Cloud collaboration market boom is good news for Microsoft

Spending on cloud-based and on-prem collaboration technologies grew to nearly $15 billion in Q2 2022, an 8% quarterly bump compared to the same period last year, according to a Synergy Research Group report released Tuesday.

Companies decreased the proportion of collaboration investment in on-prem, doubling down on cloud-based “as a Service” technologies. On-prem spend accounted for just 20% of the $15 billion, while nearly half went to a small group of high-growth, in-demand services, including service-based unified communication, contact center and communications platform technology, the report said.

This is good news for Microsoft, the market leader in collaboration technologies, and a bad sign for Zoom, which benefited from outstanding growth in Video as a Service in the first two years of the pandemic. “While that market is still growing, the growth rate has now dropped right off to the point where hosted video and VaaS is included in the mature group of services,” John Dinsdale, chief analyst at Synergy Research Group, said in an email.

When COVID-19 descended in 2020, companies scrambled to facilitate remote meetings. Zoom fit the bill and became, like Kleenex is to tissues, synonymous with video conferencing.

Two years later, workplace video meetings are as commonplace as email and companies are adjusting to the new norm — a hybrid workforce enabled with more than just conferencing capabilities, prepared to weather the next big disruption.

Microsoft positioned itself well for the paradigm shift. The combined impact of remote work and cloud migration fueled growth in Microsoft Azure, which commands nearly one-quarter of the infrastructure services cloud market share, ranking second behind Amazon Web Services and ahead of Google Cloud.

Microsoft has its high-growth service bases covered. In addition to the UCaaS capabilities enabled by Microsoft Teams, the company’s service line has grown to include Microsoft Digital Contact Center, a CCaaS service rolled out in July, and Azure Communication Service, a CPaaS service introduced in Sept. 2020

“With this move to cloud, there’s a buffet of services and features and capabilities that users can consume,” said Curtis Johnstone, distinguished engineer at Quest Software and a Microsoft MVP, in an interview with CIO Dive.

Companies want access to as much of that buffet as possible in order to get the productivity and efficiency gains, Johnstone said, but not at the cost of compromising data privacy or increasing security risk.

Integrating various enterprise software applications with a menu of add-ons under the Microsoft umbrella has simplified security and access.

“You have this vast Microsoft ecosystem, where not only are all the end user collaboration services tightly integrated, but now more than ever, all their security compliance and data governance tool sets are integrated with all those collaboration services,” Johnstone said.

Johnstone points to Azure AD’s identity management capabilities and Microsoft’s authenticator mobile app as control features that are helping companies overcome access and security hurdles.

“When you authenticate, that second-factor authentication is nothing more than a pop-up on your phone that you approve,” Johnstone said. “It’s seamless and easy, which makes it very secure.”

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