Market Guide for Communications Platform as a

Service
Published 27 September 2021 - ID G00737675 - 41 min read
By Analyst(s): Lisa Unden-Farboud, Brian Doherty, Daniel O'Connell
Initiatives: Software Engineering Technologies; CSP Digital Transformation and
Innovation

Business units need to improve operational efficiency and

customer experience digitally. Software engineering leaders should
embrace CPaaS to embed SMS, application to person, voice and
emerging CPaaS (like advanced messaging, video, enhanced
security and digital payments) into applications.

Additional Perspectives

■ Summary Translation: Market Guide for Communications Platform as a Service

(29 November 2021)

■ Invest Implications: Market Guide for Communications Platform as a Service

(29 September2021)

Overview
Key Findings
■ CPaaS business adoption remains robust as software engineering leaders seek to
deepen digital engagement with customers and stakeholders on a variety of use
cases. Their teams are increasingly embedding communications APIs into
applications and business systems.

■ Many large and multinational organizations have IT staff members with the API and
software engineering skills to leverage CPaaS tools today. Those lacking such skills
can hire third-party consultants or SIs to get them up and running.

■ End customers are requiring deeper engagement with enterprises over the
communications channel of their preference. CPaaS vendors have moved to
advanced messaging capabilities (led by WhatsApp with omnichannel that
combines traditional modes of communications) with advanced components to
enhance customer engagement.

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Recommendations
Application and software engineering leaders whose teams are pursuing CPaaS as part of
their digital transformation to set the customer experience strategy should:

■ Engage their developers in the CPaaS selection process by empowering them with
access to the rich ecosystem of APIs, SDKs, IDEs, blogs, training and events
available for understanding CPaaS vendor emerging offerings.

■ Evaluate visual builders as part of their CPaaS selection process. They are a
valuable tool for designing business flow logic, enabling noncoders to access CPaaS
and make logic modifications in a low-code environment.

■ Promote an expansive CPaaS strategy by encouraging developers to deliver

advanced CPaaS functionality (such as video, messaging apps, bots, omnichannel)
for richer conversations, and look at areas where it can be adopted across business
units.

Strategic Planning Assumptions

By 2025, 95% of global enterprises will leverage API-enabled CPaaS offerings as a
strategic IT skill set to enhance their digital competitiveness, up from 20% in 2020.

By 2025, at least 40% of midsize enterprises will scale up digital capabilities for customer
experience using CPaaS tools, up from less than 10% in 2021.

Market Definition
This document was revised on 12 October 2021. The document you are viewing is the
corrected version. For more information, see the  Corrections page on gartner.com.

Communications platform as a service (CPaaS) offers application and software

engineering leaders a cloud-based middleware from which they can integrate
communications software into business processes programmatically. A CPaaS platform
provides developers with APIs, software development kits (SDKs), integrated development
environments (IDEs) and documentation to (for example):

■ Facilitate simplified access to an array of communications tools (spanning voice,

SMS, messaging and video)

■ Build communications solutions

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■ Better run their business

■ Enhance customer experience

■ Improve speed to market for new products and services

CPaaS vendors are also expanding low-code/visual builder capabilities to help

nontechnical enterprise roles. Some have consultants to help enterprises optimize CPaaS
business uses.

Market Description
Figure 1 captures the framework of services that can be offered in the CPaaS market. A
given CPaaS provider typically only offers a subset of these modules. The five layers in
the middle of Figure 1 represent the communications modules and intelligence layers. The
colors indicate market demand and maturity.

■ Foundational — These modules (green) are common communications APIs

requested by customers today. Gartner believes they represent ~80% of today’s
enterprise CPaaS spend. Many of today’s users still focus on SMS (along with the
requisite short code or long codes), where they can build application-to-person (A2P)
or bulk SMS implementations to tie in their business processes. Messaging app
WhatsApp has also entered this group. Basic security like two-factor authentication
(2FA) is included here too.

■ Emerging — These modules (mid-blue) are receiving increasing customer demand.

Advanced multifactor authentication (MFA) modules are replacing less secure 2FA.
Omnichannel features, including bots, are needed to straddle a variety of advanced
messaging. Video is being introduced to enhance voice conversations. Payment
capabilities are being integrated into core CPaaS APIs. Basic contact center agent
management features are being introduced. Analytics for both monitoring the
robustness of the network and for profiling the customer are also being introduced.

■ Potential differentiation — These modules (dark blue) represent potential sources of

differentiation or nascent market demand. Gartner sees CPaaS vendors deploying
custom solutions to verticals such as healthcare, education and emergency services.
A few vendors have unified communications as a service (UCaaS) solutions, and
some have differentiated to focus on the area of CDP to tie into CRMs and with
campaign management solutions. Some vendors are adding Internet of Things (IoT)
to support use cases like connected homes and trash collection.

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Figure 1: Five-Layer CPaaS Architecture

CPaaS vendors now have programs (left side of Figure 1) to improve their competitive
positioning. This includes:

■ Marketplace — Vendors are expanding their partner capabilities through internal and
add-on marketplaces, via partner programs and ecosystems. An example of this
could be at a networking level for connectivity into regions where they don’t have
local capabilities. Another could be for working with specific agents or professional
services companies for integration capabilities. CPaaS vendors may provide
marketplaces of third-party add-ons such as those for sentiment analysis or
language translation to complement their own offerings and to further build a
partner ecosystem.

■ Customer success plans — These plans help customers get the most out of their
CPaaS deployments (often at an additional charge), and in many cases go on to
build new CPaaS use cases across business units.

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■ Vertical and regulatory compliances — These involve adherence to vertical
compliances (for example, Health Insurance Portability and Accountability Act
[HIPAA], General Data Protection Regulation [GDPR] and Payment Card Industry Data
Security Standard [PCI DSS]) so that their CPaaS offerings are authorized for use.

■ Developer blogs, developer relations, certifications, training and events — These

build a deeper bond with the developer community. This is in addition to the core
developer APIs, SDKs and documentation (on the right side of Figure 1).

The right side of Figure 1 presents the assortment of tools and capabilities CPaaS
providers bring to the table. Visual builders are more important. Now, most vendors offer a
visual builder or low-code capability in addition to their developer toolsets. They allow
business analysts or other nontechnical roles, such as knowledge workers, access to the
CPaaS toolset. Through a graphical user interface, nontechnical, noncoding roles can
design business workflows by configuring drag-and-drop communications modules.

Market Direction
Spurred by COVID-19 in 2020 and into 2021, the CPaaS market has witnessed growth of
at least 30% over the past five years. It is forecast to grow with a CAGR of around 30%
through to 2025 (see Forecast Analysis: CPaaS, Worldwide). Enterprises recognize a need
to build a digital DNA using CPaaS for contactless engagement and for driving business
efficiencies. Gartner often sees a single business unit adopting CPaaS for a particular use
case. It then virally spreads to other business units as they learn the CPaaS value
proposition, in such areas as marketing campaigns, e-commerce and field service
automation.

CPaaS is a fragmented market. Gartner has witnessed mergers and acquisitions,

partnerships, new entrants (Microsoft) and telco plays. Acquisitions are made to enter a
new geographic market, gain access to additional developer networks or fill in for a
technology gap. Notable M&A activity includes MessageBird’s acquisition of email
provider SparkPost (April 2021), Sinch’s acquisition of Chatlayer for AI (March 2020) and
Twilio’s acquisition of customer data platform (CDP) Segment (October 2020).

Growth is projected to continue across all CPaaS segments, while SMS APIs increasingly
part of A2P represent nearly 50% of enterprise CPaaS spend. WhatsApp is a major CPaaS
growth engine, followed by Apple Business Chat (ABC), Google Rich Business Messenger
(RBM), WeChat, LINE and Telegram. The adoption of messaging apps enables richer
conversations through enabling mechanisms such as artificial intelligence (AI), bots and
natural language processing (NLP).

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The vertical solution area has also seen strong adoption in gig food delivery, education,
healthcare, retail and supply chain logistics, among others. We also see enterprises
evaluating CPaaS payment, security and contact centers. CPaaS vendors are expanding
integration and partnering capabilities into enterprise systems such as contact centers,
CRM, CDPs and ERP, or are building their own campaign management solutions.

Market Analysis
Top Emerging CPaaS Trends for 2022
Advanced Messaging Apps Grow for Richer Communications
Consumers want to converse with their brands on their terms, in their preferred
communications channels for a richer engagement. This means messaging apps like
WhatsApp (now a foundational service), Google RBM, ABC, Facebook Messenger,
Telegram, WeChat, Viber, KakaoTalk and LINE are being assessed. These messaging apps
provide deeper conversational capabilities than basic SMS. They support such use cases
as customer support, e-commerce and food ordering, ticket purchasing, location tracking,
loan payments and others.

WhatsApp is the most prevalent advanced messaging app brought up by Gartner clients,
particularly in the financial, public sector and utility industries. Other messaging apps are
strong in a particular country market, such as WeChat in China.

Omnichannel and Orchestration Scales With Bots

Omnichannel allows businesses to connect with customers across multiple channels,
while maintaining context across those channels. A conversation can therefore start in
one channel, switch to a second, and then be completed in a third (for example, from SMS
to WhatsApp and to video). CPaaS users have a strong interest in visual builders to build
out an omnichannel customer experience. Vendors have enabled conversational APIs,
adding to the functionality of one “inbox” regardless of the channel within.

Bots, both chatbots and voicebots, are increasingly attached to messaging apps. They
can be used to completely fulfill simple requests, such as a password reset or address
change, or they can be used to automate routine tasks, such as gathering name, address,
account number and reason for calling. Amazon Lex, Google Dialogflow, [24]7.ai,
yellow.ai, Kore.ai, and OneReach.ai are among the many available bot options. Some
vendors like Twilio and Infobip have their own bots.

Video Usage Expands

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Although CPaaS video has been around for more than five years, injecting video into
industry-specific applications is still emerging. Enterprise usage expanded greatly in 2020
to 2021 due to COVID-19, with such use cases as work from home, remote schooling and
telehealth leading the charge, along with live (and interactive) streaming events. Gartner
has also seen other use cases such as insurance, banking, telejustice, social (such as
gaming, dating, events) and training. New cases continue to appear. Growth of CPaaS
video is projected to be roughly 80% in 2022.

Not all CPaaS vendors aggressively pursue video solutions, but others view video as a
strategic growth market. Building in-app video with APIs enables integrated workflow,
boosting the overall value proposition. Enterprises can build according to their specific
uses and requirements, removing the friction of OTT video (Zoom, Microsoft Teams and
Cisco Webex). The CPaaS video application can embed adjacent CPaaS capabilities, such
as voice, chat, authentication, AI and analytics, for customized solutions.

Artificial Intelligence/Analytics Enhances CDP and CRM

AI, NLP, bots and sentiment analysis are coming to the CPaaS forefront. CDP also brings
an AI element by providing a predictive behavior to CRMs (such as Salesforce and
Microsoft Dynamics), which contain customer records. The CDP layer becomes a
centralized customer behavior hub. CDP tracks customer activity across e-commerce,
websites, messaging apps, social media, business cloud applications and public records,
along with past activity with the CPaaS customer. This past behavior represents a picture
of likely future behavior. The result is a dynamic layer of business and consumer
intelligence over the static CRM records.

With CDP intelligence, the CPaaS customer secures insight into its customer behavior.
This is valuable in predicting customer buying behavior, financial wealth, brand loyalty,
sentiment, unmet needs and frustrations. CDP within CPaaS is relatively new, and only
came on Gartner’s radar screen in 2020. Twilio (Segment acquisition, October 2020),
MessageBird (Hull acquisition, March 2021) and Route Mobile are examples of CPaaS
vendors investing in CDP.

Other Trends
CPaaS and CCaaS

In some ways, the CPaaS and contact center as a service (CCaaS) markets are starting to
overlap. CCaaS platforms support SMS, advanced messaging and social media channels.
They are also incorporating chatbots for automation and self-service. Meanwhile, CPaaS
user journeys sometimes involve use cases in which customers interact with a live agent
(specifically for complex problems that cannot be resolved via AI).

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Some CPaaS providers can support basic contact center features such as interactive
voice response (IVR), automatic call distribution (ACD), surveys, routing engine and
reporting tools. This can be API-connected with third-party vendors for workforce
management (WFM) and quality monitoring (QM) (such as NICE, Verint and Calabrio).
The customer can assemble these modules and build a customizable contact center. The
most notable CPaaS-CCaaS providers to date are Amazon Connect and Twilio Flex, which
are gaining traction with large customers (or midsize tech-savvy customers) whose
CPaaS use cases occasionally require human interaction. Other CPaaS-CCaaS solutions
are available from IntelePeer and Infobip.

Advanced Security (Multifactor Authentication and Biometrics)

CPaaS providers have offered 2FA for more than five years for enhanced security over
traditional usernames/passwords. But 2FA is vulnerable to compromise by malicious
hackers. CPaaS providers are starting to roll out more robust security capabilities,
including silent mobile verification (which matches both the device and the phone number
for authentication).

There is a shift toward more robust multifactor authentication (MFA), which layers in
additional resiliency through biometric security tools such as voice recognition, facial
recognition, iris scanning and palm print/fingerprint verification. Investments have
expanded in this space, such as Twilio’s May 2021 acquisition of Ionic Security.
Application and software engineering leaders should evaluate CPaaS security tools as a
means to address critical application security requirements, including those in industry-
specific scenarios such as Strong Customer Authentication (SCA) in open banking.

Payments

COVID-19 spurred demand for B2C digital engagement, with enterprises increasingly using
CPaaS platforms to build customized apps and flows for customer journeys. Customers
on messaging apps expect simple “click through” to purchase via digital wallets and
credit/debit cards. They expect a similarly effortless experience when paying via voice as
well.

As a result, CPaaS vendors such as Clickatell, CM.com, Twilio, Vonage API, Infobip,
Kaleyra and IntelePeer are promoting their payment capabilities. This may be through
their own payment capabilities or through partnering with third-party payment
providers/gateways. Payments are typically integrated with messaging apps like SMS,
WhatsApp, WeChat, Apple Business Chat and Google RBM.

Pricing

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A few of the developer-focused CPaaS providers display list prices for many of their
services. Depending on the CPaaS capability, pricing can vary by country. Volume
discounts may exceed 67% for large commitments. Hence, a $0.0075 (0.75 cents) list
price for SMS may be $0.0025 (0.25 cents) for a $500,000 annual commitment.

CPaaS pricing is becoming more complicated because CPaaS vendors are expanding
their base of services in such areas as bots, advanced messaging, email, video and voice
translation. In addition, not all CPaaS vendors offer the same CPaaS modules. As a
general rule, Gartner sees list prices staying firm, but street pricing going down, because
buyer total spend goes up as CPaaS becomes a foundational IT tool.

Many customers seek professional services to build customized solutions. Some CPaaS
vendors make this a core competency. Other CPaaS vendors call on partners to fulfill this
role. Some CPaaS contracts include customer success fees (perhaps 5% of the total bill)
for ongoing customer service and support.

CPaaS Vendor Focus Convergence

CPaaS has matured from early offerings that were solely aimed at users with coding
capabilities. CPaaS now encompasses the availability of tools that enable access to a
wider range of users, such as business analysts and marketing users. These latter user
groups don’t have deep coding capabilities. Although CPaaS vendors have expanded from
one of these two approaches to expand their addressable market (developer or co-
creation; see Note 2), it’s still an important segmentation. The ones with strong developer
self-service with typically low transparent pricing such as Twilio and Sinch (for example)
have expanded their customer success teams and consulting partners, and added visual
builders and low-code capabilities, along with consulting support. Typical co-creators
such as IntelePeer focus on helping customers solve business problems through the use
of fusion teams combining technical and nontechnical members. This is often
supplemented with professional services. Co-creators’ initial go-to-market provides
customer success teams and consulting support for enterprise solution approach, and is
now extending to provide developer toolkits, SDKs and documentation. So, a blurring of
distinction is now starting to occur, but the distinction is still important for enterprises that
may select a vendor based on its developer capability or co-creation capability. Figure 2
depicts the different focuses.

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Figure 2: Developer and Co-Creation Vendor Focus

Representative Vendors
The vendors listed in this Market Guide do not imply an exhaustive list. This section is
intended to provide more understanding of the market and its offerings.

Market Introduction
Representative Vendors
Table 1 shows 20 representative vendors of the CPaaS market, spanning North America,
Europe, Africa, Asia/Pacific and Latin America. CPaaS is a fragmented, emerging market,
and Gartner expects new entrants to emerge, with many large telcos evaluating the
landscape. Mergers and acquisitions will continue. See Note 1.

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