Although the on-premise model with its control and security advantages will dominate the enterprise communications market in the immediate future, the revenue share of hosted services is poised to increase significantly, according to Frost & Sullivan. Hosted communications services present an ever more popular alternative for deploying IP telephony and unified communications applications.

New analysis from Frost & Sullivan – European Hosted IP Telephony and Unified Communications Services Market – finds that the hosted IP telephony market in Europe earned revenues of €0.9 billion in 2010 and estimates this to reach €4.9 billion in 2016.

"The hosted IP telephony and UC services market in Europe is witnessing rapid growth mainly due to the increasing awareness about hosted solutions and improved feature sets," notes Frost & Sullivan Industry Analyst Dorota Oviedo. "The economic slowdown and limited capital availability for investments urged many enterprises to consider alternative communications delivery methods."

Once companies experience the actual functionality and service level offered, they become more comfortable with communications being delivered as a service. Services are becoming more mature, offering a complete PBX capability rather than the limited functionality of Centrex solutions previously witnessed in the market.

"With the economy rebounding, companies will continue using hosted IP telephony services," adds Oviedo. "At the same time, they are also expected to complement them with new communications and collaboration applications."

The European hosted IP telephony and UC services market is highly fragmented. All the major enterprise communications providers and vendors show interest in tapping this opportunity to leverage the strong customer demand for operational expenditure (OPEX)-based solutions.

However, building a distribution channel is one of the key challenges faced by this growing industry.

"Channel partners need to be educated on the benefits of predictable revenues based on recurring monthly revenues and commissions, which are less sensitive to the general economic fluctuations and will increase as hosted services gain traction," concludes Oviedo.

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