State of Disruption Report: UCaaS, CCaaS, SD-WAN, Cybersecurity

AVANT | State of Disruption | 1 2021 STATE OF

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2021 STATE OF Copyright © 2021 AVANT Communcations

AVANT | State of Disruption | 1 The Greek philosopher, Heraclitus, famously said, “The only constant in life is change.” In 2017, noted futurist and entrepreneur Peter Diamandis amended that statement for our times: “The only constant is change, 1 and the rate of change is increasing.” In an enterprise climate where disruption is the norm, businesses live or die by their ability to meet constantly evolving conditions. Those that stay ahead of change — that anticipate it, evolve with it, and even help facilitate it — experience lasting success. Those that fail to adapt don’t stay afloat. In recent years, we’ve seen longstanding retail chains crushed by ecommerce, traditional booksellers supplanted by Amazon, and successful entertainment companies sunk by streaming. In short: Transform or die. But what does the imperative to transform mean for enterprise tech decision making? And what does the rate of technology change look like across industries and company sizes? 1 - https://twitter.com/peterdiamandis/status/833821676219412481

AVANT | State of Disruption | 2 Measuring Disruption Purchasers of Information Technology have moved beyond the mindset in which their knee-jerk reaction is to adopt the latest whiz-bang technology. Today’s buyer is looking to build revenues, reduce expenses, amplify the efficiency of the team, or make the company’s assets more secure. Technologies that serve one or more of those objectives tend to prosper. Those that don’t fit those objectives either fade rapidly into memories, or translate to niche products with limited deployment footprints. With progress limited only by the ingenuity of the designers of these technologies, products, and services, successful technologies displace older ones, leaving enterprise technology decision makers to decide whether to adopt them, how to adopt them, and when to adopt them.

AVANT | State of Disruption | 3 This report is a critical tool in making those determinations based on the feedback and experiences of your peers. Transformation will continue to be necessary, but the executives who most competently make these transitions will reap the most rewards from their efforts. What does the imperative to transform mean to these enterprise technology decision makers? What does the rate of change look like across industries and company sizes? This report is designed to answer those questions. Methodology and Survey Logistics AVANT polled 500 U.S.-based enterprise decision makers at either the C-suite or Management/VP-level in IT, security or finance. To qualify for the survey, respondents had to be involved in choosing or helping their organization to implement new data network, voice or compute infrastructure technology including buying/ selecting new tools and services. Respondents include statistically significant subsets from the following five industries: Manufacturing, Financial Services, Healthcare/Medical, Ecommerce and Consulting/Business Services. Additionally, in order to ensure that the results of the survey are representative of the distribution of establishments in the U.S., a weighting scheme was applied based on number of employees in the respondent company. For a more detailed demographic breakdown and explanation of our weighting method, please reference “Respondent Demographics” section.

AVANT | State of Disruption | 4 How to Interpret the Term “Growth” Much of the data provided in this report measures “growth.” This begs the question, “What kind of growth?” In the context of this report, “growth correlates to the recent usage reported by respondents as compared to their anticipated level of usage over the near term. This translates to the growth in “disruption” against legacy technologies, the identities of which vary based on the specific technology displacing the older ones. This ultimately refers to shifts in investment, focus, interest, and, ultimately, user seats and general uptake. In other words, this is the “AVANT State of Disruption Report.”

AVANT | State of Disruption | 5 Our study revealed several key findings, including: SD-WAN MPLS Nearly half of the respondents intend to grow their About 44% of companies say they would increase their usage of SD-WAN. About 46% of companies plan to MPLS usage by the end of 2021. An additional 15% increase SD-WAN usage 2021 and an additional 14% expects to significantly increase MPLS usage. anticipate “significant” increases to SD WAN usage by the end of 2021. This is particularly true among Nearly 60% of respondents expect to increase companies in the $50 million to $500 million or significantly increase their use of MPLS. revenue range. TRUSTED CCAAS ADVISORS CCaaS adoption is currently being fast-tracked. In addition to the fact that businesses rapidly moved to a Trusted Advisors continue to escalate in importance work-from-home model at the outset of Coronavirus/ as technology decisions become more complex Covid-19, we believe that, in many cases, growth and the integration of applications becomes more is being driven by enhanced capabilities delivered comprehensive. Nearly two thirds of the respondents by artificial intelligence and the resulting positive report working with Trusted Advisors in support impact on customer satisfaction. The highest uptake of their IT decision-making process while 63% of and growth for CCaaS is currently in the Healthcare/ respondents who do not work with Trusted Advisors Medical vertical with an anticipated 40% rate consider their companies to be technology laggards. of displacement. UCAAS SECURITY Customer interest in UCaaS surged 86% at the outset Roughly 70% of respondents fear that a successful of the Coronavirus/Covid-19 pandemic. About 51% of security breach could cause them to lose their jobs. the companies deal with bandwidth issues at certain sites when moving to UCaaS.

AVANT | State of Disruption | 6 Digital Transformations Industry vs plans for digital transformation 71% 89% Digital transformation maps to Legal Construction/Engineering 79% 92% increased reliance on information Manufacturing Retail/E-Commerce technology as a means of solving 82% 92% High Tech Consulting/Business Services real-world business problems, 88% 92% Financial Services Healthcare/Medical and as a means of building a 86% Have plan No plan Other competitive advantage. Figure 1.1 The following shows the same comparison by end customer revenue band, as opposed to vertical market. Note the correlation between company size and We’ve now reached a point where companies in most verticals the likelihood of having a defined digital transformation plan in place. have developed their plan for digital transformation, even in circumstances where they might not be fully deployed. Digital transformation plans by revenue 91% Among the highlights, Consulting/Business Services, Healthcare/ More than $1 billion Medical, Retail/eCommerce, and Financial Services are the most 87% likely to have a plan for digital transformation. This is largely about $1b - $501 million the need for efficiency and accuracy, and sometimes the sheer 90% volumes of data generated within these vertical markets. $500m - $101m 83% When viewed by company size, respondents from smaller $100m - $51m organizations tended to be the ones that still need to build 84% a plan. Figure 1.1 shows the percentage of survey respondents $50m - $11m whose companies have a defined digital transformation plan in 81% place as opposed to the companies that do not. $10m - $1m Have plan No plan Figure 1.2

AVANT | State of Disruption | 7 Is your internal team fully qualified to plan, manage, optimize, and troubleshoot your entire IT infrastructure? 58% Highly Qualified 38% Role of the Somewhat Qualified 4% Trusted Advisor Somewhat Unqualified Figure 2.1 Nearly two thirds of the respondents report working with Trusted Advisors in More than 40% of respondents support of their IT decision-making process. An additional 37% use tools believe that their internal teams commonly made available by Trusted Advisors. are less than highly qualified Half the time, the Trusted Advisors assist with selecting and operationalizing to plan, manage, optimize, and new technologies, though the ultimate go/no-go decision is made internally by company IT teams. This participation spans a variety of cloud, security, and troubleshoot the full range of network-related functions. their IT infrastructure. As technologies continue to grow more complex, especially in terms of integration with other products and services, the role of the Trusted Advisor is likely to increase over time. Companies in this condition are most likely to seek the services of a Trusted Advisor, in whole or in part, depending upon their Resources to Support IT Decision-Making specific circumstances. 64% 49% 37% 52% 27% Third party Third party Tools (DC Locator, Self- Marketing consultant research Fiber Locator, etc) Assessment Collateral Figure 2.2

Top Disruptive Technologies 2023

UCaaS, CCaaS, SD-WAN, Security

AVANT | State of Disruption | 8 In most cases, Trusted Advisors play a key role in the assessment Areas of Trusted Advisor Participation process with variable levels of participation in decision-making and execution. Usage: Services of Trusted Advisors 50% 20% 16% 10% 4% 76% 67% 59% Cloud-based Cloud-based and/or Data Network computer services Managed Security Infrastructure Providers 54% 41% 32% SaaS Application Voice/ Data Center Services Telecommunications Colocation Services Figure 2.4 Trusted Advisors make recommendations to internal teams Customers particularly turn to Trusted Advisors for assistance Trusted Advisors specify to internal teams for decision/execution with cloud services and selection criteria and consulting related Trusted Advisors control all technology decisions and functions to managed setrvice providers (MSPs). Other infrastructure and Trusted Advisors provide general consultation application issues are similarly addressed through Trusted Trusted Advisors provide limited consultation in specific areas Advisors, as shown in Figure 2.4. Figure 2.3

AVANT | State of Disruption | 9 Distribution of Leaders & Laggards Within Each Industry 56% 44% Retail/E-Commerce 49% 51% Manufacturing Leaders vs Laggards 61% 39% High Tech 35% 65% Among those surveyed, two groups Healthcare/Medical emerged: Leaders (those who 45% 55% Financial Services see themselves as ahead of their 47% 53% Consulting/Business Services competitors in terms of innovation) 61% 39% and Laggards (those who feel they Construction/Engineering 52% 48% are behind). Other Leader Laggard Figure 3.1 Construction/Engineering and High Tech lead the league in this self- Leaders, Laggards & Trusted Advisors perception, with 61% classifying themselves as Leaders in each case. Professionals in the Healthcare/Medical field were most likely to see their companies as Laggards. Traditionally, this vertical is slower in adoption due to security and compliance-related issues. 54% 46% 63% 37% Engages with TA Leader Laggard Does not engage with TA Figure 3.2

AVANT | State of Disruption | 10 Plans for SD-WAN Usage by Vertical 31% 49% 14% 6% Retail/E-Commerce 1%, 1% 38% 43% 9% 7% Manufacturing 4% 38% 33% 4% 21% Legal 3% 22% 46% 24% 6% High Tech SD-WAN 4% 32% 47% 12% 5% Healthcare/Medical 32% 43% 14% 10% More than half of the respondents Financial Services 2% 33% 49% 7% 9% (60%) expect to increase, or Consulting/Business Services 6% 22% 56% 17% significantly increase, their usage Construction/Engineering 37% 44% 19% of SD-WAN by the end of 2021. Other Significantly decrease Remain the same Significantly increase Decrease Increase We do not use SD-WAN & don’t intend to adopt it Figure 4.1 A wide variety of vertical markets are adopting SD-WAN at approximately the same rates, as shown in Figure 4.1. Figure 4.2 shows expansion of SD-WAN usage based on end customer These numbers represent an increase in budget as well, revenue bands. as in the number of seats to be served by SD-WAN. Plans for SD-WAN Usage by Revenue For more information on SD-WAN, please download our AVANT 6-12 2% 28% 51% 14% 5% Report at www.goavant.net/sdwan-report More than $1 billion 1% 2% 31% 45% 17% 4% $501 million - $1b 3% 27% 52% 13% 4% $101m - $500m 15% 2% 5% 18% 55% 15% 6% $51m - $100m 40% 36% 12% 12% $11m - $50m 41% 34% 14% 11% $1m - $10m Significantly decrease Remain the same Significantly increase Decrease Increase We do not use SD-WAN & don’t intend to adopt it Figure 4.2

AVANT | State of Disruption | 11 Plans for MPLS Usage by Vertical MPLS Despite the growth of SD-WAN, MPLS continues to grow, despite the fact that MPLS is often the technology being displaced by SD-WAN. Figure 5.1 Plans for MPLS Usage by Revenue $1m - $10m $11m - $50m $51m - $100m $101m - $500m $501m - $1b $1b+ Across the board, 59% of respondents expressed the intention to 11% 8% 1% 6% 6%6% 13% increase their use of MPLS by the end of 2021, while only a small 14% 21% 10% 12% fraction expected to decrease their use of MPLS. 13% 19% In many cases, MPLS continues to be the technology-of-choice at 42% the core of the network while SD-WAN is used closer to the edge. 36% 51% 50% 47% However, as SD-WAN continues to make inroads, its position 35% near the core of the network is likely to amplify over time. 37% 20% 35% 33% 31% 30% 6% 5% 1%, 1% 3% 3% Significantly decrease Remain the same Significantly increase Decrease Increase We do not use MPLS & don’t intend to adopt it Figure 5.2

AVANT | State of Disruption | 12 UCaaS Growth by Vertical 100% UCaaS 75% 68% 54% 60% 43% During the early stages of 50% 38% 40% 23% 31% 38% 33% 43% the Coronavirus/Covid-19, 29% 30% 26% 32% 25% 25% 21% interest in UCaaS spiked 18% by 86% over last year’s levels. 0% n g l al h l g il er io in c ga ta h t t i ec e rin e c T L u R Ot tru Med gh t ac ns Consul Financia Hi f nu Co Ma Unified Communications as a Service (UCaaS) continues to gain 2018 - 2019 (actual) 2019 - 2021 (projected) Figure 6.1 momentum, both for general market reasons (e.g. widespread cloud adoption) as well as for safety reasons given the onset of the UCaaS Growth by Company Revenue Coronavirus/Covid-19. During the early stages of the Coronavirus/ 100% Covid-19, interest in UCaaS spiked by 86% over last year’s levels. Based on responses from our survey, UCaaS is enjoying high 75% growth with overall usage of the technology, and expansion of seats, expected to increase substantially over the next year. While 50% 46% 46% the consensus of the overall analyst community points to continued 42% 40% 39% 39% high growth, there is a wide range of findings for current penetration. 35% 31% 31% 28% 28% 25% 22% For more information on UCaaS, please download our AVANT 6-12 Report at www.goavant.net/ucaas-report 0% m $50m m - $1b $1b+ 1m - 501m $1m - $10 $1 $51m - $100m $101m - $500 $ 2018 - 2019 (actual) 2019 - 2021 (projected) Figure 6.2

AVANT | State of Disruption | 13 When companies choose to defer moving to UCaaS, that decision is most often based on bandwidth concerns, as opposed to a rejection of UCaaS, itself. In fact, most of those companies plan to move to UCaaS within one year. Reasons Some Companies Still Use Legacy Telephone Systems 51% Bandwidth issues at certain sites 36% Learning curve 33% Legacy contract has punitive terms for early termination 30% Lack of budget 24% We are just “kicking tires” on UCaaS 6% We have completed our migration to UCaaS 1% Other Figure 6.3

AVANT | State of Disruption | 14 Timeframe for UCaaS Adoption Figure 6.4

AVANT | State of Disruption | 15 CCaaS Growth by Vertical 100% 75% 71% 52% 52% CCaaS 50% 40% 39% 36% 35% 36% 31% 29% 28% 26% 27% Contact Center as a Service, better 24% 22% 25% 19% 19% 21% known as CCaaS, is a cloud-based technology that facilitates inbound 0% on g l al h l ng ail r i tin c ec ri t ct edi Lega tu Re Othe ru M ac calls over a variety of channels, such st Financia High T f Con Consul Manu as voice, text, and chatbot. 2018 - 2019 (actual) 2019 - 2021 (projected) Figure 7.1 CCaaS Growth by Company Revenue 100% Features typically includes Automatic Contact Distributor (ACD) and Interactive Voice Response (IVR) to support effective routing. The platforms also integrate with CRM, ERP, and other types of back-end 75% systems. They are also increasing their ability to leverage Artificial Intelligence (AI) and Machine Learning (ML). 50% 45% 40% 39% According to our survey, CCaaS is being widely adopted by 37% 36% 34% 34% 31% 28% 29% 27% a full range of vertical industries with strong growth numbers. 25% 26% 0% $10m $50m 100m 500m b $1b+ - $ $ $1m - 11m 1m - m - $ $5 $101 $501m - $1 2018 - 2019 (actual) 2019 - 2021 (projected) Figure 7.2

AVANT | State of Disruption | 16 Timeframe for CCaaS Adoption Figure 7.3

AVANT | State of Disruption | 17 IaaS Growth by Vertical 100% 75% 53% 50% 50% 49% IaaS 42% 41% 40% 34% 36% 32% 30% 32% 29% 27% 26% 25% 25% 22% Infrastructure-as-a-service (IaaS) is a 19% 17% cloud-based capability that delivers virtualized computing online. 0% on g al al ch al ng il r i in c g ta ct lt i Te Le uri e ru u nanci Med t R Othe igh ac st Fi H f Con Cons Manu 2018 - 2019 (actual) 2019 - 2021 (projected) Figure 8.1 Like many cloud-based services, IaaS can scale up or scale down based on the current business requirements, with billing on a pay-as- IaaS Growth by Company Revenue you-go basis. IaaS, which is managed by a cloud service provider, can 100% reduce costs and complexity associated with a legacy data center. However, selection, installation, configuration, and management of 75% software, including operating systems and middleware, remain the responsibility of the customer. 50% IaaS technology is in the midst of substantial growth, 39% 40% 40% 40% 36% based on feedback from our survey respondents. 32% 32% 29% 28% 28% 25% 25% 22% 0% 10m m 00m 500m b $1b+ m - $ $1 - $ 01m - $1 $1 $11m - $50 $51m - $101m $5 2018 - 2019 (actual) 2019 - 2021 (projected) Figure 8.2

AVANT | State of Disruption | 18 When companies choose to retain their on-premises solutions, security concerns leads the list of objections at 56%, while customization capability and bandwidth issues represent distant second and third places. Reasons Some Companies Still Use Legacy Systems 56% Security concerns 35% Customization 34% Bandwidth issues at certain sites 33% Management/oversight concerns 21% Learning curve 17% Preference for CAPEX vs. OPEX 16% We are just “kicking tires” on IaaS 6% We have completed our migration to IaaS Figure 8.3

AVANT | State of Disruption | 19 Colo Growth by Vertical 100% 75% 53% 50% 52% 50% Colocation 40% 41% 38% 34% 32% 26% 26% 28% 25% 24% 25% 25% 21% Colocation, (colo), is a based on 18% 22% a large multi-tenant data center 8% where equipment, space, and 0% ng ial l h al ng ail tion i c ca ec g lt T e su h L turi Ret Other truc n Medi g c ns Co Finan Hi fa bandwidth are rented to Co Manu business customers. 2018 - 2019 (actual) 2019 - 2021 (projected) Figure 9.1 Colo Growth by Company Revenue 100% These centers provide servers, storage, networking infrastructure, physical security, power, climate control and space for all of the 75% above. A variety of related services can also be purchased as a means of offloading complexity and potentially reducing costs. 50% Penetration is fairly evenly dispersed among key verticals, although 46% 40% 41% 36% 34% 39% growth is clearly stronger in some segments than in others. 20% 24% 24% 23% 31% 25% 23% 0% m $50m m $1b+ $1m - $10 m - $500m $11m - $51m - $100 $101 $501m - $1b 2018 - 2019 (actual) 2019 - 2021 (projected) Figure 9.2

AVANT | State of Disruption | 20 Survey respondents who are less inclined to adopt colocation most frequently cite security concerns as their primary reasons. However, a number of other issues also factor into the equation, as shown on the chart below. Reasons Some Companies Still Use Legacy Systems 55% Security concerns 38% Customization 35% Management/oversight concerns 33% Bandwidth issues at certain sites 17% We are just “kicking tires” on colocation 12% Preference for CAPEX vs. OPEX 6% We have completed our migration to colocation Figure 9.3

AVANT | State of Disruption | 21 Cloud-based Apps Growth by Vertical 100% 75% 59% 56% 51% 50% 46% 44% 40% 39% 35% 32% 26% 28% 28% 27% Cloud-based Applications 25% 22% 22% 16% 19% 9% While the adoption of cloud-based 0% ial al h l il r c c ga ta applications has been well under Te Le turing Re Othe truction Medi gh c ns Consulting Financ Hi fa way for quite some time, growth Co Manu 2018 - 2019 (actual) 2019 - 2021 (projected) Figure 10.1 numbers continue to rise. Cloud-based Apps Growth by Company Revenue 100% These applications run the gamut from basic office-style tools to advanced ERP, CRM, etc. Uptake is relatively even across the 75% various vertical markets. Failure to adopt is usually linked to security concerns, although that objection continues to fade. 50% 50% 44% 46% 40% 39% 35% 29% 26% 24% 22% 25% 20% 22% 0% - $1b $1b+ $50m $100m $500m $1m - $10m $11m - $51m - $101m - $501m 2018 - 2019 (actual) 2019 - 2021 (projected) Figure 10.2

AVANT | State of Disruption | 22 Preparedness for Cyberattack by Vertical 3% 57% 40% Retail/E-Commerce 1%, 1% 64% 34% Manufacturing 4% 8% 50% 38% Legal 1% 4% 50% 45% High Tech 0%, 1% 70% 28% Healthcare/Medical Security 1% 4% 39% 56% Financial Services 4% 53% 42% Years of escalating cyberattacks Consulting/Business Services 56% 44% combined with widespread Construction/Engineering 4% 52% 44% messaging around the importance Other Extremely Unprepared Somewhat Unprepared Somewhat Prepared Extremely Prepared of IT security have clearly paid Figure 11.1 dividends. Overall, only 4% of the Preparedness for Cyberattack by Revenue survey respondents acknowledge 0%, 1% 51% 48% More than $1 billion 3% 56% 41% a lack of preparedness. $501 million - $1b 3% 56% 41% $101m - $500m 2% 62% 36% $51m - $100m 5% 53% 41% $11m - $50m 4% 6% 54% 36% $1m - $10m Extremely Unprepared Somewhat Unprepared Somewhat Prepared Extremely Prepared Figure 11.2

AVANT | State of Disruption | 23 Slightly more than 60% expressed concern that a data breach could bring about termination of their employment. This is not particularly surprising, given that people who fail at jobs for which they were specifically hired frequently experience a lack of job security. Breaches: Perceived Risk to Employment 29% 36% 35% Not Concerned Somewhat Concerned Highly Concerned Figure 11.3

AVANT | State of Disruption | 24 Sixty percent of the respondents report that their security management is handled primarily by their internal teams, but only 13% manage their security with no third-party participation whatsoever. Most companies feel like they are either highly qualified, or somewhat qualified to handle security on their own. For more information on security, please download our AVANT 6-12 Report at www.goavant.net/security-report Security: Internal vs. Outsourced 13% 60% 19% 8% No third-party Mostly managed and Fully managed and participation operated by third-party operated by third-party Figure 11.4

AVANT | State of Disruption | 25 Weighting Statement Most often in survey research, the distribution of respondent characteristics, like age and company size, differs from what is known to be the true distribution of the population from which it came. If characteristics of the true distribution are known, it is appropriate to weight the survey sample to reflect the true distribution. In order to ensure that, the results of the AVANT State of Disruption survey are representative of the distribution of establishments in the US, a weighting scheme was applied based on the number of employees in the respondent company. The population data was taken from the number of firms, number of establishments, employment, and annual payroll for the United States. For some size categories it was necessary to interpolate between categories in order to match the employment categories of the sample. Other adjustments were made in order to eliminate firms with under 10 employees from the weighting scheme since they were deemed to be irrelevant to the analysis. The weights applied were relatively small. Sensitivity testing revealed that in most aspects of the analysis, the results from the weighted and unweighted samples were not significant. We believe, however, that weighting the sample will make it easier to interpret results for future comparable studies.

2021 STATE OF Copyright © 2021 AVANT Communcations