article

Infonetics Research: VoIP and IP PBX Significant Sources of Revenue

VoIP and IP PBXs will continue gaining popularity and provide significant sources of revenue during 2004 and 2005, according to the quarterly report from Infonetics Research (www.infonetics.com), Next Gen Voice Products. In fact, VoIP is expected to bring in a major portion of carriers income through at least 2007, which represents a big opportunity for agents.

In 2003, worldwide revenue for next-generation voice products totaled $338 million in the fourth quarter, marking a 31 percent increase over the third quarter. Analysts Kevin Mitchell and Matthias Machowinski, authors of the report, say vendors benefited from a surge of budget clearing and an overall trend to VoIP.

The writers pointed out that the VoIP market dropped 28 percent in 2002 but turned around, growing a total of 21 percent in 2003. Annual revenue is projected to grow 305 percent to $5 billion between 2003 and 2007, representing a CAGR of 42 percent, the report reads.

Discussing the Next Gen Voice Products numbers, Mitchell says, [T]here have been many voice over IP customer wins — and more importantly, service rollouts — from top tier carriers, including AT&T, Bell Canada, BT, France Telecom, Qwest, SBC, Telus and Verizon. Some of these moves are baby steps, but it shows that VoIP is in their plans and creates momentum, which can help make the second half of this year and 2005 solid investment periods as carriers ramp up subscribers and service revenue.”

Greg Praske, CEO of master agency Association Resource Group, says next-generation service rollouts are not the first steps. It seems the largest benefit is within the carriers networks to drive lower costs and additional capabilities, he says. We dont see VoIP as a separate, standalone service/product offering.  To us, VoIP is simply one of the tools that may be used in our solutions, whether that is behind the scenes with the carriers network or whether its used as a delivery method to the clients premises.

For instance, the presidential re-election campaign is using ARGs virtual PBX solution, which Praske says eliminates the cost of investment in PBX equipment, while providing the functionality of such a system.

The Infonetics report also looked at the future of IP PBX solutions. Although percentages remained flat between the third and fourth quarters of 2003, worldwide IP PBX revenue jumped 33 percent from 2002 to 2003 to reach $256 million. Mitchell and Machowinski predict annual revenue to reach $830 million in 2007, representing a compound annual growth rate of 34 percent.


“IP PBX growth was very healthy last year, especially considering the depressed corporate spending environment in which it happened,” Machowinski says. “New spending cycles are heavily favoring next generation technology as the versatility and flexibility of IP telephony continues to attract buyers. Add an improving economy to this recipe, and we expect to see IP PBX shipments increasing at double-digit annual growth rates for at least the next five years.”

Kieren McCobb, president of master agency TeleConfusion Removal Inc., sees cost as too big an obstacle for companies to simply install new PBXs. Unless the savings are equal to or substantially more than the cost of upgrading your whole PBX, the decision to move to VoIP is going to have to wait for such time as the client is upgrading their PBX or replacing it, McCobb explains. In most cases, somebodys not going to put the investment into the hardware and software just to have voice over IP theyre not going to do it just to brag to their golfing buddies.

TeleConfusion is making money on VoIP, but mostly in a consulting capacity, McCobb says. We have proposals out. [VoIPs] garnering an increasing amount of attention but its not something that moves quickly because its a way different sale and a way different proposal than switching from Carrier A to Carrier B. Were talking a serious expense in infrastructure to be able to use it.

Next Gen Voice Products

, released in the first quarter of 2004, says Cisco Systems Inc. leads IP PBX revenue market share and lines shipped, followed by Alcatel and Avaya Inc. Other statistics include the number of IP lines shipped on hybrid platforms, which were up 52 percent from 2002; pure IP lines were up 29 percent from 2002; and lines shipped on hybrid platforms accounted for 68 percent of all IP lines in 2003.

Meanwhile, Machowinski says the voice application server market did not live up to vendor or analyst expectations in 2003, creating a repeat of the prior year. “However, now that carriers have begun publicly unveiling and marketing hosted IP telephony services that have been in development for the past 12 months, this segment is finally positioned for a take-off in 2004,” he notes.

Among its other findings, Next Gen Voice Products details worldwide media gateway revenue as increasing 13 percent to $745 million; global softswitch revenue was up 31 percent to $380 million; and worldwide session border controller revenue reached $29 million, up 359 percent from 2002.


Leave a comment

Your email address will not be published. Required fields are marked *

The ID is: 70143