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Study Finds Cloud Dampening Enterprise Unified Communications Solutions Sales

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Study Finds Cloud Dampening Enterprise Unified Communications Solutions Sales

June 03, 2015
By Peter Bernstein
Senior Editor

At the risk of getting my good friends at IHS (News - Alert) Infonetics, and for that matter other industry analyst firms a tad annoyed, precision in the headlines of announcements about new reports would be useful. The case in point is the recent announcement of the IHS Infonetics (News - Alert) report, “Enterprise Unified Communications and Voice Equipment report. The headline was, “Businesses’ Move to the Cloud Dampening Sales of Unified Communications (News - Alert) Solutions.”  This led to my first thought that the entire unified communications (UC) sector, including premises, cloud and hybrid solutions, was faltering even though the headline indicated the move to the cloud was a constraint.

I was curious as to how what everyone sees as increased UC adoption squared with the headline. After all thanks to things like the growth of SIP and SIP trunking, WebRTC, the offerings by almost every major PBX (News - Alert) vendor of options to have UC via premises, cloud or hybrid solutions, coupled with the growth of hosted PBX solutions in general indicate that UC overall is experiencing robust adoption after years of reality not matching market hype. 

Imagine the relief when I saw the word “equipment” in the report title.  As usual IHS Infonetics resident research director for VoIP, UC and IMS, Campbell, was out with another one of her comprehensive and insightful reports, and yes what it really is looking at under the combined PBX and UC moniker is what we used to just call the premises PBX and UC markets. And, here the findings are quite interesting.

Myers found that PBX revenue fell 6 percent in the first quarter of 2015 (1Q15) from a year ago.  What she is confirming once again is the continuation of what has become a long story.

In Myers’ words, “The enterprise PBX market remains challenging, with revenue down yet again in the first quarter of 2015. Pure IP PBX was the one segment to post year-over-year growth due to strength in Asia Pacific.” She added, “Things have started to slow on the unified communications (UC) front as well, which we attribute to movement to the cloud as businesses look for ease of management and flexibility.” 

None of this is a surprise. The context for this is that at the moment the installed base of legacy PBX and Key Telephone Systems has never been older.  The good news on that score is that enterprises of all sizes are evaluating how to best participate in the all-IP era with all of the multimedia and multiple media capabilities. The bad news if you are a fan of premises-based solutions is that customers are voting with their dollars to move all business communications functionality, including UC, to the cloud.  Plus, if you are a legacy PBX vendor, the availability of open source solutions means customers have options moving forward that are attractive because of the wisdom of the crowd and elimination of possible vendor lock-in. 

This does not mean that premises PBX and UC premises solutions are dead. However, to Myers point the markets are “challenging.”  As the graphic below shows, the total market is not what it used to be when it was the only game in town and had multi billion dollars per year in revenue, and growth is projected to be miniscule going forward to 2019.

Other sobering highlights from the report include:

  • Worldwide PBX revenue (TDM, hybrid and pure IP) totaled $1.6 billion in 1Q15
  • PBX line shipments were up 3 percent in 1Q15 from 1Q14
  • Pure IP PBX line shipments were a strong driver, up 17 percent year-over-year following a solid 4Q14
  • Hybrid IP PBXs accounted for around 60 percent of all lines shipped in 1Q15
  • Sales of unified communications (UC) applications dropped 5 percent in 1Q15 from the year-ago first quarter as enterprise spending remained conservative
  • In 1Q15, the top enterprise telephony vendors are Cisco and Avaya, while Microsoft (News - Alert) continues to dominate the UC platform market.

If nothing else the report underscores how much times have changed and will.  That said, the dominant players remain the dominant players regardless of where functionality resides. In fact, it is actually getting harder and harder to think of any of the vendors in the business communications platforms and solutions space as “equipment” vendors.  They are broadly defined software services companies that in almost all cases now offer their software as a service with hardware when desired under various licensing and entitlement management and service support models.  In this respect, as noted at the top, “dampening” seems an odd descriptor for what is a market in major healthy transformation mode. 

Edited by Maurice Nagle

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