In Midst of an Upgrade Cycle, PBX Market Staying StrongIn Midst of an Upgrade Cycle, PBX Market Staying Strong

SMBs and Enterprises say they're buying, and increasingly, it's channel partners that are making the difference among winning and losing vendors.

In Eastern Management's most recent global purchasing survey of 10,000 SMB and enterprise managers, 50% reported they are either at the beginning or in the midst of a PBX upgrade cycle (purchasing, not simply evaluating). This should be good news for North America sales of communications equipment and software, for vendor companies and their channel partners. It is ratification that strong PBX demand should continue. Even competitors whose market share has been under siege can see that considerable new business remains to be had.

Each year, Eastern Management surveys IT managers to find markets of opportunity (i.e., end customer size, vertical industry, and geographic regions). Our most recent examination provides the strongest evidence yet that an upgrade cycle is underway. Interestingly, two years ago our survey found 34% of businesses were involved in a PBX upgrade cycle. While good for the time, it's been dwarfed by the present 1-in-2.

Role of the Channel
Do all manufacturers benefit from a growing market? Today for UC and PBX manufacturers, this isn't the case. What about the channel? Does adding more channel partners translate to more sales? Most definitely not.

Contrary to certain thinking, increased shipments is reflective less of the number of channel partners added as it is of the PBX manufacturer's investment in the customer's experience--and customer experience, in turn, absolutely is reflective of a manufacturer's spend (capital, labor, strategic effort) on the quality of its partner programs.

In 2011, three PBX manufacturers grew North America shipments. In our survey of 10,000 managers, these same three PBX companies--Cisco, Mitel and ShoreTel--also scored highest, out of all major manufacturers, in the critical customer experience areas of customer service and value (the other metrics include technology, installation, and management tools).

Customer experience is wrapped around the channel partner programs of PBX manufacturers. The programs become the engine for customer satisfaction and consequently market share growth. In the zero-sum game of UC and PBX sales, winners emerge at the expense of would-be winners. That is to say, winners in market share growth generally have well-structured channel partner programs.

A new Eastern Management market research report titled "SMB and Enterprise UC PBX Market to 2015" notes that manufacturers' channel partner programs are not just enabling but driving UC and PBX companies to far outdistance their competitors.

Though not the only variable to influence sales, partner programs make a sizeable difference in customer purchases, since 80% (or more) of all unified communications and PBX sales go through the channel. Manufacturers' direct sales forces play an ever smaller role, with many UC and PBX companies selling direct to as few as 200 of their largest customers, and even then using channel partners for fulfillment. The channel partner programs are what help to separate PBX market share growers from those not growing.

To increase PBX market share, manufacturer channel programs for UC and PBX must be high caliber, even for manufacturers targeting niche markets (e.g., SMB, vertical industries, and selected geographies).

Our examination observed that competitors successfully increasing market share have many strong aspects of their channel partner programs. Quality channel account management is critical for success. Then comes programmatic certification/specialization, training, manufacturer-provided support to the reseller, marketing support for the reseller, discounts, promotions, and financing for both the reseller and end customer...each of which elements must perform effectively.

Eastern Management's survey found customers expect increasing value coming from the resellers. Architecture and solution sales reflect greater customer value than box sales. Manufacturer ecosystems and channel partner third-party sales likewise add to customer value.

Some manufacturers are getting significant traction from their channel partner programs, and the evidence is reflected in sales performance. The message for PBX manufacturers is to build high-caliber channel partner programs that create a positive customer experience. For IT managers, the advice is to find the PBX manufacturers with the best channel partner programs.

John Malone is president and CEO of the Eastern Management Group. The study "SMB and Enterprise UC PBX Market to 2015" is part of Eastern Management's service Monitor Communications Solutions. By delivering product research, market research and analytical tools to clients, Eastern Management facilitates decision making by IT Professionals and IT Vendors.