IP Telephony a Three-Horse Race
Synergy Research looks at the key issues facing the enterprise VoIP market.
A recent Synergy Research report, Q4 2005 Worldwide Enterprise VoIP Market Shares, states that enterprise IP telephony sales saw substantial growth in 2005, while traditional enterprise telephony (TDM) sales remained flat. Top vendors of pure VoIP systems, according to the report, were Cisco, Avaya, Nortel, Alcatel, and Mitel, in that order.
Synergy CEO Jeremy Duke says the competition remains extremely intense among the top vendors. "It seems like it's a three-horse race at the top, with Cisco, Avaya, and Nortel," he says. "They're all just beating the crap out of each other in terms of price and marketingthey're very aggressive, and each one has a unique approach to the marketplace."
Vendors like Avaya, Duke says, have a loyal installed base that's in the process of migrating from TDM to IP, and in this 'converged' telephony category, Avaya leads the market. Cisco, by contrast, has chosen to go the IP-only route. "It's surprising how quickly Cisco has ramped," he says. "They got into the market via their acquisition of Selsius, and then they spent a lot of time developing that product and hardening itbut now they're shipping just as much as everybody else."
Both converged TDM/IP players like Avaya and pure IP players like Cisco, Duke says, have legitimate value propositions. A new company would have no reason not to go with Cisco's pure IP offeringbut for an established business that already has a substantial investment in a legacy system, it would only be logical to start by checking with their existing vendor. "There's no million-dollar answerit really depends on each situation," he says.
Selling the IP phone
The next step, Duke says, will be for IP phones to gain market share over legacy TDM equipment. "Right now, you can go to an IP telephony setup, but you can still keep a TDM phone on your desktop," he says. "What's that competitive, compelling advantage to make somebody go, 'You know, I'm going to get rid of that TDM phone and buy an IP phone'? That compelling application isn't there yet."
Currently, Duke says, the best selling point for IP phones is that they make it easier to do adds, moves and changes. "With an IP phone, if I get a promotion upstairs, I don't have to call up the phone guy and schedule two weeks out to have him rewire my phone from the PBX cabinet to my new desk," he says. "I just literally pick it up with my computer, take it upstairs, plug it into the wall, and I've got phone service."
For most companies, though, that's not compelling enough to justify the investment. "But if you had an application and you said, 'Hey, this new collaborative work application with video has shown that you could save 20 percent or increase productivity 35 percent,' then you could probably enter a conversation with a CFO to write a check," Duke says.
And considering that an IP phone is really just an IP device that happens to be optimized to deliver voice, Duke says, there's room for a lot of different compelling applications to be discovered. "I look at it as another sort of IP tool that's on the network," he says. "I'm sure some very creative and intelligent people will come up with some interesting applications that will ride on it."
Other areas to watch
The small/medium business (SMB) market, Duke says, presents its own unique set of challenges for equipment vendors. "You have some players that have done okay in that area, like 3Com and Inter-Tel and Mitel, but Cisco and Avaya still are figuring out how to drill down into that space to get to it, because it's a bit expensive to sell to a small company," he says.
One aspect of the SMB market that's particularly worth watching, Duke says, is the opportunity that exists for converged solutions like Cisco's Linksys One. "Personally, as a business owner, I would have been very open to paying $300 or $400 a month to AT&T to completely manage all my communications, voice, and data, and not worry about it," he says.
Finally, Duke says another factor that could affect IP equipment sales in the coming years is the arrival of price pressures from Chinese vendors like Huawei Technologies. "They've done a couple of joint ventures already with some North American vendors," he says. "If they come into the marketplace, that could shake a few things up."