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April 10, 2006

IP Telephony End Points Find New Markets in the SME Segment

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PALO ALTO, Calif., April 10 --The small and medium-sized enterprise (SME) segment offers new markets for carriers providing hosted IP telephony services, leading to a rise in demand for IP end points. However, increased competition and the commoditization of IP phones could result in depleting profit margins over the years. The ability to offer products that are distinguishable from competing offerings will play an important role in maintaining competitive advantage in the future.

Frost & Sullivan  finds that the North American Enterprise IP Telephony End Point Market earned revenues of $822.8 million in 2005 and estimates this to reach $2.44 billion in 2012.

"IP telephony has considerably matured over the years and enterprises are considering it a mainstream solution for their communication needs," notes Frost & Sullivan Research Analyst Kumar Alagappan. "IP telephony, which was restricted to the medium and large enterprises segment, is beginning to make inroads into small enterprises as well, thus leading to a rise in demand for IP telephony end points".
The availability of hosted IP telephony solutions from telecommunication carriers will cause an increase in the shipment of IP lines, which in turn will have a positive impact on IP telephony, end point shipments. IP phone vendors will also be able to reach SME customers interested in hosted IP services offered at compelling cost structures.

Increasing competition, falling hardware prices and the arrival of open standards such as session initiation protocol (SIP), will result in a downward pricing pressure and the commoditization of IP phones. This can be seen in the low-end phone segment, which could perpetuate to middle and high-end phones in two to three years. Thus depleting the profit margins that vendors realize through the sale of phones.

"The IP telephony market, which is characterized by end-to-end solutions based on proprietary protocols, will slowly shift to best-of-breed solutions with the increasing popularity of SIP based telephony solutions," explains Alagappan. "Enterprises that were previously confined to phones based on proprietary protocols will now have the option of choosing from low-cost third-party SIP phones."

The maturing of SIP in the coming years could result in the commoditization of middle and high-end phones as plug and play interoperability, which is currently limited to basic private branch exchange (PBX) features, and could be extended to support more advanced feature sets.
"IP phone vendors should bolster their product portfolio with SIP phones that can offer support to the PBX features provided by their proprietary IP phones," says Alagappan. "They should distinguish their offerings by providing support for custom applications targeted at specific industry verticals and integrating their products with other popularly used enterprise applications such as CRM."

North American Enterprise IP Telephony End Point Market is part of the Enterprise Communications subscription, which also includes research in the following markets: North American Hosted IP Telephony and VoIP Access Service Markets, North American Enterprise VoWLAN Markets, as well as North American Business VoIP and IP Telephony Service Markets. All research included in subscriptions provide detailed market opportunities and industry trends. All research is evaluated following extensive interviews with market participants. Analyst interviews are available to the press.

Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company's industry expertise integrates growth consulting, growth partnership services, and corporate management training to identify and develop opportunities. Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the investment community by providing comprehensive industry coverage that reflects a unique global perspective and combines ongoing analysis of markets, technologies, econometrics, and demographics. For more information, visit http://www.frost.com/ .
North American Enterprise IP Telephony End Point Market
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