Modern Work Transformation Trends: AI, BYOD, and the Long Tail of PBX with Tim Banting

0:00

This week on teams inside a podcast, we have Tim Banting who's practice lead for digital workplace that at Omdia. Tim does really great research in this area. And we get into what's going on in digital transformation in the workplace. BYOD AI and the long tail of the PBX. Really appreciate Tim sharing his insights and also many thanks to Landis who are the benefactor of this podcast. Really appreciate their support on with the show.

Tom: 0:27

Hey, everybody. Welcome back to the show. I've been looking forward to this one. Tim and I often get together not as often as we should, because we're very local to each other, but often talking about the industry. So I'm glad to have him on the pod. Tim, do you want to just give us a bit of an intro?

Tim: 0:41

Certainly. Thank you, Tom. I'm delighted to be here. My name is Tim Banting. I'm the practice leader at Omnia for Digital Workplace. We cover things like the future work, workplace transformation, mobile phones and mobility, customer engagement and unified communications and collaboration. So quite a lot

Tom: 0:55

Quite, quite a big, fast moving area to say the least

Tim: 0:58

Absolutely. Yeah, it keeps us on our feet. That's for sure.

Tom: 1:01

Awesome. We had a prep call for this and I think we came up with about five podcasts worth of content. But where I wanted to start, I think the most interesting thing or we talked about was the long tail of the PBX. We spend a lot of our time. I spend a lot of my time. With Teams, customers who are all heading towards the cloud, going into the cloud. And it sometimes feels everybody's doing that and everybody's there, but you've done the research, like what's the total world view look like.

Tim: 1:25

Yeah, it's an interesting one. And it's certainly where the revenue is in the cloud. So if you look in terms of market revenue size, the UCAS market is about three or four times the size as the PBX market. So the on prem market is certainly lower in terms of revenue, but it's still a 7. 5 billion market with a CAGR over the next five years of 2%. So it's still hanging on in there. There might not be so many being sold. There might not be so many new PBX is being sold, but people are still hanging onto them for a number of reasons. There's about 315 million seats of existing PBX out there. Various reasons. It might be that there's absolutely no reason to go with the cloud. And if you look at the capabilities offered in direct routing and things like that. Maybe that's what people don't want. They want to have that insurance policy. So they got a PBX that's there just in case the internet goes down. There'll be people there that might have loads of analog or digital phones and don't want to swap out for analog terminal adapters, or, if you're in hospitality in a hotel to equip all of those new rooms with new phones. Might not be viable. So there's still a very persistent lot of PBXs out there.

Tom: 2:33

Yeah, I think it's important to talk about the real business value. Like it's easy to get swept up in the cooler and you spend a lot of, you spend a lot of time with all the vendors. I spend a lot of time with Microsoft and Microsoft partners and it's new and it's exciting, but it often comes down to, it should business value and math. Like I can make a phone call today and I can make a phone call tomorrow. And has it drastically changed the end users world? Like often. Not, and I guess that, that kind of brings on to the AI conversation. Cause I feel like for the first time in a long time, that the business value of bringing your phone to the cloud, suddenly there's a new feature that you're not going to get. On prem whereas previously it was like yeah, we could rationalize operational costs. We can make it all slick and clever. We can work from anywhere. There's some benefit there, but there's a real hard recurring cost that comes in with the cloud. That many of these PBX it's often sunk costs. They've been running for years and years. So it's a big new investment to make even the migration project. I'm seeing a lot now of like customers that are licensed. But the only reason they're doing it is because they're like, Oh, do we really want to spend the budget on the project when, there's other projects we could do that are higher priority.

Tim: 3:41

Absolutely. And of course you can get the best of both worlds. Some people would argue the best of both worlds. Premise based and then complemented by all the value added services from the likes of Teams and other sort of cloud based services out there. And what we did this year, we had a IT Enterprise Insights survey. And we asked the question, how many vendor solutions have you deployed for your unified communications and collaboration needs? There are only 11 percent in a global study. There are only 11 percent of respondents that said they've consolidated on a single vendor. Those that have two or two to four different vendor solutions was about 50%. I think it was five or more was something like 38%. And those are the only solutions that IT know about. There's a whole load of shadow IT that's going on that they don't know about, but it's not a one size fits all. We'll be monitoring that through the subsequent years and finding out whether or not that increases, but there's a whole variety of reasons, different use cases, different features, even things like usability comes into effect there. So there's a whole reason why people want a variety of different solutions. So it's not just one size fits all. Bearing in mind that Teams is extremely feature rich and very competent. There are other areas where perhaps people would want a more simple capability.

Tom: 4:58

Yeah. That is one of the downfalls of Teams. Obviously numbers wise, it's doing incredibly well. It has the momentum of Microsoft 365. 320 mil monthly active with the last number. But there are certainly one of the criticisms you can leverage at it is it has 7, 200, 000 features now with 7, 200, 000 buttons. And actually some of the other competing platforms are just doing one thing and trying to do that one thing well, so maybe they don't have all the combination of features, but they have a simpler experience. I've certainly heard that before.

Tim: 5:29

Absolutely. And of course, that then as you raise the subject about AI that comes into a different sort of perspective, perhaps even from a licensing perspective Microsoft, I have a feeling that their revenue growth has topped out and they're looking to increase the ARPU. Yeah.

Tom: 5:45

That feels pretty clear. Doesn't it? If you look at the quarterly results and what the pushes are and this add on of everything, having a premium option now, it's we've sold P5 into all these markets. They've got the bundle. We need to up the ARPU. And they're a business, right? That's their job, right? It makes sense. But it's interesting from a customer perspective, obviously I follow the features very carefully and every feature now it's is that cool? Or is that Premium? Do I have to add another license for this? I think it's been really interesting over 2024 see how the big customers react to this kind of like you need to buy an add on for this you need to buy an add on for that because that's not the old method of Microsoft

Tim: 6:17

No, and of course, to get that for AI, when people like zoom and Cisco are essentially giving that away at no extra cost, those sort of meeting summaries and those chat responses and email replies in the case of zoom. Zoom's AI companion can also prompt for new ideas on whiteboards. They'll be adding a meeting coach with speech analytics in there. So we're seeing these features being replicated across platforms at different speeds and at different capabilities, but they're all essentially going to become. Table stakes, I guess it's whether or not people will be willing to pay for it, is that enough? Is the commercial discussion enough for Microsoft to take heed to that and perhaps adjust their commercial pricing? I don't know, but it's a very interesting dynamic that's really gaining pace out there.

Tom: 7:00

Yeah. Super interesting. I think Microsoft, obviously Microsoft know they, prices only go one way. They don't go up typically they go down in the scale. I think they've set this 30 dollar mark as this is the threshold we want to see AI valued at. I think the thing they have, putting my Microsoft hat on for a minute that the other platforms don't have is they have all the data, so like it's not Teams Copilot, it's M365 Copilot. So you've got all the files and SharePoint. You've got all the, if the customer's bought into the ecosystem, they've got all the files and SharePoint, they've got the emails. So in theory, the power they should be able to leverage because they have the data. Should, could be more than a standalone UCAS platform where they've got the meeting minutes or transcripts, obviously, but they haven't got the context of the emails and the documents. So Zoom is now obviously making inroads to be a stack player with their docs product, which is more like a notion type thing than what we would call docs and email, of course.

Tim: 7:55

and of course, contact center.

Tom: 7:56

Oh yeah. Yeah.

Tim: 7:57

office back office integration there to be able to derive AI meeting summaries from a customer perspective, and then passing that to third line support or someone like that adds another dynamic to that as well. So we're really going to see a lot of capabilities being added to all sorts of platforms, and it's going to. I don't know if it might actually overhang the market to some degree as people say I don't know what to do. Microsoft's got this, Zoom's got that, Cisco's got this, RingCentral's got something else. It's going to it's going to be a very interesting year ahead. That's for sure.

Tom: 8:29

It really will be interesting. I think as all the dust settles on all these options, one of the cool things I think is it will be interesting to compare because they're all fundamentally using the same types of technology. They're tweaking models that they're buying models in from one of the big providers. Like you say, does it level out over the next two years where. All the AIs are basically the same. Or does someone create something that's proprietary enough or tweaked enough that they're like, Oh, their meeting summaries are meaningfully different than their meeting summaries, for example.

Tim: 8:59

Yeah, I have a feeling that the whole generative AI, it's hard to sit in a presentation without in the first three minutes hearing that. I'm starting to deliver, I'm starting to get a nervous twitch every time someone says Gen AI or AI. I just have a feeling that's going to fade into the background. I hope so. It's going to be like you remember the the good old days where WebRTC was going to be, everyone spoke about WebRTC became a great huge buzzword. And then all of a sudden it was just, Oh, it's browser based calling. I have a feeling we'll find that this will become a much used a much loved feature, but I don't think we're going to hear much about LLMs and generative AI and all those sorts of things in the near future.

Tom: 9:36

It reminds me of when we both went through this the, the first round of UC when everything got UC slapped on it, it was suddenly like a UC PBX like, whats UC like about that? I don't know. It's just, it's unified communications now, sure. Everything's AI now. What do you think, like going back to your survey about people having multiple platforms, I see Cisco banding that around a lot. They've got a really good play with their rooms of a multi platform experience. So they're constantly saying, enterprises have, four or five platforms. I hundred percent can believe that, M&A, different regional budgets, like people banging things on credit card at the business unit level. Do you have a feel in your research or all the people you talk to is that going to be a constant state. Is that an aspiration or is it more like a fact of life? And then they're constantly trying to bring it down from an enterprise perspective, but the business is bringing it up or or is it just, you've got the numbers, but you don't know the kind of the, do they want five platforms or are they just got five platforms?

Tim: 10:33

Yes. Wow. What a question. Yeah I, my, my personal belief is a lot of it is shadow IT with people finding individual use cases to add things like notion or coda or those sorts of capabilities to perhaps extend beyond the confines of the domain. So if you're working with a partner or across the digital supply chain it's quite difficult to set up a Teams channels to do that. It requires a lot of IT involvement. I think a lot of people just fly under the radar. So I need to work with this person over here. Maybe they're a graphical artist and they need to do some work on a marketing document. I'm just going to buy a month, two months, three months, a contract's worth of UC, and I'm going to work with them. IT don't need to know about it, but it's much more efficient than using a email or having constant meetings.

Tom: 11:21

I completely acknowledge like Teams is not the simplest setup, particularly with smaller organizations who may not have it, but also it, and big orgs tend to turn all that stuff off. So they're like you, even if you could work out how to do a guest in a team, they've turned it off and there's 72 forms to fill in. Whereas, like you say, they go and buy Notion or Dropbox or whatever, like the, they're away Notion's really. I love Notion, like I, I used to use it a lot. I've faded out of it now, but it was a really cool tool, but you see all the innovation happening there as well. So if they're forward looking business users, they're like, Oh, this is the new, really exciting thing to use. And then you see over time, it's interesting what zoom are doing with docs and what Microsoft doing with loop, it feels like they're taking inspiration from that kind of dynamic document interlinked, big web of data.

Tim: 12:07

We call it co-creation workspace, or I sort of coin that term. And I think what's interesting about that is it allows people in different time zones and distributed workforces and teams to be able to collaborate asynchronously. Now I think Microsoft have recognized that as a potential threat and incorporating Microsoft Loop in various Teams, channels and components. Like the meeting notes, I believe is going to be Loop spaced. What I found. Interesting. I'll use that term because it's a neutral term. What I found interesting with Cisco was that their WebEx event recently, they had a bit of a swipe at Zoom to say, we don't need another word processing application. I think they completely underestimated what Zoom Docs is and what the impact will be

Tom: 12:49

Yeah or are they trying to characterize it as a word processor? Docs is not a great name. It wasn't a good marketing call because it's not, it immediately goes to Google docs and word as a mental comparison, which it's more like you say that co creation Notion type scenario from what I gather.

Tim: 13:07

it certainly is. And we'll see what impact that has in its release next year. But it is certainly a new way of working. And I have a feeling that in some ways, Microsoft may have over rotated on meetings. Everyone has a meeting. I had a full set of hair at the beginning of the year. I tear my hair out with the number of meaningless meetings that I attend. I think Microsoft personally have over rotated on meetings. You've got Maybelline filters and backgrounds and avatars and all of this wonderful stuff. Some of it's great, some of it I think is a bit gimmicky in the enterprise space. But what I am glad to see is that they are now incorporating Loop in there because we are working in different ways. Things like bring your own meeting. There's people that are now looking at, they're on a WebEx call. They're on a go to or a or a Teams call or a zoom call. And they're bringing their own meeting on their PC. And they want to have the ability to leverage a meeting room regardless of whoever they're meeting on and whatever the software platform is. So there are there's a growing recognition that we don't always have internal meetings. We need to bring in an outsider or sometimes we're invited to a meeting. And therefore, we need to use the client that's on someone else's in someone else's domain. And we want to leverage a meeting room to be able to take advantage of that. So there's a lot of stuff that's happening. One thing that we're seeing as well is the. Big increase in mobile devices and people needing to use their mobile phone. So one thing that we've seen there is that in a future work survey on business mobile convergence, we found that mobile phone usage had increased 33 percent of businesses. The mobile phone usage has increased in response to hybrid working and we saw that desk phone usage had declined by 26%. And this is in, we're seeing these frontline workers used to be the driving force behind it. But now this hybrid new style of working is really coming to the fore and I've been on numerous analyst vendor events where they've put in front customers that have taken out tens of thousands of phones and companies are turning around and saying, we're not buying phones anymore. So there's a huge shift away from devices and. It's in a real state of flux at the moment,

Tom: 15:19

I'm fascinated by the mobile story. Obviously you've got like WebEx Go on the Cisco side. You've got Teams Phone Mobile on the Microsoft side. It's gone a lot slower than I thought it would go. Like I thought, because most most unfair, lots of enterprises have by business mobile. So they're already paying that cost. And I probably naively in hindsight thought the mobile providers have a great opportunity here, right? They can lock you into their model. They just say, Oh, now we do Teams Phone Mobile. So we'll sweep in the SIP minutes. Cause let's face it like concurrency and on fixed line is going down. So there's a cost there, but not huge, but now. Where your fixed and mobile provider, not everybody has Teams Phone Mobile. So there's a massive, like a gate there. But I've seen the opposite, like the Teams Phone Mobile side, they're adding three, four, five, six dollars on top of a high end mobile contract. Cause they're trying to recur that they're thinking short term. They're trying to obviously recoup their immediate cost of deploying it, which is not inconsiderable. By still, I'm still bullish over the long term that mobile becomes the default on some timeline, because why wouldn't it?

Tim: 16:24

me too. And in a similar study that we've we've done on future of works, there's 31 percent of organizations have a bring your own device strategy. The corporate responsibility units are about 32%. And of course, depending on the setup, whether or not you have SIM or eSIM, that drives a lot of this market. So I think there's going to be a huge opportunity there for MVNOs. I wonder whether or not Microsoft are going to offer their own eSIM based variant at some stage. I know that Microsoft even have tried becoming a mobile virtual network operation MVNO themselves. I think it was about nine years ago with Windows 10 you could buy a no fixed contract data plan for, from the Windows store

Tom: 17:05

Yeah, they've done it for data, haven't they? They've never done it for minutes, but I think it was the surface team as well, because obviously they have devices that have Sims embed. They had the concept of being able to buy a device with data would be a concept, but,

Tim: 17:17

Yeah. So I think that's another area that's really going to take off. I think 2024 will be a very interesting year. I'd love to see what happens at the keynotes the keynotes to Enterprise Connect that comes up in March. I have a feeling that this is going to be a big area. And I think the return to the offices that forget about that. It's just it's hybrid working. I don't think we're going to find people threatened with losing their jobs if they don't go into the office, even on our local high street. I'm seeing when I walk into town for a coffee or something for lunch. There's on a Monday. It's empty on a Friday. The town center is empty Tuesday, Wednesday, Thursday is bustling as people start choosing the way that they want to work, that fits their work style. I have a feeling that we're just waking up to this new sort of opportunity in the mobile space. And of course, everyone has their mobile device with them. Why not leverage the native dialer that you have on the phone for all your business calls as well.

Tom: 18:16

Yeah, I don't have it on my current laptop, my laptop before this one, I had a data sim in it, which was, I got really used to that and it was beautiful because like I'd sit in cafes that have wifi, but just not having to deal with the gate and open up and go and close. And again, that, I think over some timeline, you look at all the investment in the 5g infrastructure, like you can see a model where that becomes more normal, obviously on all the tablets, you have that option, but it's still very high end of laptops, but if the. If the mobile operators could get a proposal together where they're like, we cover your, eSIM and your minutes and your eSIM or your SIM for your work device. And we tie it all together. It's really sticky. I'm obviously it's easy to say and hard to execute on, but you can see the potential there where they can add significant value to a business. And really they tie themselves into the laptop cycle and the mobile cycle.

Tim: 19:05

Absolutely, especially for contingency workers, temporary staff, you might be on a six month contract. You have your bring your own device, you get an eSIM, you get a QR code to scan, the email confirmation code is up and running. It's a six month contract or it's a monthly contract. I think anyone that's got that. That sort of capability squared away will really excel in this sort of area. Of course, it might not be in the it might not be in the interest of mobile operators to do that because the infrastructure costs a lot, but an MVNO could come along

Tom: 19:35

that's where the MVNOs are interesting, isn't it? Because all of this stuff is first party mobile operators at the moment on all vendors. That kind of makes sense, but like obviously Microsoft are trying to integrate very tightly into those networks and bring some unique capabilities because of the tight integration. But I think a lot of the hunger to change the market is in MVNOs and the partners, not in the tier ones. So I think that's another reason why it's been slower than you might have thought, because they're like how excited are the tier one mobile operators disrupt the market? Not terribly they're making good money doing what they're doing.

Tim: 20:09

Exactly. And they, they sell a lot of transactional minutes and texts to MVNOs anyway. But I think those are the three sort of main areas and market dynamics that we've covered off quite well there. It's generative AI. It's that long tail of PBX, which still persists with people wanting to add additional capabilities through UCAS and and collaboration services and then mobile being, a key driver and a key growth opportunity and a big differentiator for a lot of those UCAS vendors

Tom: 20:38

Awesome. Tim, thanks for taking the time to share with us. And if people want to find out more about you or the research, what's the best thing to do?

Tim: 20:44

Yeah, drop us a line at digitalworkplace@omnia.com or you can find me on LinkedIn, probably the best way to do it.

Tom: 20:51

Awesome. Thanks for the time, Tim.

Tim: 20:53

Thank you, Tom.