Infonetics Q&A

Infonetics Research's Myers Analyzes Enterprise Telephony Market

By Paula Bernier, Executive Editor, IP Communications Magazines  |  April 01, 2011

This article originally appeared in the April 2011 issue of Unified Communications

Infonetics recently released a study showing that the enterprise telephony market had its third straight quarter of growth, although decreased spending by small and large business in North America led to a 5 percent decline here in fourth quarter. Nonetheless, the PBX and UC market saw annual growth in 2010, totaling $8.3 billion (up from $7.7 billion in 2009). And growth among small businesses and large enterprises in Central and Latin America drove a 20 percent increase in PBX spending in that region infourth quarter of last year.

"The enterprise telephony and unified communications market is experiencing a slow and steady recovery, ending the 2010 year up 7.4 percent,” says Diane Myers, directing analyst at Infonetics Research (News - Alert). “Leading the recovery is the move from TDM to IP across all regions, particularly North America."

Unified Communications magazine recently spoke with Myers to get more details.

For what quarter did the enterprise telephony market have its third straight quarter of growth?

Myers: This is sequential quarterly growth for the second quarter of 2010, the third quarter of 2010, and the fourth quarter of 2010. Each of these quarters had quarter-over-quarter growth.

What was driving this growth?

Myers: In 2009 the worldwide enterprise telephony market declined 22 percent due to economic conditions and enterprises putting IT upgrades, including telephony, on hold. The growth we saw in 2010 was largely due to enterprises starting to spend again, particularly in North America, [which] is leading the way with upgrades to IP.

What does this level of growth indicate for the industry now and for the future?

Myers: We expect similar levels of growth for the next several years, driven by the migration to IP and also enhanced applications associated with UC.

According to the study, Avaya has edged ahead of Cisco. That's related to what specific products?

Myers: It has become a very tight race between Cisco and Avaya throughout 2010 with hundreds of a percentage point separating them in any given quarter. In the fourth quarter of 2010, Avaya saw strong adoption of its IP products, including endpoints and appliances, which drove overall revenue upward. For calendar year 2010, Avaya was up only 0.2 percentage points ahead of Cisco – it is that close.

What's the market share of each for this category at this point?

Myers: We don't publish the shares, but it is less than 25 percent each.

To what do you attribute Avaya's success in moving ahead of Cisco?

Myers: The two have been close in market share over the past three years, but Avaya’spurchase of the Nortel enterprise assets pushed them into a much tighter battle in terms of market share in 2010.

Most people in the communications space are talking about the growth and promise of video. Yet several companies have told me that when they introduced video phones or services, the U.S. business market wasn't interested. What's the reality of demand for business video solutions?

Myers: We're just starting to formally cover video solutions as part of a new service from one of my colleagues. Anecdotally, my sense of the reality is that many businesses attribute video with expensive, proprietary systems. As we see the proliferation of video on a broader set of devices (i.e., videophones, laptops, tablets, mobile phones, etc.) and services that allow for video federation across platforms, enterprises are likely to take a much harder look. 

One of the big trends we're seeing in enterprise telephony is the rise of the bring-your-own device phenomenon, specifically related to mobile devices like smartphones and tablets. How is that impacting enterprise telephony trends and market share?

Myers: We haven't seen the impact of this on current market shares/positions. However, vendors will absolutely position themselves, and some already are, with applications that enable anywhere communications off the corporate system. Providing enterprises with client applications that can sit on smartphones and tablets is happening today, and we'll see acontinued increase of this as businesses look for flexibility and mobility for their users.

Business users have become accustomed to a high level of functionality and applications available via Android devices, the iPhone and the iPad, and the like. How, if at all, are traditional enterprise VoIP/UC equipment and services providers adapting their solutions to be more feature rich, and even potentially to include or tie into the above-mentioned operating systems and products?

Myers: We're seeing a number of the leading PBX vendors providing feature-rich clients for mobile devices such as the ones listed above that offer enterprises a feature rich environment on the mobile handset. I had a chance to demo such clients from NEC at Enterprise Connect (News - Alert).

Any recent acquisitions on the enterprise VoIP/UC front that are noteworthy? If so, which ones and why?

Myers: ShoreTel's (News - Alert) acquisition of Agito for mobility. What I find interesting on this front is that ShoreTel is out selling the products to enterprises regardless if they use the ShoreTel PBXs or not. [That’s an] interesting strategy to get into accounts that are Cisco or Avaya, for example. 

Where we see more acquisitions these days is with service providers (hosted PBX/UC providers). There was a whole slew of them in the second half of 2010 – the last one being Broadvox (News - Alert) and Cypress Communications.

A while back Microsoft announced a solution that some said could mean the death of the PBX. What kind of uptake has that seen?

Myers: Those claims were made regarding OCS and now Lync. With Lync, Microsofthas a telephony solution, not just UC applications such as IM and presence or collaboration.  Microsoft came to see the light that companies will not do away with traditional phones any time soon. To this end they've worked with third-party handset manufacturers such as Polycom (News - Alert) to addresss this requirement. What we expect is that even with Lync, Microsoft will find initial successes around the UC applications such as I mentioned above and will work to win the telephony pieces, understanding that if an enterprise has made an investment in an IP PBX in the last few years they aren't going to rip and replace.

Edited by Stefania Viscusi