Premises UC Platform Largest Seller
For a decade, unified communications media coverage has focused on UCaaS while mainly ignoring other platforms like hybrid-cloud and server-virtualization. Premises PBX, a fourth platform, has hardly gotten a second look from the press.
UCaaS, the reportedly inexpensive (one might challenge this assumption), all-singing-all-dancing, award-winning UC platform, finished 2021, having captured a third of all new PBX sales for the year. However, UCaaS sales are upstaged by premises PBX shipments.
The Eastern Management Group's new report “Unified Communications Market 2022-2027” finds 2021 premises PBX sales were good across all markets:
• Among enterprises with more than 1,000 employees, 61% of those that acquired a new UC system in 2021 purchased a premises PBX, which outsold UCaaS by more than one third
• Small businesses with less than 300 employees that acquired a phone system in 2021 bought a premises PBX 25% more often than UCaaS
• As the data above shows, the PBX industry is past the stage where premises PBXs are just for big companies and UCaaS just for small ones
Eastern Management Group analyzed 2021 PBX sales across 19 vertical industries and found the banking sector purchased premises PBXs four times more often than UCaaS; schools did so three times more frequently, and healthcare businesses twice as often.
Customers had compelling reasons (purchase drivers) for acquiring a premises UC solution in 2021 over other alternatives. Eastern Management Group survey data from 1,000 IT managers identified the influential factors as:
• Security features
• Productivity Improvement features
• Self-serve provisioning
• Dealer provided security and regulatory support
• Dealer provided system and network support
IT managers that bought a premises PBX also rated price and total cost of ownership as top purchase drivers.
There is a lot of future opportunity in the premises PBX market. New PBX sales, including premises PBX, will exceed 50 million seat/line licenses every year for the next several years, and that's just if the average installed system remains in place for 8-9 years. Should turnover increase to 5-6 years, which we think it should, total sales will be more significant.
What you need to know
Several premises PBX vendors have proven equal to the task of growing their business and sloughing off concerns about the growth of UCaaS. Here's how some are doing it and how all premises PBX providers should:
• R&D - R&D is the lifeblood of product innovation. In our opinion, the minimum premises PBX vendor R&D investment should be 10% of revenue. Cisco spends around 13%; Sangoma, a premises PBX provider for SMB customers, clocks in at 15%
• Dealer Support - World-class dealer support requires continuous training, promotions, best-in-class discounts, deal support, and substantial discounts so dealers can grow their businesses. Good support is expensive. It can cost $10,000-30,000 to add a new dealer to a vendor's channel. A global dealer training program can be more than a half million dollars
• Dealer Investment - Those premises PBX vendors most likely to be around in 10-years will surround themselves with channel partners that are highly trained, well-compensated, financially established, and receptive to best-in-class support from their vendor partner
Vendors at the Forefront
To an enterprise customer, Cisco is a deep-pocketed dominant provider. Cisco shares premises PBX shelf-space with players like Avaya, Atos, and Alcatel-Lucent Enterprises. All these companies get good customer satisfaction scores in Eastern Management Group's annual IT manager surveys.
Capable small-business-first specialty firms like Sangoma and Yeastar do an excellent job addressing the SMB market. These two premises PBX companies receive good satisfaction scores in Eastern Management Group's annual surveys of their customers.
Premises PBX Headwinds
The premises PBX industry faces headwinds due to competition from hundreds of UCaaS competitors and has had departures among its ranks. A recent one blamed:
• A sharp decline of the market and rapid shift to cloud-based solutions
• A technological mismatch between factory and future market needs and trends
• Lagging behind their competitor's R&D activities
• Constant financial deficit due to the reasons above
• Shift to new types of demand (e.g., Teams, Zoom) significantly accelerated by Covid-19, which makes the future business untenable and unpredictable
Eastern Management Group recently surveyed IT managers to learn what type of communications platform would account for most of their company's communications in 2025. The answer came back: 55% will use premises PBX. Despite its challenges, the premises PBX industry will be around for a long time to sell and support large enterprises and small customers.
While new vendors have not been queuing up to enter the premises PBX market, this is a missed opportunity. We'd like to see more new premises PBX companies, which should be welcome by all PBX customers.
Research is based on Eastern Management Group's report "Unified Communications Market 2022-2027."
This article appeared in No Jitter