[February 21, 2005]

The 2005 PBX Market � Part II

By David Sims, TMCnet CRM Alert Columnist

[Editor's Note: See also Part 1 and Part 3 of this series.]

Business Communications Review’s lengthy overview of the 2005 PBX market, available online at RedNova, is a great cheat sheet for those wanting to catch up on the industry in a hurry. Today we look at BCR’s analysis of who’s buying all this wonderful stuff.

“IP telephony has been most widely accepted and installed by customers with larger line sizes or multiple locations, and who have greater in-house resources to deploy and operate the new technology,” BCR finds.

This clashes with the early assumptions that IP-telephony installation would be easier for small-system customers with simple LANs requiring minimal design upgrades and enhancements.

The study finds that public education (K-12), as well as colleges and universities, has been “a prominent early adopter, principally because their new voice systems have been subsidized by the federal government's E-rate program.” Financial services companies, banks and insurance firms are strong commercial buyers, as are professional services such as law firms. Corporate and regional headquarters with remote communications requirements are interested in IP telephony as well.

Health care, hospitality, retail, and large government institutions are more wait-and-see.

BCR’s study finds that “the traditional telecom department has been losing authority and responsibility for many years, and this shift has been more noticeable over the past three years as IP telephony has made major strides. The primary beneficiary of this power shift has been Cisco, the dominant data supplier that also happens to market a growing portfolio of voice systems.” The study applauds Cisco’s decision to educate datacom managers on the fundamentals and benefits of IP telephony, while traditional PBX system suppliers market to telecom managers.

“It appears that the old guard – Avaya, Mortel [sic, probably Nortel], Siemens, NEC and Alcatel, among others-have been asleep at the wheel,” BCR finds. “Cisco's shipments of IP station equipment are approximately double that of the number-two IP station supplier-either Avaya or Mortel [sic, probably Nortel], depending on whose market research you believe.”

To stop Cisco’s eventual dominance “someone must take a strong position that voice is not just another LAN application, as Cisco often says, but is a distinct discipline that happens to share a transport and switching network with data.”

Of the three IP telephony system designs – IP-enabled circuit switched, converged TDM/IP and “Pure IP” client/server – BCR’s research shows “within the past three years, the converged design has become the most popular, because most customers still deploy a mix of analog and digital station equipment, often re-using existing digital telephones from their older system while gradually increasing the number of IP endpoints longer-term.”

What’s next? Peer-to-peer, due to the declining cost and expanding performance of integrated circuits and memory storage allow system designers to develop an almost fully-functional PBX system at every desktop or mobile handset. BCR singles out Popular Telephony and Nimcat Networks as two P2P pioneers “with their sights set on the enterprise… Each company has been establishing strong relationships with manufacturers of voice terminals and related devices.”

As far as the current competition goes, “Avaya is still the undisputed U.S. leader in voice systems, as they have been since they created the market as an AT&T unit, and Nortel is still running a strong second. Siemens, NEC, and Mitel remain in the leader group, but have recently taken a back seat to Cisco.”

In zooming from the bottom of the pack to the top, Cisco's ascendancy has been “smoother and faster than any of the traditional suppliers anticipated,” BCR writes. “Cisco's success must be very encouraging to another company looking to expand its horizons via the voice communications market space, a company that is richer and more powerful than even Cisco – namely, Microsoft.”

David Sims is contributing editor and CRM Alert columnist for TMCnet.