LONDON, UK: The economic downturn has had a significant impact on the enterprise communications market in Europe.

Companies have limited capital available for investment but are, at the same time, considering unified communications (UC) deployment as they look for ways to cut costs and increase productivity.

Recession has generated strong interest in alternative delivery methods said a new analysis from Frost & Sullivan,

The report on European cloud-based unified communications services market, finds that the market earned revenues of €46.9 million in 2009 and estimates this to reach €1.6 billion in 2014, growing at a compound annual growth rate (CAGR) of 79.3 per cent.

“Down economy favoring OPEX-based solutions coupled with market’s need for flexibility and focus on core competencies, all boost cloud-based UC services adoption, Both small businesses and large enterprises are interested in communications delivered as a service” noted Dorota Oviedo, analyst, Frost & Sullivan Research

In case of small businesses, the lack of internal IT skills is a major factor spurring uptake. The elimination of complexities resulting from managing and integrating multiple applications and vendors, as well as testing various UC applications is attracting enterprises.

The concept of hosted enterprise communications services was first introduced over a decade ago. However, it has only started to gain mainstream acceptance in recent years as modern communications have become increasingly more sophisticated. Additionally, during the economic downturn, rising costs and a fall in the availability of capital is favoring OPEX-based solutions, said the report.

Cloud-based services also offer businesses great level of flexibility. Organizations can rapidly enhance or expand their ICT capacity by adding new services without investing in the development of new skills or deploying new hardware and software.

Businesses can decide on the number of seats they need at a given moment and the locations to which they want the capacity to be delivered. They can scale up or down in real time. It enables them to rapidly adapt to the sudden changes in business volumes or business strategies.

Despite the positive outlook for cloud-based UC services in Europe, the market has several challenges to battle. These include the general preference for customer premise equipment, low market awareness of cloud communications services, market fragmentation and negative perceptions of security and reliability.

“Cloud-based UC market participants claim that customer mindset is one of the major barriers to adoption. Reliability and security issues are among the main customer concerns” explained Oviedo

Service provider brand name, service level agreements (SLAs), coupled with successful deployment references are helping win over customers.

“Eventually, the cost-effective approach of cloud services’ in terms of ‘pay-as-you-go’ functionality should dominate the argument, especially in the small- and medium-size business sector,” Oviedo concluded.