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IP TELEPHONY OVER LAN MARKET FORECASTED TO GROW 138% AVERAGE ANNUALLY OVER NEXT 5 YEARS September 22, 1999 - IP Telephony PARSIPPANY, NJ, September 22, 1999 -- With the increasing convergence of voice and data, nearly 90 percent of companies with multiple locations will begin switching from their conventional phone systems to IP Telephony over their LANs within the next five years. This crossover, according to a study from PBI Media-InfoTech, will spawn a $1.9 billion industry by the year 2004 with an average annual industry growth of 138 percent over the next 5 years. The study also foreshadows an all-out battle between incumbent customer premises equipment (CPE) leaders, including Lucent Technologies (NYSE: LU), Nortel Networks (NYSE: NT), and Siemens; data networking leaders Cisco Systems (NASDAQ: CSCO) and 3Com (NASDAQ: COMS); and a bevy of start-ups, such as Vertical Networks, Shoreline Teleworks, and Merlot Communications. "Research of nearly 500 multi-site enterprises revealed that Internet Protocol (IP) Telephony is the technology that will finally bring about the ubiquitous convergence of voice and data in the enterprise environment," according to Terry White, a Senior Director of PBI Media-InfoTech and lead analyst for the study. "Decision-makers tend to see the solutions emerging from this technology as the natural evolution of the existing PBX and smaller Key/Hybrid telephone systems markets," White said, "and most are convinced that current obstacles surrounding reliability, quality of service, and scalability will evaporate over the next 18-24 months." The research found that 10 percent of enterprises have already begun trials of IP Telephony over the LAN, and that this penetration will increase to 44 percent of enterprises by the end of 2000. Actual implementation will begin slowly, with 13 percent of enterprises indicating "very high likelihood" of implementations beginning in 2000, but increase sharply to where 60 percent of enterprises will have begun replacing their private branch exchange (PBX) or Key systems with IP Telephony solutions by 2002. Only 7 percent of enterprises researched indicated that they were unlikely to install this new technology before 2004. Several key factors will fuel IP Telephony adoption across all enterprise customer segments. "Customers perceive real cost savings will result from the integrated management of one premises network, based on IP Telephony over the LAN, rather than two separate premises networks, a PBX and a LAN," said White. "Although average price per line for IP Telephony solutions have started out higher than traditional PBX systems ($821 vs. $498 per line), these prices will drop to parity levels in 2002 and continue to drop steadily, forcing traditional systems to keep pace. As a result of this crossover, sales of IP Telephony solutions are forecasted to lift-off in 2002. Enterprise users also feel that IP Telephony will enable them to more quickly and easily introduce and empower future e-business applications." But perhaps the most significant driving force will be IP Telephony's ability to bridge the "comfort zone" gap between voice and data distribution channels. Value added resellers (VAR) and other data channels are able to position this technology as an upgrade to the LAN, adding servers to support voice and traditional telephony applications. PBX distributors can position these systems as an evolution of the PBX architecture, enabling the PBX to support IP and operate as a LAN. Meanwhile, this technology introduces the opportunity for competitive local exchange carriers (CLEC), Internet service providers (ISP) and other service providers to configure integrated premises equipment as an extension of the service provider network, thus making it easier to provide better network maintenance, support, and premium services to their customers. At stake is the installed base of over 86 million PBX and Key Telephone lines, with an embedded value of approximately $100 billion. The surprisingly positive customer attitude towards this new IP technology indicates that this installed base is at risk, according to Eric Schmiedeke, PBI Media-InfoTech vice president who led the study. "The impact of this transformation from proprietary voice systems to open converged networks will be to force every manufacturer, applications provider, and distribution channel currently playing in the $16 billion voice customer premises equipment (CPE) market to re-evaluate their business and marketing strategies in response. By 2004, nearly half the shipments of traditional CPE lines will have shifted to this new technology." The research further revealed that enterprise decision-makers were split as to their channel preferences for future IP Telephony purchases; 48 percent indicating strong preferences for their traditional CPE vendor, 40 percent referring their data vendor or VAR. This split portends hefty competition between incumbent CPE vendors, leading data networking vendors, and a variety of start-up companies. For more information on our IP Telephony multi-client study Click Here, or contact our sales department at infotech@accessintel.com |
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