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Businesses Acknowledge the Cost-Saving Value Proposition of VoIP Access and SIP Trunking: Report
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July 09, 2010

Businesses Acknowledge the Cost-Saving Value Proposition of VoIP Access and SIP Trunking: Report

By Jai C.S., TMCnet Contributor

New analysis from business research and consulting firm Frost & Sullivan, included in a report titled 'North American VoIP Access and SIP Trunking Services Markets,' reveals the VoIP access and SIP trunking services market earned revenues of $717.3 million in 2009. What's more, the market is expected to earn revenues of $3.9 billion in 2016.

The market for VoIP access and SIP Trunking, according to Frost & Sullivan (News - Alert), will continue to build on its impressive, downturn-defying 40.1 percent growth in user base and 22.3 percent growth in revenues in 2009, as enterprises look for cost-effective alternatives to their legacy time division multiplexing (TDM)-based communication infrastructure.

Intense market competition and the resulting price pressures, at least at the lower end of the market, are likely to keep the subscriber base growing at a faster rate than revenues, translating to lower margins for the providers, says the researcher.

The study clarifies that although end users prefer IP-based technologies, such as SIP trunking, for their ability to save costs by converging voice and data access lines and reducing long-distance calling charges, their real attraction lies in the ability to support a more centralized application management and the integration of the telephony infrastructure with a variety of enterprise applications such as email, customer relationship management platforms, and unified communications applications that include messaging, presence, and conferencing.

Also, the analyst believes that with integrated access lines emerging as a viable alternative to legacy telecom circuits for voice calling, businesses that have deployed TDM infrastructure are grappling with the issue of multiple service providers for their voice and data networks.

'The majority of the installed customer premise equipment is still TDM private branch exchange (PBX (News - Alert)) and therefore, a large percentage of the installed services base requires the deployment of media gateways for protocol conversion, while only a small percentage is direct/native SIP trunks connecting to SIP-enabled IP telephony platforms,' said Elka Popova, program director at Frost & Sullivan. 'Going forward, that ratio is bound to change as customers increasingly replace their legacy systems with new, hybrid, or pure IP telephony equipment.'

Popova noted that SIP trunking services are expected to gain momentum as companies increase their investments in IP-based communications applications and extend their UC environments beyond the enterprise to communicate with customers and partners. She said she believes that with strong evidence of the return on investment benefits of SIP trunking, service providers have started promoting these services more strongly.

The market is undergoing a transition from traditional infrastructure to IP-based systems, wherein the revenues from legacy services are declining, but new IP-based services have not yet taken off. This situation will change, driven by macro-economic and company-specific factors including technology evolution, and maturing standards and service levels. When that happens, carriers will start selling IP-based services and applications on a larger scale.

Meanwhile, service reliability and quality levels of VoIP access services have significantly improved over the years.

'Service providers are investing in enhancing their VoIP access/trunking services in terms of survivability, redundancy, and trunk pooling to be able to offer greater value,' observes Popova. 'Service providers have more or less overcome voice quality issues with their ability to provide different classes of service, dynamic bandwidth allocation, and voice prioritization capabilities.'

However, these improvements come with a heavy price tag (News - Alert), which belies the popular perception that VoIP is inexpensive. Service providers also admit that even though enterprises are curious about SIP trunking, awareness of its availability and benefits is still inadequate.

Market participants have to operate shrewdly as VoIP access and SIP trunking are not suited to all types of customers. They will have to choose their clients based not only on their geographical spread, but also on the nature of business and status of their existing legacy contract. What is encouraging is the fact that businesses have an increasing tendency to consider these services, not just from the perspective of cost reduction, but as tools to achieve their long-term communication goals.

'North American VoIP Access and SIP Trunking Services Markets' is part of the Enterprise Communications (News - Alert) Growth Partnership Services program, which also includes research in the following markets: World Enterprise Telephony Platform and Endpoint Markets, World Enterprise Email Platform Markets, World Unified Communications (News - Alert) Markets and North American Hosted IP Telephony and UC Services Markets among others.

Jai C.S. is a contributing editor for TMCnet. To read more of Jai's articles, please visit his columnist page.

Edited by Marisa Torrieri

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