7 CPaaS Trends to Follow in 2018

Here are CPaaS trends you should be expecting this year. There’s no doubt about it. CPaaS is growing and it is doing so rapidly. It is a multi billion dollars industry, and while still small, there’s no sign of its growth stopping anytime soon. You’ll see the numbers $4 billion and $8 billion a year appearing in different reports and estimates that are flying around when talking about the near future of the CPaaS market size and growth potential. I have no clue if the numbers are correct - I’ve never been one to play with estimates. What I do know, is that we’ve got multiple CPaaS vendors now with ARR (Annual Run Rate) higher than $100 million. Most of it may still come from good old SMS and phone calls, but I think this will change along with how consumers communicate. This change will make CPaaS a lot more interesting and diversified than the boring race to the bottom that seems to be prevalent in some of the players’ offering and messaging in this market. The problem with CPaaS today is twofold:

1. SMS and voice are somewhat commoditized. There is a finite way in which you can send and receive SMS and phone calls over phone numbers, and we’ve exhausted them and how to express them in a simple API for developers to use years ago. Since then, the game we played was one of scalability, stability and price points
2. Developers are resistant to paying for IP based communications services at the moment. They somehow believe that these are a lot easier to develop. While that is correct for the “hello world” implementation, once you need to provide long term maintenance and scalability capabilities this can grow into a huge headache - especially when you couple this with some of the trends in communication that are being introduced

Which brings me to what you can expect in 2018. Here are 7 CPaaS trends that will grow and become important this year - and more importantly - what they mean.

#1 - Serverless

Serverless is also known as Functions. You might know about serverless from AWS Lambda, Azure Functions, Google’s Cloud Functions and Apache’s OpenWhisk. The list here isn’t random - it goes to show that all big cloud platforms are now offering serverless capabilities. This still isn’t prevalent in CPaaS, where for the most part, developers are expected to develop, maintain and operate their own servers that communicate with the CPaaS vendor’s infrastructure. But we do see signs of serverless making its way here. I’ve covered that last year, when I took a deeper look into the Twilio Functions offering and what that means to the CPaaS market. At the time, Twilio stated that Functions is already Twilio’s fastest growing product ever. Here’s where they explain what it does: https://www.youtube.com/watch?v=Opm7I_dF7Ec&t=21m50s Twilio being the market leader in CPaaS, and Functions being a fast growing product of theirs means that other CPaaS vendors will follow. Simply because demand here is obvious.

#2 - Omnichannel

When SMS just isn’t enough. Not sure when you last used SMS for personal reasons - I know that I rarely end up inside that app on my smartphone. The way things are going, SMS can be considered the spam channel of 2018. Or maybe the channel used by businesses who’ve been told that this is the best way to reach customers and interrupt them. While I definitely see value in SMS, I also think that businesses should strive to communicate with their customers on other channels - channels their users are now focusing on with their social life. In Israel that would be Whatsapp. In the US probably a mixture of Facebook and iMessage will work better. Telegram would be the choice for Russia. Whatever that channel is, to support it, someone needs to integrate with it. And then decide which channel to use for which customer and for what interaction. For CPaaS, that’s what Omnichannel is about. Enabling developers, and by extension businesses to communicate with their customers on the customer’s preferred channel. 2018 is going to be the year Omnichannel becomes a serious requirement. Why? Because now we can actually use it. Apple’s own Business Chat service is planned to make its public debut this year. Facebook has its own APIs already, and Whatsapp announced business accounts (=APIs). That alone covers a large majority of customer bases. Throw in SMS, mix and choose the ones you want. And voila! Omnichannel. For businesses, relying on CPaaS for Omnichannel makes sense, as the hassle of adding all of these channels and maintaining them is expensive. Omichannel CPaaS APIs will abstract that away. For CPaaS vendors, this is a way to differentiate and make switching between vendors harder. A win-win. The ones offering that already? Nexmo with their Chat App and Twilio through their Engagement Cloud.

#3 - Visual / IDE

From code, to REST, to point-and-click. We used to use DOS as an “operating system”. I worked at a small computer shop as a kid when I grew up. For a couple of years, my role was to go to people’s homes and explain to them how to use the new computer they just purchased. How to put the DOS disk inside the floppy drive, list the files in a floppy, run games and other applications. Then came Windows (along with Mac and OS/2 and others) and we all just moved to using a visual operating system and a mouse. As a kid, I programmed using Logo and Basic. Then Turbo Pascal - in a decent IDE for the first time. In the university, I got acquainted to Tcl/Tk. And then UI development seemed fun. Even it if was by writing code by hand. Then one day, vtcl came to life - a visual editor. Things got easier. Developing communications is taking the same path now. It started by needing to build your own stuff from scratch, then with open source frameworks and later CPaaS and REST (or god forbid SOAP) APIs. In 2017, Twilio Studio was announced - a visual IDE to use on top of the Twilio functionality. In that corner, you can also count Amazon Connect, though not CPaaS but still in the domain of communications - it has a visual IDE of its own. In a recent VoxImplant event I was invited to speak at in Russia, VoxImplant introduced a new service in beta called Smartcalls - a visual IDE on top of their CPaaS offering. Albeit… in Russian. The concept of using visual tools requiring less coding can greatly increase productivity and the target audience of these tools. They are no longer restricted to developers “who code”. Hell - I can use these tools. I played with Twilio Studio a bit - it was fun and intuitive. It guides the way you think about what needs to be done. About the flow of the service. I really can’t see how other CPaaS vendors are going to ignore this trend and not work on their own visual offerings during 2018.

#4 - Machine Learning and Artificial Intelligence

It is time to be smart about communications When I worked at Amdocs some years ago, we’ve looked into the area of Big Data Analytics. It was all about how you take the boatloads of information telecommunication companies have and do something with it. You start by analyzing and visualizing it, moving towards the domain of actionable. It frustrated the hell out of me to understand how little communication vendors are doing with their data compared to enterprises in other markets. Or at least that was my impression looking from inside a vendor. Fast forward to today, and what you find with CPaaS vendors is that they are offering a well oiled machine that provides generic communications. You can do whatever you want with it, and the smart ones are adding analytics on top for their own needs. But want about the CPaaS vendors themselves? Shouldn’t they be doing something about analytics? Or its better branded colleague known as machine learning? Gustavo Garcia wrote a good article about it - improving real time communications with machine learning. This is where most CPaaS vendors are probably looking today, optimizing their network to offer a better service. But it is just scratching the surface. The obvious is adding things around NLP - speech to text, text to speech, translation. All those are being done by integrating with third parties today, and many of the CPaaS vendors offer these out of the box. To move the needle and differentiate, more needs to be done:

1. The internal structure of the CPaaS vendors should take into account the need for researching data. Data scientists and machine learning people have to be part of the development and product teams for this to ever happen
2. CPaaS vendors need to start thinking on what they can offer by analyzing their own data (and their customer’s communications) beyond just optimizing it

If you are a CPaaS vendor and you don’t have at least a data scientist, a machine learning developer and a product manager savvy in this domain yet, then start recruiting.

#5 - AR/VR

Time to connect ARKit and ARCode to communications. Augmented reality and virtual reality have been around for the better part of the last decade or two. But somehow, they are only now becoming interesting. I guess the popularity of AR has grown a lot, and where it fits directly in smartphones today (and not the bulky 3D headsets) is with things like Pokemon Go and camera filters (started by popularized snapchat and found everywhere today). With the introduction of Apple ARKit and Google ARCore, this is only going to get more commonplace. And what we see now is CPaaS vendors finding their way around this technology. The most interesting one yet is Twilio’s work with ARKit, which they showcased at last year’s Kranky Geek event: https://www.youtube.com/watch?v=qfiM-axqKY4 With all the focus put in this domain, I am sure we’ll see more CPaaS vendors looking into it.

#6 - Bots

Omnichannel + Machine Learning + Automation = Bots Chat bots is all the rage. Search the internet and you’ll be thinking that humans no longer talk to customers anymore. It is all taken care of by bots. I’ve added a chat widget to certain pages on my website. And every once in awhile I get a question there asking if that’s a human they’re interacting with. Bots require integration and APIs. They are also about communications. Which is probably why CPaaS vendors are taking a step towards this direction as well. The ones adding Omnichannel offerings across multiple channels are in effect enabling bots to be created there across channels. That’s a first step though, as the next would be to cater this market better by enabling conversational interfaces and easing the part of packaging the bots for the various channels. Expect to see a few announcements around bots to be made by CPaaS vendors this year. A lot of it will revolve around Amazon Alexa and Google Home

#7 - GDPR

The governance headache we’ve all been waiting for. GDPR stands for General Data Protection Regulation. It is a new set of EU rules that have been put in place to protect the data related to EU citizens that is collected and stored. While it is easy to assume that CPaaS vendors store no data - they “live” in the real time, that isn’t accurate. Stored meta data and logs may fall into the GDPR black hole, and definitely recording services. With the introduction of Omnichannel and Bots comes chat history storage. Twilio jumped on this bandwagon last year with a GDPR program. Other vendors such as MessageBird indicated future support of GDPR. All global CPaaS vendors will need to support GDPR, and since these regulations come to force this year, 2018 will be the year GDPR gets more attention and focus by CPaaS vendors.

2018 - The Year CPaaS Vendors Differentiated

In the past few years, we’ve seen CPaaS vendors struggling in two directions:

1. Increasing their customer base, mainly around SMS and voice offerings - which is where most of the revenue is these days
2. Growing from a telecom focused player to a global player

That second point is important. Up until recently, CPaaS equated to running one or two data centers (or the equivalent of running from a small number of cloud based data centers), connecting developers via REST APIs to the telecom backend. With the introduction of IP based communications (and WebRTC), the was a growing need for client side SDKs along with more points of presence closer to the end user. We seem to be past that hurdle for most CPaaS vendors. Most of them have grown their footprint to include a global infrastructure. The next frontier is going to happen elsewhere:

1. Serverless - in making the services easier for developers to adopt by reducing the requirement for customers to deploy their own machines
2. Omnichannel - extending the reach beyond the telecom channels of SMS and voice into social networks
3. Visual / IDE - grow the service beyond developers, making it easier to use and faster to deploy with
4. Machine Learning and Artificial Intelligence - add intelligence and analytics based services
5. AR/VR - capture the new world of augmented and virtual reality and enhance it with communications
6. Bots - align with the A2P model of businesses communicating with customers through automation
7. GDPR - provide support for the new EU initiative, adding governance and regulation as another added value of choosing CPaaS instead of in-house development

CPaaS will move in rapid pace in the next few years. Vendors who won’t invest and grow their offerings and business will not stay with us for long.