IP PBX market softens while Cisco continues to conquer

Infonetics Research found that the North American IP PBX market slumped by 2% in the first quarter of this year while Cisco continued to conquer the space.

The IP PBX market in North America softened during the first quarter of this year, according to Infonetics Research.

While the IP PBX purchases declined, market leader Cisco Systems continued to take share away from fellow industry leaders Avaya and Nortel.

"It's not like the market is really plunging, but it should have done a little bit better," said Matthias Machowinski, directing analyst for enterprise voice and data at Infonetics.

The IP PBX market declined 2% last quarter to $661 million. General economic uncertainty in North America is probably causing a little bit of an investment hesitation, Machowinski said.

"This market is tied more to the overall market economy, while other markets are a little bit different because some of the equipment we track could pay for itself," he said. "A large part of the PBX market is driven by expansion and business creation."

With economic uncertainty, business creation and expansion isn't as robust, and demand for new IP PBX technology has stumbled a bit.

Machowinski said Cisco has been increasing its share of the IP PBX market at the expense of Avaya and Nortel, the second and third players, respectively. Last year, Cisco held 27% of the market to 22% for Avaya and 17% for Nortel. Cisco's market inched up slightly while Avaya's shrank by 2%. Nortel's IP PBX share held steady, but its overall PBX position is also down slightly.

The proliferation of IP PBX technology is shifting the decision-making authority over enterprise voice from the traditional telecommunications department to IT, Machowinski said, and IT is buying from the vendor it knows best.

"Many companies are looking to buy IP PBX, and Cisco has a strong offering there, but it's also the buying decision," he said. "It used to be telecom managers making that decision, but we've seen that decision moving to the IT department. And who does IT know? Cisco -- intimately!"

Conlan Barkovic, telecom team lead for Calibre Systems, an Alexandria, Va.-based government contractor that offers management and technology services, said rapid business expansion was the impetus for his company's investment in a new IP telephony infrastructure.

"We've got a goal to be at $250 million in revenue, and the only way to get there is M&A [mergers and acquisitions]," Barkovic said. "We're pretty much acquiring two companies per year, with 35 to 40 people per company. The next acquisition will be in the 100 to 150-person range. We've got to have a system that will grow with us more rapidly."

Barkovic said his company had been using a Hi-Path IP PBX from Siemens, but he wanted something that would scale better. Calibre is moving away from the traditional PBX vendors such as Siemens, Avaya and Nortel, but it isn't gravitating toward Cisco. Instead, it's selecting another vendor well-known to IT decision-makers: Microsoft.

Barkovic is moving his company's entire voice infrastructure onto Microsoft Office Communications Server. He'll be running the OCS platform on HP servers with AudiCodes Media Gateways to deliver connectivity between OCS and Exchange for voicemail. He's also using gateways for redundant POTS lines for backup connectivity in case data connectivity fails. For phones, he is using Microsoft's Tanjay devices on desktops and RoundTable devices in conference rooms.

Barkovic believes Microsoft's OCS platform is the most capable of scaling at the rate his company wants to grow.

"If you stay with the likes of Avaya, Nortel, Siemens – Siemens isn't looking all that great here in the U.S., so who would support those systems if Siemens were to disappear?" he said. "The biggest challenge we've got with [Avaya and Nortel] is we're so locked into buying only their gear and doing things only their way. If I want to put another company up and buy them and merge them, I either have to buy a whole other platform from them or find a kind of backwards way to connect the two offices. The cost associated with all that proprietariness is just too great."

Machowinski said Calibre is an exception, not the rule. "While there is great interest in Microsoft OCS, most companies we talked to planned to deploy it alongside their VoIP infrastructure," he said. "For many, voice reliability is absolutely crucial and Microsoft hasn't proven itself there yet."

Barkovic agreed that OCS isn't fully mature, but it's "moving at such a rapid pace towards that maturity that it's really going to be the platform to be recommended."

Let us know what you think about the story; email: Shamus McGillicuddy, News Editor

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