What Does the Future Hold for PBX in the Cloud?What Does the Future Hold for PBX in the Cloud?

I predict that we will eclipse the 20 percent market share, though I doubt it will ever get above 50 percent.

Now that the era of "cloud everything" has arrived, I'm hearing a lot of chatter about the PBX in the cloud. Having been in telecom for about 20 years, my first thought was "Centrex." A little research showed me that Centrex was never more than 20 percent or so of the PBX market. So I wondered whether the "cloud PBX" is different and if it could get more market share. The answer to the first is "yes," and the answer to the second is "well, maybe."

First let's define cloud. According to Wikipedia (the world’s new authority on everything)--"Cloud computing is the delivery of computing as a service rather than a product, whereby shared resources, software, and information are provided to computers and other devices as a utility (like the electricity grid) over a network (typically the Internet)." So a PBX in the cloud is a voice PBX service offered like a utility. How is this different from the Centrex services of yesteryear?

In a nutshell, what makes the cloud PBX different is the packet-based nature of today's systems and the ubiquity of IP networks. The IP PBXs that are hosted in the cloud today allow the hosted service providers to send multiple media types and streams to their customers. This means that a customer can get not only Class 5-type PBX features, but also presence and application integration (IVR, fax, click-to-dial) easily from one vendor.

These features--along with the well-known cloud benefits of automatic updates, constant addition of new features, reliability and maintainability--do change the value proposition from that of traditional Centrex. If your service provider also integrates this all into a CRM (a la Office 365 or Salesforce) or social media platform, the value for a business in going this route extends even further.

Now let's talk about market share: will the cloud PBX decrease on-premise PBX penetration? Well, maybe. First, there are problems with the cloud model. Recent studies on data-cloud services have shown that they may not be the right choice for every type of business. For large businesses, or medium-sized businesses with special requirements, purchasing and maintaining the data application themselves will deliver a stronger ROI. I expect that this same type of result will apply to the cloud PBX world. Indeed, from everything I've been able to ascertain, the largest percentage of early adopters in the cloud PBX world has been in the SMB category.

So how will the cloud PBX be able to grow above Centrex's 20 percent market share? First, by innovating on features over and above Class 5 voice. Second, the providers of the service need to leverage the cost-cutting benefits of IP architectures to offer their services at a low monthly price point. The old Centrex world was bound by the physics of TDM telephony, which kept prices relatively high. TDM switches cost $X and can supply Y services within a bounded geographic area. IP switches cost $X and can supply more than Y services worldwide. The operating costs are also lower for an IP switch versus the traditional switch. The IP world will be able to lower the traditional Centrex price points substantially, and the laws of supply and demand will take care of the rest. I think a great case in point is Microsoft Office 365 which is $27 per month per person. With this you get not only your voice features through Lync, but the entire Office suite. Compare that to AT&T's $25 per month Centrex charge, with which you get only voice features.

With those kinds of economics, it's clear that more people will move to the cloud than have previously. As such, I predict that we will eclipse the 20 percent market share, though I doubt it will ever get above 50 percent.