Enterprise Adoption of Hosted VoIP to Grow Exponentially

Pace of technology change, decentralization of facilities combine to drive emerging trend.

By Adam Stone | Posted Oct 18, 2007
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Looking for hosted VoIP? Check amongst the enterprises. That’s where you will see it next.

 

So says ABI Research in its recent study, The Evolution of Enterprise VoIP.

 

While in-house VoIP is solidly entrenched throughout much of the enterprise market, hosted VoIP has not gotten nearly so much traction. But the day is coming soon, predicted Stan Schatt, ABI vice president of broadband and wireless networks.

 

In North America, ABI is looking for a 110 percent annual growth rate in hosted IP services for the enterprise sector between 2006 and 2012, from $136.8 million to $11.5 billion. Western Europe should see a similar increase, from $113.3 million to $9.9 billion.

 

A number of factors will conspire to drive the rising adoption of hosted VoIP at the enterprise level, Schatt said. First, there is the sheer pace of telecom technology change, which has enterprise users feeling skittish about making large-scale infrastructure investments.

 

“No one really wants to buy a lot of PBXs—even IP PBXs—anymore, because there comes a question of whether you are going to be able to maintain them,” he said. More to the point, today’s technology is heading ever more quickly toward tomorrow’s trash heap. “You really don’t want to invest in something that is going to be a declining asset.”

 

Many enterprise IT managers are especially concerned about the accelerating trend toward voice/data convergence, not just because convergence will change the IT landscape, but because enterprises may not have the necessary expertise to respond to the change. In the past enterprise users have been able to devote sufficient resources to in-house telecom expertise, but that may no longer be the case in a converged world, Schatt said.

 

“You can find people who are good in data, but it is really hard to find people who are experts in voice,” he said. In this scenario, the prospect of a hosted service with its own cadre of talent starts to look like a tempting proposition.

 

All that being said, the notion of an in-house telecom solution still is firmly rooted in the enterprise sector. Big users have PBXs that still are depreciating, and they have negotiated favorable long-distance rates. As a result they haven’t felt any special pressure to look to hosted solutions.

 

Things change, though. In additional to technological advances, Schatt points to the increasingly decentralized nature of the corporate beast. “Headquarters” are rapidly being augmented, or in some cases even supplanted, by networks of branch or satellite locations spread out over broad geographic areas. Such operations are ripe for the VoIP picking, Schatt said.

 

“I might have dozens and dozens of small sales offices, for instance, and with this you can simply dial an extension and it is all one big phone system,” he said. More than just cost and convenience, hosted VoIP offers another crucial element to the far-flung enterprise: Support.

 

The typical branch location won’t have an IT professional on hand, much less a telecom expert. A hosted solution lifts that weight, delivering expert help where it otherwise might not be available.

 

As a result of all these business pressures, ABI predicts, larger carriers will begin to court enterprise customers with hosted offerings. Once the realm of smaller providers, hosted VoIP already has seen such heavyweights as Verizon and AT&T enter the ring. “As you see larger enterprises move in this direction, obviously the carriers will try to preserve their revenue base by offering hosted services,” Schatt said. “They don’t want to be just a pipe.”

 

As the move toward hosted enterprise VoIP plays out in the United States, the rest of the world likely will not be far behind, ABI said.

 

The Asia-Pacific region is slated to go from $73.4 million to $8.2 billion or 120 percent per year by 2012. While hosted enterprise VoIP in Eastern European is slim today, just $12.7 million, even that sector is expected to grow by 122 percent per year by 2012 to $1.5 billion.

 

These markets may be ripe for hosted VoIP, which would come in as a new rather than a replacement telecom solution. In these 'greenfield' arenas, carriers and ITSPs could find open doors among companies lacking the technical know-how to build their own solutions.

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