Markets and Trends

CPaaS Segment Is in Transition

The CPaaS market is driven by new tools and technology allowing providers to simplify, automate, and amplify customer experience excellence.
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The communications-platform-as-a-service (CPaaS) segment is in transition. Over the past few years, companies in this segment benefited from a tsunami of growth driven by the demand and subsequent adoption of digital customer engagement platforms.

However, the economic and social environment is different, and companies are no longer focused on impressive growth metrics. CPaaS companies thrived on the promise of years of 30%+ annual growth, attracting investment and hordes of new entrants. Today, there is a muted atmosphere born of the reality of investor wariness and disappointment fueled by overambitious growth.

Despite the setbacks of slowing sales cycles, restructuring, and downsizing, the industry is still one of the strongest IT sectors with attainable double-digit and profitable growth in reach of many companies. IDC forecasts the worldwide CPaaS market to grow from $14.3 billion in 2022 to $29.7 billion in 2026. CPaaS will continue to grow at a rapid pace (15.8% compound annual growth rate or CAGR for 2022-2027) as many enterprises embrace cloud-enabled communication API solutions and services that help them easy and affordably increase customer engagement and improve operational efficiencies.

Customer Experience

The COVID-19 pandemic that started in 2020 accelerated the shift by companies to digital infrastructure and the use of omni-channel digital customer engagement. As users become more demanding, communications must be omnichannel, interactive and enriched to provide personal, intelligent, and customized engagement. According to IDC research, spending on customer experience and digital engagement channels will be a key driver of IT spending over the next few years and will also be relatively immune to budget cuts due to adverse economic conditions.

While many companies are well along in their digital transformation journey, refining and perfecting customer engagement is still a complex process. Leveraging CPaaS platforms reduces the complexity of creating customized differentiated applications, especially with the introduction of low code and no code tools and unified APIs for omni channel engagement. As such, customer experience and digital engagement capabilities remain a top priority.

According to IDC survey data, customer experience will remain a key driver of digital infrastructure over the next few years.

Enterprises also recognize the need for consolidation of cloud communications platforms including seamless integration of CPaaS, UCaaS and CCaaS. This will also enable companies to rationalize spending on multiple platforms, while improving productivity for employees.

Multichannel and Uses Case Focus

Application-to-Person (A2P) messaging has been intrinsically dominated by SMS, being a regulated channel and effective way to reach a wide audience. However, as mobile channels are becoming more important for brands and enterprises, this has caused a proliferation of new channels in the A2P eco-system that are more suitable for interactive engagements such as chat apps, social media apps, Web-RTC voice and video as well as RCS and iChat.

IDC identifies six key services feature segments within the enterprise CPaaS market: voice, messaging, video, email, other APIs, and miscellaneous services. Messaging (this includes SMS as well as OTT messaging) is the largest segment and will remain so throughout the coming years. Voice is the second-largest service, but video is the fastest-growing service and driven by use cases in manufacturing, banking/insurance, and healthcare.

IDC’s enterprise communications surveys that are conducted yearly across the various regions help to gain more insights into the adoption, drivers, and challenges towards a large number of ICT solutions and services that are network, mobility, UCC and also CPaaS. It provides a view of the most used channels, use cases, deployments as well as criteria when selecting a CPaaS provider.

The European Enterprise Communications Survey, 2022: Attitudes Toward Communications Platform as a Service is one of these yearly published surveys which provides an insight into the adoption trends of CPaaS in Europe. The 2023 survey results are expected to be published in June. Another insightful CPaaS focusing survey report is the IDC CPaaS Developers Survey: 2022 that was published in March 2023. This survey provides a high-level overview of which applications developers are creating on CPaaS platforms, as well as various usage preferences in key markets such as Australia, Brazil, India, Singapore, the United Kingdom, and the United States.

Industry Dynamics

IDC assessed 23 CPaaS providers for the 2023 Worldwide CPaaS MarketScape study. This segment is entering a new phase. The market has become saturated with a diverse array of companies, including pure play CPaaS Providers, IT companies, network service providers, software providers and others. While the market is dominated by CPaaS specialists such as Twilio, Infobip, Sinch and MessageBird, companies that provide CPaaS as a complementary service or integrated with other services will become increasingly common. 

CPaaS providers are ideally suited to meet the requirements of companies to simplify, automate, and amplify customer experience excellence. The addressable market is expanding, driven by new tools and the march of technology that is opening up new possibilities for companies in this segment.

Advice for the Buyers Market

The following is a list of key attributes and factors for enterprises to consider in choosing a CPaaS partner:

  • Automation and AI-driven personalization capabilities: The ideal partner should demonstrate the ability to reduce complexity, while integrating a diverse range of applications and platforms to produce improved business outcomes including reduced marketing and operational costs.
  • Unified and conversational engagement capabilities: These include the ability to put customer channel preferences as the priority and provide channel choices depending on regional or regulatory and compliance requirements.
  • Enhanced tools and capabilities: While a diverse range of application programing interfaces (APIs) is important, developers should consider adjacent expertise such as low-code tools, integrated CCaaS even if it’s a minimal IVR, SaaS tools for agile and flexible application deployment, and customer data platform (CDP) whether in-house or via third-party integration.
  • Platform reliability and carrier integration: Yes, CPaaS is primarily software driven, but it also relies on efficient direct connectivity with network operators. The ability to provide cost-effective global routes, with high SLAs, and the expertise to ensure secure platforms is crucial to business continuity. Seek a proven record of accomplishment but retain a backup secondary provider in the event of the inevitable security breach.

The IDC MarketScape: Worldwide Communications Platform as a Service 2023 Vendor Assessment  is IDC’s most ambitious study of the CPaaS segment to date, with assessments of companies across the geographic and strategic spectrum. It represents a new chapter in the evolution of the industry and one that shows how CPaaS providers take on the dual challenges of meeting shifting enterprise requirements and the demands of investors.


Research Manager, European Enterprise Infrastructure and Communications Melissa Fremeijer-Holtz is a research manager in IDC's European Enterprise Infrastructure and Communications group and is based in Amsterdam. As one of the lead analysts for the European Enterprise Communication Services research program, she focuses on the European enterprise managed UCC, video, and communications-platform-as-a-service (CPaaS) market. She is also responsible for IDC's content delivery network (CDN) and broadcast TV and online video research program for the European region.