The PBX Market: How Bad Is It, Really?The PBX Market: How Bad Is It, Really?

An Infonetics report has tough revenue figures for the vendors--but the news is far from bleak for enterprises or the industry as a whole.

The top line on this Infonetics report on the global PBX market looks ugly--"tough times for enterprise telephony market"--but a closer read makes it look like pretty good new for enterprise customers, and maybe not-so-bad news at least for the domestic PBX market.

The news that's bad if you're a PBX vendor--global revenues fell 9% Q/Q and 10% Y/Y in 1Q2013--is of course good news if you're on the other side of that transaction. As Infonetics principal analyst Diane Myers puts it in the press release, “The big squeeze is coming from hyper-competitive price pressure all over, with average revenue per line down across the board." In other words, it's a buyer's market for PBX functionality.

Infonetics also notes the effect of the lagging economy in regions like Europe, though the relative strength of North America's economies has meant that, in Myers' words, "demand is actually flat-to-up in North America and Asia, reflecting uneven economic recoveries."

If you've been around the enterprise communications market for awhile, this is a familiar dynamic--demand for PBX capacity largely tracks the larger economy. That more and more vendors are fighting it out for this market, and are slashing prices to make the sale, is good for enterprises, at least in the short term.

Longer term, getting a great deal on a PBX from a company that down the road may be merged or acquired out of existence isn't such a hot prospect. So there's that to consider. There's also the whole issue of how much future the "PBX" has, though I think that this question is more semantic than technical. Calling Avaya Aura or Microsoft Lync a "PBX" may be the only way to make something like apples-to-apples comparisons among vendors selling voice capacity to enterprises, but neither of these products looks like a PBX in the old-time sense of the word.

There will always be private exchange platforms for managing enterprise communications connectivity--even if they're setting up and routing sessions as complex as video conferences and voice sessions that originate in office productivity applications. The only word in that acronym that truly may be outdated is "branch," since this control function is unlikely to live at individual dispersed "branches", in the sense of having a standalone appliance at each remote site.

So the bottom line on this Infonetics report, to me, is that demand for PBX capacity seems to be, actually, somewhat encouraging in the parts of the world where we have any right to expect it to be encouraging, and down where we'd expect it to be down. And revenue is down because competition is driving prices down.

And even that bad news for vendors is tempered by Infonetics' finding that UC revenues are up 21% Y/Y--though presumably off a much smaller base than the PBX market. All in all, to me this Infonetics report looks like a market in the midst of a very gradual, reasonable transition.

So, what do you think? Am I whistling past the graveyard here?

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