New Evidence of the UC 'Tipping Point'
New Evidence of the UC 'Tipping Point' by Marty Parker
Last Wednesday, the weekly Enterprise Connect eNews article from Eric Krapf commented on two posts at NoJitter.com that documented surveys and analyses on the North American PBX and UC marketplace. Eric’s comments were from the perspective of progress in migration to IP PBXs.
However, when viewed from the perspective of the adoption of Unified Communications (UC), these two NoJitter Posts seem to define an important tipping point. It appears that buying patterns are shifting from traditional PBX and IP PBX approaches to the new Unified Communications (and Collaboration) models of deployment and utilization for communications solutions and infrastructure.
The first tipping point indication is the result of the recent consolidation of the PBX market in North America. The Eastern Management Group analysis of 2010 North America PBX Line Shipments shows that just two vendors account for almost 60% of the station lines shipped: Cisco with 34.76% and Avaya (including former Nortel customers) with 23.33%.
This is the highest level of concentration seen for almost 20 years, i.e. since the emergence of many alternative suppliers in the early 1980s following the deregulation of the US (AT&T) and Canadian (Nortel) communications equipment markets. The remaining 41% of the 2010 PBX market was divided among more than 10 other vendors, with NEC (8.30%) and Mitel (6.68%) leading among those. The Eastern Management Group did a very thorough job, it seems, with over 8,000 IT management interviews combined with data and fact checking with vendors and distributors.
By the way, you can tell this is a pretty traditional PBX market share study since it excludes the open source (e.g. Asterisk-based) options and also excludes the enterprise communication end-point users who are now using "desktop" and "cloud" communication software (e.g. Microsoft Lync and Office 365, IBM Lotus Sametime and Lotus Live, Skype, and many other entrants including 8x8, CallTower, Google, Microsoft Live, AOL, SAP, SalesForce.com, et al.).
This signals that consolidation in the North America large enterprise IP PBX markets may be pretty well complete, since most of the other 10+ vendors serve the Small and Mid-sized Business (SMB) market categories.
When viewed from a UC perspective, this is a tipping point. Both Cisco and Avaya have moved beyond IP Telephony as their primary enterprise communication value proposition. Cisco has dropped the term UC and has pretty well buried the term Voice over IP (VoIP) in favor of Collaboration and Video themes. Avaya has similarly moved away from UC and IP Telephony, with emphasis on their Avaya Flare Experience and SIP-based communications applications; their recent S-1 Public Offering document describes Avaya as, “…a leading global provider of next-generation business collaboration and communications solutions.”
The indication is that both of these companies see future growth opportunities in areas other than simply replacing, adding and maintaining telephones or in saving money on long-distance toll costs. Rather, the future growth will come from delivering new value that will convert savings in employee labor (aka productivity gains) and other business operating costs (not just IT TCO) into software and services revenues. While both companies are adopting the term ‘collaboration’ in place of ‘unified communication,’ both of them match almost exactly our UC Strategies definition of UC as “communications integrated to optimize business processes.”
So, the first tipping point indication seems to be that the PBX market share leaders in North America are not content to rest on their consolidated leadership positions, but are focusing their aspirations on collaboration solutions that are based squarely in the domain of Unified Communications.
The second tipping point indication is the increasing evidence that enterprises are willing to move away from the desktop telephone as the preferred voice communications end point for most of their employees. This is highlighted by the Tom Nolle post on June 21, titled “Who’s Driving the UC Bus?”
Tom comments that in a Spring 2011 survey of 277 enterprises, over 70% of them said, “…that their UC investment plan was constrained based on their investment in legacy voice equipment, their black phones in particular.” Without that constraint, Tom reports, those 70% “believed they'd very likely scrap phones completely and move to a PC-based form of communication based on headsets.” However, the other 30% did not say that the phone was the answer; they preferred to use mobile devices, rather than PCs, as the end points and “because they couldn’t get mobile VoIP they would ‘wait’ until mobile technology caught up.”
Now, Tom does not describe the nature of the constraints from investment in legacy voice equipment. It could be the balance left on the depreciation account from prior purchases; it could be the costs of buying and deploying a new solution; it could be that the users don’t want to deal with the change to PCs/headsets (possible) or mobile devices/headsets (not likely, based on consumer mobile adoption); or it could be the pockets of intense PBX feature application (call centers, IVR, voice mail, etc.) Each of those constraints would have to be addressed in specific ways, but the enterprises in the survey are certainly saying which way they would move to a new model if unconstrained.
The shift to PCs as the preferred end point is not a big surprise, since that is where almost all information workers and many other employees do their work every day. Further, if "video is the new voice," then the built in screen on the PC, or its surrogate the tablet, is a much more natural end point device than a telephone, even one with some type of added-cost ancillary video screen.
As to the mobile device shift, this has been going on for years now. Even in 2006, we could see that major groups of employees no longer had a desk phone, often because they no longer had a desk (in a company office building). Today, with IM and Presence on the mobile devices combined with call control features, the mobile device continues to grow as the preferred enterprise communication end point. It seems that these 30% of customers are waiting until the VoIP solutions are good enough that they can use the less costly data channels on the cell phones (and other WiFi devices) for voice communications, rather than paying for a desk phone or a large monthly cellular bill.
It is easy to notice that these PC and mobile device trends are aligned with the UC direction. The PCs, tablets and mobile smart phones all need some form of UC software platform to deliver the benefits that the customers expect. As described in the “UC Options: Who’s Offering What?” sessions at Enterprise Connect (and previously VoiceCon), it requires a separate UC software platform to deliver these UC functions (even if that's embedded in a single virtual machine).
In summary, it has taken a while for UC to move so clearly into the mainstream, where enterprise buyers look for UC platforms that can support their voice communication needs rather than looking for an IP PBX that can deliver UC functions. The first UC products began shipping in 2001; the first Gartner Magic Quadrant for Unified Communications was in 2003; Cisco said that Unified Communications “changes everything” at VoiceCon Orlando 2006. But whatever starting date you choose, these two reports seem to indicate that the tipping point has already occurred or is very close at hand. As we welcome UC to the front of the parade, we should be careful to notice that UC will now become the target for displacement (want some collaboration or social networking, anybody?).
Perhaps you see these same patterns in this market data, perhaps not? Please post your comments below, either way.