The latest UC Market Evolution Report from Cavell Research reveals how business communications infrastructure is shifting beneath the feet of both enterprises and service providers. Based on extensive surveys and market analysis across Q2 2025, the research shows that cloud adoption is no longer a straightforward one-way journey and that artificial intelligence has fundamentally altered competitive dynamics.

1. Infrastructure deployments are in a state of flux with 83% expecting changes

Enterprise communications infrastructure remains highly dynamic with 83% of respondents expecting to change their deployment approach. Movement is happening in multiple directions simultaneously: 39% moving more towards on-premises, 23% towards hybrid, and 22% towards cloud. Even organisations currently operating fully public cloud systems show little stability, with only 20% expecting their architecture to remain unchanged and 45% anticipating a move partially back to on-premises infrastructure. 

The drivers behind these shifts vary by geography and market maturity. In Europe, particularly France, Germany and the Nordics, service providers report increased demand for hybrid deployments as enterprises grow wary about data being transferred or processed in the United States. The CLOUD Act exacerbates these concerns by granting the US government powers to demand data from American companies regardless of where that data resides. Some public sector bodies are reportedly removing Microsoft products entirely. 

In mature markets such as the UK and US, the straightforward migrations to cloud have largely been completed. What remains are complex deployments where on-premises components serve specific purposes, particularly in sectors requiring local survivability such as financial services and healthcare. This means that in most mature markets, the majority of new seat wins over the next few years will come from cloud-to-cloud migrations rather than first-time cloud adoption.

2. Security has displaced cost as the primary enterprise priority

Strategic priorities have evolved substantially since 2020 when pandemic-driven needs dominated business communications focus. The introduction of artificial intelligence as a strategic priority in 2023 marked a turning point but the 2024-2025 period has seen AI become the dominant priority alongside cybersecurity and compliance. 

When enterprises evaluate potential cloud-to-cloud migrations, security and compliance requirements emerge as the paramount concern at 34% whilst cost considerations follow at 30%. This hierarchy shifts dramatically by company size. Smaller businesses typically prioritise cost above all else but larger enterprises place security and compliance at the forefront of their decision-making processes. 

Service providers pursuing enterprise customers need to talk about security before they talk about price. Data protection, compliance and incident response matter more to large organisations than cost savings. Cybersecurity services now top the list of value-added services that enterprises want, jumping from 36% to 45% in a year.

3. Microsoft Teams dominance reshapes integration priorities but reveals supplier fragmentation

More enterprises are connecting their telephony to Microsoft Teams with the figure rising from 31% to 41% year-on-year. Some 61% of organisations now integrate their phone systems with Teams which confirms how the platform has moved beyond collaboration into becoming a communications hub. Analytics tools come second for integration at 36% followed by CRM systems at 34%. 

Despite this trend towards unified platforms, the research reveals that 77% of companies work with multiple suppliers rather than relying on a single provider. Most organisations have settled on using between two and four providers, suggesting they are balancing the simplicity of fewer relationships against the risks of over-dependence whilst avoiding the complexity that comes with managing too many vendor relationships. 

Organisations that operate totally remote or totally in-office working models overwhelmingly favour single suppliers likely because these deployments are simpler. Hybrid working environments show more complicated supplier arrangements, probably reflecting fragmented buying habits across different offices and departments. This fragmentation presents opportunities for service providers to help organisations consolidate their suppliers and reduce operational overhead.

4. Telephony enablement marketplaces have fundamentally altered provider economics

The emergence of structured telephony enablement programmes from Microsoft, Cisco and Zoom has created new market access opportunities but at a significant cost to provider profitability. Cavell’s research documents provider licence margins dropping from around 70% to less than 10% in some cases as unified communications becomes commoditised. 

These marketplaces operate within fixed commercial frameworks set by platform vendors including strict pricing bands, revenue-sharing models and limited flexibility in how services are packaged. This change in route-to-market is also impacting channel dynamics, another area that Cavell is focusing its research. Whilst providers gain relatively easy access to the hundreds of millions of users on these platforms globally, they sacrifice the autonomy they previously enjoyed with legacy systems such as BroadWorks or other softswitch-based solutions. 

Service providers report aggressive pricing strategies in the market with some vendors offering UCaaS seats at remarkably low prices or even at no cost when bundled with higher-margin services particularly contact centre solutions. This strategy recognises that contact centre deployments often command premium pricing and stronger margins, allowing providers to subsidise unified communications to win comprehensive deals. According to the research, 40% of service providers reported reductions in average revenue per user and average margin per user within UCaaS over the past 12 to 36 months.

5. AI-native platforms have become the biggest competitive threat

AI-native platforms now worry service providers more than any other competitor at 32%. Previous surveys showed CRM vendors and hyperscalers causing the most anxiety but that has changed. 

More AI-first startups are building voice solutions from the ground up without the constraints of legacy systems. They can use the latest language models to add features that older providers struggle to match. Regional and local competitors also register at 32% as a threat because they undercut on price and know their markets intimately. 

Previously dominant threats such as CRM vendors adding native voice functionality and hyperscalers expanding capabilities now rank lower at 23% and 18% respectively though they remain formidable as they invest aggressively in AI capabilities and acquire promising startups. Only 9% of providers believe their market position is secure, indicating widespread recognition that the communications sector faces serious disruption. 

Service providers are responding by prioritising product development as their top investment area at 30%, followed by geographic expansion at 22% and portfolio expansion at 24%. The emphasis on portfolio expansion represents providers’ strategic response to margin erosion in UCaaS and the rapid commoditisation of AI capabilities. By moving into adjacent areas such as customer experience, security solutions and vertical-specific applications, providers aim to capture higher-margin revenue streams and create stickier customer relationships. 

The research also reveals an interesting disconnect between enterprise attitudes and actual behaviour regarding environmental sustainability. Whilst 83% of enterprises claim environmental and sustainability factors are important when choosing a telecoms provider, service provider surveys show dramatically different results. No provider respondents report customers frequently requesting ESG information, only 18% say it happens sometimes, whilst 55% report rare inquiries and 27% never receive any ESG-related questions at all. Sustainability appears to work as a tie-breaker when enterprises choose between similar options rather than as a main selection criterion. That may change if regulation gets stricter and corporate ESG reporting becomes required.