Today, a group of hosted communications companies formed an alliance, which they named the Cloud Communications Alliance (refer to the press release here). The following summarizes the objectives of the Alliance and lists the founding members:

About Cloud Communications Alliance

The Cloud Communications Alliance brings together leading Cloud Communications providers Alteva, Broadcore, Callis Communications, Consolidated Technologies Inc., IPFone, SimpleSignal, Stage 2 Networks and Telesphere to promote development of the Cloud Communications category. The Alliance is aggressively pursuing new technical standards, capabilities and applications. The Alliance harnesses the power of each member’s individual networks and systems to create a seamless, nationwide HD voice network that delivers outstanding voice quality, apps, features and cost savings. For more information about the Cloud Communications Alliance, visit www.cloudcommunicationsalliance.com.

Why these eight companies? These service providers have several things in common: they all use BroadSoft’s BroadWorks platform for the delivery of hosted communications; they have all been recognized as being among the fastest growing BroadSoft customers; they are all relatively small (30 to 50 employees) with mostly local or regional focus and limited geographic reach; and they all face similar challenges.

When did it all start? About a couple of years ago, this group of eight decided to collaborate and pool their resources together in order to become more successful and accelerate growth. Since then, these companies have been having regular meetings, at which they would exchange knowledge and best practices and discuss opportunities to leverage each other’s strengths for mutual benefits.

Why does it make sense for hosted IP communications providers to join efforts? Interestingly enough, I recently heard about what seems to be a common practice among cable companies. They would get together and openly discuss challenges and best practices and try to help each other grow in their respective areas. The cable industry is more mature than hosted IP telephony, but similarities include somewhat clearly defined territories of influence and a fairly large market potential that offers opportunities for everybody. Oh, and a common enemy – the incumbent telcos!

As I have discussed in previous posts, the hosted IP telephony market is very fragmented, and small service providers (some LECs, some next-gens founded specifically for the delivery of VoIP services) have been among the most innovative and committed to advanced hosted communications, but have had limited resources to promote and support their services on a large scale. While hosted IP communications eliminate a significant portion of the CPE  and the need to dispatch technicians to the customer’s site, frequently, service providers have to ensure that the LAN is properly configured and literally crawl under people’s desks to adjust the wiring. This kind of tasks require local support staff and small market participants can greatly benefit from an alliance that helps them more effective serve larger, multi-site businesses.

Further, market awareness for hosted communications is still fairly limited. Service providers with small marketing budgets typically count on online resources, word of mouth and personal contacts to promote their services. By pooling marketing resources together, Alliance members can more effectively use market intelligence, more confidently market the capabilities of a more powerful entity, and provide customers with a “disaster recovery” option – the ability to easily port the service to another service provider if the original one goes out of business.

I asked the Alliance members about some of the additional challenges they have been facing, and they mentioned the following:

• Backoffice operations: accounting and provisioning could be slow and complex; integration with other software platforms is challenging;
• Customer acquisition is costly and difficult to scale;
• Individual providers have limited ability to come up with new ideas for apps and new sources of revenue;
• They are all looking to make their services more cloud-like.

Since the new formation is being marketed as a “Cloud” Communications Alliance, I inquired about how members saw the difference between cloud and hosted. We did not get into all the details on the call and I have promised to tackle this issue separately, so I will just highlight a few key points:

•  Some member organizations have already deployed some of their capabilities (such as voice messaging, for example) on Amazon’s and other public clouds for cost efficiencies and plan to move more infrastructure elements into the cloud (maybe storage first, call control much later).
• The members plan to enable integrations with a growing number of cloud applications (such as www.salesforce.com, for instance) to help facilitate specific business processes for their customers.
• As businesses increasingly adopt mobile communications, Alliance members plan to be able to manage the fixed-mobile integration from the Cloud.
• Finally, the Cloud offers a great sandbox and a fertile ground for more rapid and more prolific application development. As Alliance members and other parties increasingly develop Cloud applications, the ability to integrate those and properly package and position them to end users will be key for their success.

I believe the formation of the Cloud Communications Alliance is a positive development. It is part of a consolidation trend in the communications market that is likely to accelerate over the next couple of years and will impact fragmented markets more so than the more concentrated ones (such as the PBX market, for example). Consolidation at this stage is healthy; I have, in fact, been recommending co-opetition as a viable approach in hosted IP telephony for some time now.