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BT (News - Alert) has decided it is time to get into the small business hosted phone system market, rolling out BT RingCentral service in partnership with RingCentral, a Redwood City, California provider of hosted services.

 

Plans start at about £15 a month to £40 per month (roughly $31-$82), depending on the number of calling minutes and extensions a customer requires.

 

Up to this point, business users have been buying premises-based IP phone systems at about a six-to-one ratio over hosted phone services that essentially replace the local server and switch.

 

In its most recent surveys, Savatar Research found that small and medium-sized businesses adoption of hosted phone service was essentially flat, at about 17 percent of purchases. Separately, Infotech found that 75 percent of new VoIP business lines installed are for premises-based systems rather than hosted alternatives.

 

Frost and Sullivan, for example, forecasts that there will be 4.4 million hosted business lines in service by 2010, compared to one million or so in service in North America at the end of 2007 and possibly two million lines in service by the end of 2008.

 

The implication there is that hosted IP phone services someday will be a market about the size of today’s Centrex market (15 million lines in the United States, about two million lines in Canada). That suggests hosted PBX or hosted key system services ultimately could reach 15 percent of business lines in service.

 

That prediction would square in some ways with the Savatar findings that 17 percent of new SME installs are of the hosted variety, and that the rate of increase has been flat over the past year or so.

 

So far, the fundamental value proposition hasn’t changed all that much, even though IP-based services offer much more functionality than older Centrex does. Though most uses do not actually use many features, it remains the case that premises-based IP communication systems offer more features than hosted services do.

 

Nor has the fundamental financial trade-off changed: one can buy services to avoid capital expense, substituting recurring cost for capital investment. But IP has not changed the fundamental value proposition once offered by Centrex and standard digital phone systems.

 

Until something changes on that score, a reasonable assumption is that the hosted PBX (News - Alert) market segment still will resemble Centrex in terms of its ultimate market penetration.

 

 

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