Despite slow beginnings, Gartner expects the market for communications as a service (CaaS) to take off in spectacular fashion over the next five years.
The research firm blamed the sluggish start to providers not knowing how to define, package and market the service as a value-added Internet Protocol (IP) telephony offering.
Worldwide, CaaS is projected to total $251.9 million in 2007, a 37.6 per cent increase from last year.
The market is expected to total $2.3 billion in 2011, representing a compound annual growth rate at more than 105 per cent for the period.
Gartner defines CaaS as IP telephony located within a third-party data centre and managed and owned by a third party.
The assets are not carrier-grade, the service is not "in the network" and the assets are multitenant in terms of usage.
Research vice president at Gartner, Eric Goodness, said users will begin to embrace CaaS more enthusiastically in 2009, attracted by predictable costs for fixed telecoms.
"Users will also be attracted to CaaS as a means of shifting technology risk to the service provider. Technology obsolescence will be more easily managed by a scalable third party," he added.
Gartner analysts said the initial slow start of CaaS will be compounded by a longer sales cycle, as customers will need time to get used to larger, but consolidated, prices.
"A single bill that consolidates telecom services with equipment infrastructure will gain acceptance," Goodness said.
"Providers are bullish about CaaS's potential because of the opportunity to bundle more new features and capabilities to avoid service commoditisation."
Gartner has 60,000 clients in 10,000 organisations. Founded in 1979, Gartner is headquartered in the US and has 3800 associates, including 1200 research analysts and consultants in 75 countries.