMBs expect to use to connect the Lync EV servers with the PSTN (Public Switched Telephone Network).

The most popular method was to utilize direct SIP connections from the Lync EV servers to their existing IP-PBXs and use them as Gateways to the PSTN. 55% of SBs and 45% of MBs would use this method.

Another 45% of the MBs and 27% of the SBs indicated a preference for connecting the servers to Enhanced Gateways (EGs) or Session Border Controllers (SBCs) which would provide connectivity to the PSTN.

The remaining 10% of MBs and 18% of SBs planned to utilize SIP trunks to connect directly to an Internet Telephony Service Provider.

Exhibit 62 Primary Method for SMBs Connecting to the

PSTN for Lync with Enterprise Voice

27%

55%

18%




Small Business

45%

45%

10%




Medium Business




SMB Agreement on Use of 3rd Party Session Border Controllers/Enhanced Gateways

Exhibit 63 provides five statements about the use of SBCs and EGs. Our survey asked the SMB decision-makers about their level of agreement with those statements

91% of MBs and 69% of SBs said that they “Strongly Agree” or Generally Agree” with the first statement that SBCs and EGs make it relatively easy to trial Lync with Enterprise voice. The last four statements focused on how the SBCs and EGs were likely to be used. Of those four, the following statement had the highest percentage of “Strongly Agree” responses from MBs (42%):

SBCs and EGs facilitate the migration from our existing telephony systems/services and deskphones to a hybrid environment with Lync On-Premises serving some locations and cloud-based Lync Online serving other locations.

The statement that had the highest percentages of “Strongly Agree” among SBs (31%) was:

SBCs and EGs let us gradually add Enterprise Voice to Microsoft Lync because we can still use our existing telephony systems/services and deskphones for voice.

Although the MBs and SBs did not agree regarding the best way to use SBCs and EGs, the MB preference carries more weight because only 27% of SBs indicated that they planned to use them, as noted in Exhibit 62.

Exhibit 63 SMB Agreement on Use of 3rd Party Session

Border Controllers/Enhanced Gateways

31%

23%

31%

23%

23%

38%

38%

38%

31%

23%






Small Business


33%

13%

29%

33%

42%

58%

71%

50%

54%

33%






Medium Business





SMB Plans for Voicemail on Lync with Enterprise Voice

Exhibit 64 shows SMB plans for voice mail on Lync with EV.

Those that are already migrating to Exchange Unified Messaging and plan to continue to do so was the preferred method, with 46% of SBs and 36% of MBs indicating this approach. Among SBs, the second highest preference (36%) was to migrate to Exchange UM in conjunction with Lync EV. Only 18% plan to continue to use their current voice mail system.

MBs could not agree on their second choice with 32% planning to continue using their current voicemail system and the other 32% planning to migrate to Exchange UM in conjunction with Lync EV.

However, overall it is clear that Lync is going to help Microsoft sell Exchange UM as the Lync Enterprise Voice installed base grows.

Exhibit 64 SMB Plans for Voicemail on Lync with

Enterprise Voice

32%

36%

32%

18%

46%

36%

Plan to continue using my current voicemail system or service

Already migrating to Exchange UM and will continue

Plan to migrate to Exchange UM in conjunction with Microsoft Lync





SMB Preferred Vendor for IP-PBXs—Before Microsoft Entered the Enterprise Voice


Exhibit 65 shows the changes in preferred IP-PBX vendor choices among SMBs since Microsoft entered the Enterprise Voice market.

Currently, only 8% of SBs and 21% of MBs indicated that Microsoft was their preferred IP-PBX vendor. These are substantially lower than the Enterprises that preferred Microsoft as shown in Exhibit 32. Since Microsoft entered the market, MBs that preferred Avaya declined from 33% to 29%, while preferences for Other telephony systems vendors went from 41% to 29%. Preferences for Cisco declined from 24% to 19% among these MB decision-makers.

Much smaller declines occurred among SBs with preferences for Cisco and the Other vendors dropping by 3 points along with a reduction of 2 points for Avaya.

Exhibit 65 SMB Preferred Vendor for IP-PBXs—Before


26%

16%

0%

11%

47%

24%

13%

8%

11%

44%

Avaya

Cisco

Microsoft


Other

Vendors

Small Business

Before Currently

33%

24%

0%

2%

41%

29%

19%

21%

2%

29%

Avaya

Cisco

Microsoft


Other

Vendors

Medium Business

Before Currently

26%

16%

0%

11%

47%

24%

13%

8%

11%

44%

Avaya

Cisco

Microsoft


Other

Vendors

Small Business

Before Currently




SMB Preferred Vendor for UC Apps—Before Microsoft Entered the Enterprise Voice


Exhibit 66 shows the changes in preferred UC Application vendor choices among SMBs since Microsoft entered the Enterprise Voice market.

Since the company’s entry into the Voice market, Microsoft has more than doubled its support among SMBs as a UC app vendor since it entered the voice market. Among SBs, preference for Microsoft jumped from 11% to 26%, and among MBs it increased from 14% to 30%.

During that period, preferences for Avaya as the preferred UC vendor among MBs dropped 9 points from 25% to 16%, while Other lost 7 points. Cisco had a much smaller decline among the MBs, going from 21% to 19%.

Among SBs, preferences for Cisco and Avaya were lower by only 2 points, while preferences for vendors in the Other category declined substantially from 39% to 26%.

Exhibit 66 SMB Preferred Vendor for UC Apps—Before


21%

18%

11%

11%

39%

19%

16%

26%

13%

26%

Avaya

Cisco

Microsoft


Other

Vendors

Small Business

Before Currently

25%

21%

14%

7%

33%

16%

19%

30%

9%

26%

Avaya

Cisco

Microsoft


Other

Vendors

Medium Business

Before Currently

Documents

Enterprise Voice Market 2014 - news. · PDF fileEnterprise Voice Market—2014 ... Tactics provides easy access to detailed feature comparisons for business ... market briefings and