What's Driving SIP Phone SalesWhat's Driving SIP Phone Sales

Millions of analog and digital phones will be replaced.

SIP phone sales, corded and wireless, are growing steadily. Why is that? Research by The Eastern Management Group involving 17,000 information technology managers identified several drivers responsible for the growth of SIP phone sales, which are now more than 5 million devices a year. While there are multiple drivers, we'll look at five of them here: Unified communications applications, Microsoft, hosted PBX, analog and digital phones, and open source PBXs.

Unified Communications Applications--More than 85% of new PBX systems support the SIP protocol. This has opened a lot of options for the IT decision maker. With the trend toward unified communications and video, an increasing number of information technology managers say they are no longer willing to be locked into vendors that offer limited feature choices and a monolithic solution. Some of those surveyed noted there is nothing they can't do with SIP that requires a proprietary telephone. Many see proprietary as a closed garden for some PBX vendors. On top of that, with telephone sets historically representing half the cost of a new phone system, many information technology managers think a monolithic solution is now a less desirable path to follow.

Microsoft--They are a kind of a new player for enterprise UC. Microsoft has lots of IT managers thinking that the world is not just about the PBX giants of the past. Our research found 9.8% of enterprise IT managers using Microsoft for UC applications. By providing unified communications features, some of which score higher in Eastern Management customer satisfaction studies than competitors, Microsoft has caused many information technology managers to keep the door open for doing business with best-of-breed vendors.

Microsoft has opened an opportunity for SIP phone manufacturers. Several SIP phones are optimized or compatible with Microsoft, including phones from Polycom, Aastra, HP and AudioCodes.

Hosted PBX--Most hosted PBX sales, for now at least, are targeted at the small and medium business customer. Modeled after Centrex circa 1961, hosted PBX is new and therefore has a relatively small installed customer base. Hosted PBX accounts for less than 10% of all PBX endpoint sales. The market for hosted PBX, however, is undergoing significant growth.

There are around 100 hosted PBX service providers in the North America market, including every Tier 1 SP, plus a vast number of providers in other countries. Today's target customer for hosted PBX is a multi-location small or medium business (under 10 branches). The initial hosted PBX sale is often 1-3 locations and 10-25 SIP phones.

As the number of service providers offering hosted PBX grows into the thousands worldwide, so will grow the sale of SIP phones in all regions and vertical markets.

Analog and Digital phones--There are millions of analog and digital phones still installed. Many will need replacement. Digital has not gone away and information technology managers haven't gone totally IP. Therefore the replacement cycle will play out for at least five more years.

We expect the majority of these instruments will be replaced with desktop phones. Of course there will be greater choice of whether end users have a desktop, headset, soft client on a PC, soft client on a cell phone, or whether customers have a desk phone at all. Nonetheless, we anticipate a sustained and large opportunity for SIP phone sales for several years.

Open Source--Lots of new PBXs on the worldwide market are appliances built on open source software such as Asterisk, or other open source software and distributions. Collectively they represent a large market for SIP phones. Approximately 10% of new PBX systems qualify as open source. It's a trend that's hitting the low end of the market, with 75% of open source endpoints being on PBXs with fewer than 50 end users. Open source PBX appliances have an average of 54 phones.

Looking Forward--We are bullish about the market for SIP phones. As Eastern Management recently reported, there are opportunities for SIP phone manufacturers to capture 10% market share in a variety of world regions.

Now what can impede the growth of SIP phone sales? The world economy for one. The pace of PBX replacements and therefore SIP phone sales is influenced by economic conditions. So too is employment and hiring, which pulls through telephone set purchases. Another risk to SIP phone sales is soft client use on cell phones, which impacts the need for hard phones and may cost a lot less.

The Eastern Management Group's SIP research and market analysis is a global market assessment of SIP communications. Based on 17,000 interviews, the study is a market and competitive analysis by region, customer size, and vertical market. A report entitled SIP Market Size Analysis and Forecast 2013-2018 is available from The Eastern Management Group. For more information on the study and report contact: [email protected] or go to www.easternmanagement.com.

The Eastern Management Group is a global research and consulting firm established in 1979. The company is based in New York.

The Eastern Management Group is a global research and consulting firm established in 1979. The company is based in New York.