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Vendors vie for enterprise attention in struggling PBX market

As the PBX market slips, competition among traditional hardware vendors grows as they vie for enterprise attention and increase UC feature availability.

With UC software offerings taking precedence in the enterprise, traditional telephony hardware is losing ground. Many enterprises are moving away from the traditional desk phone and have started employing telephony software offerings and UC products that can combine voice, video and presence from the desktop.

But despite market research reports of a dip in sales for the PBX market in the first quarter of this year, the desk phone isn't going anywhere -- at least for now. While most vendors are focusing on hosted or virtual PBX strategies to stay relevant, hardware-centric vendors like Cisco and Avaya are now battling for the top spot in the enterprise PBX market on price, despite the recent decrease in sales for telephony hardware.

Competition in the enterprise telephony market has gotten very aggressive, according to Diane Myers, principal analyst of VoIP and IMS for Infonetics Research. In a recent report highlighting the enterprise voice-equipment market for Q1, she wrote that while the PBX market achieved modest growth in recent years, the first quarter of 2012 marked a surprising downturn for telephony hardware.

The 4.6% decline for global PBX and key systems sales from last quarter was unexpected, Myers said. "We didn't anticipate this level of decline, and we need to absolutely be paying attention to buying times and sales cycles of this market," she noted. 

Economy hits PBX market, along with mobile and softphone migration

Declining PBX sales can come from a number of factors, including enterprises hiring fewer employees or holding off on upgrades in a bad economy. Economic considerations aside, however, the migration to mobile and softphone offerings and away from hardware is tough on the traditional PBX market.

"It's harder and harder to justify replacing desktop phones when employees are increasingly relying on their iPhone or Android device for communications," said Irwin Lazar, vice president and service director for Nemertes Research, adding that more enterprises are also looking at solutions like Microsoft Lync, which delivers telephony as a software application.

While some organizations, like contact centers, require wired desk phones, teleworking is widespread, and many employees need mobility. "The stage is set for users to need the desk phone less and less. Users need their tablets and the ability to communicate from a client site or on the road," said Henry Dewing, principal analyst at Forrester Research.   

But even though PBX phone systems are on the decline, they will not be going away, Dewing noted.

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PBX purchasing decisions have traditionally been made by the IT department. But purchasing cycles have slowed, and more business owners and architects are contributing to technology-related decisions, Dewing noted.   

Avaya along with Cisco and Siemens remain consistently the top vendors in the PBX market, noted Myers of Infonetics.

"The offerings are very similar and meeting the needs of the enterprise," said Dewing, "so it's boiling down to a dog fight in pricing."

To counteract price wars, the traditional vendors are working to build more capabilities and ecosystems to deliver more UC and communication functionality in an as a Service model, he said, noting that the trend is prompting many buyers to wait for the next release for new features or price reductions.

If vendors hope to compete in the voice market, a UC virtualization strategy is key to the enterprise, Lazar said. Enterprises need software-based telephony, and vendors that have a hardware focus only will struggle to play catch up. "Avaya is behind the curve right now, but Cisco sells its [telephony offerings] as either dedicated hardware or software that runs on both the Cisco virtual infrastructure (UCS) or run it on any server supporting VMware."

As enterprises hold on to their budgets and delay hardware purchasing decisions, vendors are catching on. "We are seeing vendors [notice] that customers are waiting to upgrade," Myers said, noting that enterprises are looking for support of their legacy PBXs and starting down the path toward UC and IP softphones.

Let us know what you think about the story; email: Gina Narcisi, News Writer.

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