Communications platform as a service (CPaaS) is a cloud-based platform that enables integration of real-time communications into business applications through application programming interfaces (APIs).

Some major players include Twilio, Sinch, Infobip and Vonage (now part of Ericsson). Enterprises use CPaaS solutions to engage their customers over a wide range of communications channels such as voice, SMS, chat apps, social media, video, and e-mail.

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CPaaS is driven by businesses digitising their operations and is a key enabler of the ‘digital enterprise.’ It plays a key role in enhancing customer interaction – particularly in enabling an omnichannel and personalised experience. CPaaS vendors have ramped up their businesses rapidly through acquisitions, and saw high demand during the pandemic when consumers engaged businesses through various digital channels.

CPaaS business slow down

However, major CPaaS players started to experience a slow down in business since the beginning of 2023 due to macroeconomic headwinds, more intense competition, and changing customer demand.

Major CPaaS players that have made acquisitions started to look inward to rationalise their business and to improve business margins. This has resulted in changes to the CPaaS business, from a provider of a broad range of communications APIs to an enabler of enhanced customer engagement across different channels and business functions such as marketing, sales and customer service.

For example, Twilio offers Flex, a contact centre solution for customer service, and Engage for creating multi-channel marketing campaigns. MessageBird has also recently rebrand itself as Bird and introduced Bird CRM which allows businesses to offer personalised interactions (marketing, support, sales and payment) through various communications channels.

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Emphasis on customer data management

There is also greater emphasis on customer data management, AI/GenAI, and integration with a range of business applications such as CRM, contact centre and workflow automation tools to deliver better customer engagement outcomes

For example, Twilio is evolving its business to one that combines communications with data and AI to deliver quantifiable engagement. This is demonstrated through the introduction of Linked Audiences, Unified Profiles and Agent Copilot; leveraging data and AI for enabling personalised interactions and improving agent effectiveness.

Others have also developed AI capabilities, for example, Infobip’s Experiences (a GenAI-powered, no-code experience journey builder), Sinch AI (supporting different business functions such as generative writing tools for marketing and more sophisticated bots for personalising customer service), and Intelepeer’s AI Hub (a unified platform to automate customer interactions).

Other players are also seeing the benefits of building CPaaS capabilities to augment existing solutions. The communications service providers (CSPs) in particular are adding CPaaS capabilities to their portfolio, particularly to strengthen their UC, contact centre, and wholesale services.

Acquisitions, collaborations and differentiation

More recently, Tata Communications acquired Kaylera and Proximus acquired a 57.56% stake in Route Mobile, which could demonstrate ways for CSPs to create new revenue opportunities through APIs. There are also wider collaborations between CSP network vendors and CPaaS players such as Ericsson’s acquisition of Vonage and Nokia’s partnership with Infobip.

In addition, unified communications (UC) and contact centre vendors have also developed CPaaS capabilities to drive business growth. Vendors such as Alcatel-Lucent Enterprise (Rainbow), Avaya (OneCloud), Cisco (Webex Connect), and 8×8 (CPaaS through Wavecell acquisition).

These players have also highlighted faster growth from CPaaS than other product lines. Many CPaaS players continue to target digital-natives and are overly focused on the US and European markets. Communications APIs are also becoming commoditised and there is a need to create new areas of differentiation.

This means the CPaaS business will continue to evolve as competitors look to expand their scope to target larger enterprises, enter new markets, and to solve more complex problems. To succeed, CPaaS vendors will also need to expand their partner ecosystem not only to include independent software vendors but also service providers and consulting companies that are helping enterprises with their digital transformation