Slow economy slows worldwide IP telephony adoption

Melanie Turek of Frost & Sullivan posted some highlights of her latest research into the worldwide enterprise telephony market. To me it looks to be a good snapshot of the overall global economy, too…

Traditional systems made up 25.8 percent of total line shipments, declining at a rate of 18.1 percent year over year. NEC was the undisputed market leader in this category, with around 3.6 million TDM lines shipped; it’s followed by Panasonic and Siemens.

The decline in traditional-line shipments is expected to be even greater in the coming years as customers continue to acknowledge the value of IP communications and vendors gradually phase out legacy TDM/KTS PBX systems.

This is a fairly impressive number — TDM lines still account for 1/4 of total shipments. And if we fool ourselves for a moment into thinking that the economy is no worse than last year’s and there is no decline, then the TDM lines add up to 1/3 of total shipments. NEC, being the “undisputed market leader” in TDM shipments, continues to enjoy a slightly better economic condition in Asia whereas North American and European markets are spiraling deeper into trouble.

I also believe that traditional-line shipments will decline in the coming years, but I’m not so sure about the “even greater” part. I think the lack of any uptick in the global economy — at least in the coming year or two — will prevent customers from leaping into the IP pool. Vendors may push for IP communications solutions, but customers won’t be buying in droves, instead opting to milk the most out of their TDM PBX systems. After all, if it ain’t broke, why fix it? Especially when money’s tight.

Cisco was the market leader in total line shipments, with 13.6 percent market share, followed by NEC (13.3 percent) and Avaya (12.9 percent).

There’s only a 3.3 percent difference between Cisco, the IP leader, and NEC, the TDM leader, in total lines. That’s not a whole lot. There’s still a lot of TDM lines to be phased out, eh?

Traditional systems made up 21.4 percent of market revenues, declining at a rate of 27.3 percent. NEC was the market leader with a 33 percent market share, followed by Panasonic, Avaya, Nortel and Siemens, in that order.

IP systems (converged and native IP) accounted for 78.6 percent of market revenues, declining at a rate of 24.2 percent. Avaya’s voice system market revenues were greater than Cisco’s, with a total market share of 17.1 percent.

It’s no surprise that both traditional and IP systems showed revenue decline. It’s no surprise, either, that revenues from IP systems command such a big chunk of the pie. After all, going from TDM to IP requires a lot more hardware and professional services.

Overall, Avaya is the enterprise telephony platform revenue market leader with a market share of 15 percent, followed by Siemens, Cisco, NEC and Alcatel-Lucent.

Come on, Alcatel-Lucent… You can do better. Put those high-profile acquisitions to good use. Being the laggard in a market which the leader only commands 15 percent is a red flag, especially when the economy isn’t getting any better soon.


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