PRESS RELEASE

Growth in IP (LAN) PBX Market Driven by Application Development

Ref:TP0016M01V01

4th June 2001

Significant growth in global IP PBX market is identified by TekPlus, a leading industry consultancy, which expects the worldwide market to grow by a compound annual growth rate (CAGR) of 61 percent, from $365 million in 2000 to $1,530 billion in 2003. This impressive growth despite the current market conditions is a result of IP PBX vendors delivering more than just a box to the enterprise market. The addition of new applications that meets the business critical needs of many enterprises has helped ramp-up this market. During the same time period of 2000 to 2003, the number of IP PBXs will grow from 660 thousand to3.6 million, at a CAGR of 77 percent.

Gareth Williams, Director of Research at TekPlus, states that, 'the business end-user market has begun to adopt IP PBXs as they offer a lower cost alternative to converging LANs using a traditional PBX.' Moreover, the value that IP PBXs deliver to enterprises means that the return on investment (ROI) is far greater than that of traditional PBXs. The provision of integrated CTI applications and GUI management reduces the management costs of LAN networks, in-turn improving ROI. Gareth continues, 'This value is being increased with the addition of web - based administration and management that is easy to use and monitor. This eliminates the need for training, improves configuration and organisation of applications.'

The main growth areas for IP PBXs are:

Branch offices of corporate companies Single and multi-site campuses New offices, service offices and building management office sites Merged or acquired sites or companies SMEs in general - those that are IT illiterate and have scaling issues The target audience and addressable market will continue to expand as traditional PBXs need replacing and enterprises make a concerted effort to converge their LAN infrastructure, starting with the migration of the PBX.

There will be winners and losers in this market as vendors begin to make a bigger push into the IP PBX market. Dr Mitul Mehta, Managing Director of TekPlus, says, 'To access a wider market, as the market for converged applications and networks expands in the LAN, will require vendors to seek new partnerships and channels. Regional and local VARs and smaller system integrators will become crucial for those vendors that have tended to focus on the service provider and corporate markets.'

Channels to market will need educating, depending on whether they come from a data or voice background, and support will need to be tailored for individual partner needs. Channels that have become used to selling PBXs to enterprises including VARs and SIs will need to develop new skill sets in order to sell IP PBXs. Vendors will need to create tiering systems in order to encourage partners to push forward their deployment of IP PBXs and ensure that end-users receive the necessary support from installation through to integration, upgrading and expansion of converged networks.

The winners in the IP PBX market will be those companies that are able to deliver value to end-users and influence end-users. This does not mean that IP PBX vendors need to own all the value delivered to the end-user. There are few companies that have the ability to manage and develop all the applications that must meet end-user expectations and perceptions in order to succeed in this competitive market. Gareth elaborates, 'the IP PBX vendors of today need to become the hub of eco-system partnerships and drive the value being delivered to end-users, in order to extract improved margins and revenues.'

There are a variety of companies that have demonstrated their ability to start eco-system partnerships by embarking on JAPA (Joint Ventures, Acquisitions, Partnerships and Alliances) strategies. Companies such as 3Com have taken a significant step in delivering value to its partners and eventual end-users. 3Com has engaged in partnership with companies such as Apropos in order to add a solution to manage real-time customer interaction across a variety of communications media, including e-mail, web and voice. Vendors will seek to develop strategic partnerships with a variety of companies in order to deliver 'best of breed' solutions to end-users, these could include companies specialising in IVR, VoIP gateways, billing and auto attendant software. Evaluation of vendor’s core competencies will need to take place and the results acted upon, in order to create differentiation amongst vendors in the market and provide enterprises with real choice.