3 Cloud Communications Trends Impacting CSPs in the Era of XaaS

The landscape of enterprise communications has evolved and is forcing communications service providers (CSPs) to take a second look at their offerings to reposition themselves in the era of everything-as-as-service (XaaS). Cloud-based CSPs are driving innovation in the industry by empowering developers to take control of their communications, which has led to an increase in communications platform as a service (CPaaS) offerings and made XaaS more accessible.

Customer expectations also continue to change and are highly focused on quality and speed of service and support. In response, CSPs are at a crossroads, deciding where to partner with other cloud-based communications providers by consolidating services and where to compete by offering innovative features that deliver improved transparency and control to customers.

The future of CSPs is full of possibilities. The migration to cloud-based models offers enterprises and their customers a host of benefits, including more enhanced user experiences, lower costs, greater scalability, and flexibility of services.

As CSPs determine where to compete and where to consolidate, three cloud-based communications trends provide opportunities to redefine their place in the industry.

1. Increased collaboration through the shift to horizontal service offerings.

As a result of network virtualization from the increased adoption of cloud-based communications services, CSPs have automated their internal infrastructures and created software-defined networks that can collaborate with other communication applications and be offered to customers.

This cloud-based movement is also changing the industry standard from CSPs specializing in vertical stand-alone services to more industry-specific offerings that facilitate collaboration and access for customers. For example, CSPs operating in this model provide customers with comprehensive industry-tailored service offerings, such as secure cloud-based reporting tools for medical and financial applications, as well as cloud-based communication capabilities for transportation and hospitality sectors. As a result, we'll continue to see cloud-based CSPs that enable CPaaS players to deliver tailored cloud voice and messaging capabilities.

The industry trend toward horizontal offerings will also positively impact CSPs by creating increased demand for their existing expertise (e.g. access to networks, local presence, billing, etc.), as well as the opportunity to partner with cloud-based providers that can help maximize expansion into a new variety of segments. In this case, CSPs with a more collaborative structure for working with partners will be able to take the next step in evolving their go-to-market approach through leveraging APIs and bundling services specific to each business customer.

2. Strengthening customer connections through telecom evolution.

Changing customer preferences and improvements in cloud technology have driven the evolution of telecom services. This progression has created an opportunity for CSPs to provide more compelling cloud solutions leveraging mobile integration and analytics. CSPs are also shifting their value in the industry by partnering with CPaaS technology partners that can integrate innovative features that offer benefits and deliver added value to their customers. Innovations could include the addition of calling and texting through a telecom API or integrating the ability to pay by app or mobile through a payment API.

Further, CPaaS solutions and enablers that provide developers with APIs allow enterprises to be nimble and differentiate from the competition by tailoring core services to meet the needs of changing customer preferences (e.g. through voice and messaging and mobile payments and location tracking, etc.). APIs also offer a new resource for maintaining profitability in the horizontal-focused market by reducing the resources spent on every business integration. Instead, CSPs can integrate APIs that can be applied for multiple verticals (e.g. telecom API integrating SMS or MMS functions for transportation or restaurant customers.

Adopting APIs can also allow CSPs to better compete with new non-traditional providers by transforming current resources to better serve customers. Through sophisticated partnerships and API integration, CSPs have the potential to expand presence into to global markets.

3. Reestablishing value through reselling.

As cloud-based communications continue to drive XaaS adoption, CSPs have the opportunity to create customer value by becoming cloud services brokers reselling cloud offerings. CSPs are shifting the focus away from technology infrastructure toward value-added services that further improve the customer experience in a one-stop-solution model. Companies are increasingly drawn to the agility and flexibility of as-a-service solutions because they provide access to a host of innovative capabilities without the large upfront capital expenditures required of on-premises options. As a result, CSPs are selling their own services in combination with other as-as-service offerings, such as contact center, billing, HR, and ERP services, to business customers.

The transition of CSPs to resellers and cloud brokers is attractive to businesses because it provides a one-stop solution. Additionally, CSPs have established security capabilities that are attractive to businesses when interacting with sensitive information in the cloud.

Despite the value-add for customers, acting as a reseller can create complications and is not always the best option for CSPs. On one hand it allows CSPs to move up the IT stack and become a single-source information and communications technology provider. However, CSPs aiming to become cloud brokers must be willing to lower costs to make their services competitive among other telecom SaaS solutions. Additionally, as CSPs move up the IT stack, there will be increased competition between customers and partners offering professional services.

CSPs are at the heart of the digital disruption cloud-based communications and XaaS solutions are delivering. In this new era, CSPs will be forced to reevaluate the value they can add to the industry and to their customers.

As CSPs determine which route of digital transformation to choose, cloud-based trends will put added pressures on CSPs to integrate offerings or select cloud partners that will best meet customers' expectations. Lastly, CSPs and their current partners need to face the impact of becoming competitors through CPaaS-focused business solutions.

Al Castle is vice president of product and engineering at Flowroute, a West Company. He brings more than 15 years of operational experience in software engineering and B2B SaaS platform management. Prior to joining Flowroute, Castle was the director of engineering at Motorola Solutions, where he built and launched the organization's first SaaS platform and IOT enterprise software system in less than five months.