Frost & Sullivan on the SMB Market for Premises-Based IP Communications
With the first signs of economic recovery, SMBs will start evaluating new communications infrastructure and applications to gain a competitive advantage.
My colleague Alaa Saayed recently published Frost & Sullivan's latest research on the SMB market for premises-based IP telephony solutions. He estimates that there are about 55 million Small and Medium Businesses (SMBs) around the world, with a total estimated workforce of about 3 billion people. Out of these, Frost & Sullivan estimates that only about 9.6 million business establishments (7.4 million firms and 2.2 million branches) belong to the carpeted-office category (i.e., excluding construction, manufacturing, retail and other non-office environments) that have business (versus residential) telephony lines.
Most of these small and medium-size businesses are just emerging from the turbulent waters of the global recession. Many of them have never been able to afford advanced communications solutions, and most put all their IT and communications spending on hold during the past few years. With the first signs of economic recovery, these SMBs will start evaluating new communications infrastructure and applications to gain a competitive advantage.
But while many SMB executives are familiar with IP telephony solutions and unified communications, most are skeptical of the value of these technologies to their businesses. They're still looking for hard evidence that upgrading their communications infrastructure will help them accomplish their business goals. If their current systems meet their immediate business needs, SMBs are in no rush to deploy next-generation technology.
That said, although the SMB telephony market shrunk in 2009 in terms of total line shipments, we expect SMBs to slowly adopt IP telephony solutions as credit markets and overall economic conditions improve.
The world enterprise telephony systems market is estimated to have shipped around 28.1 million total lines in the SMB space in 2009, of which 18.5 million lines, or 65.8 percent, are IP PBX lines. In terms of the current IP telephony installed base, Frost & Sullivan believes that around 25 percent, or around 1.88 million of the world SMB firms, have already deployed some type of IP telephony solution. The U.S. and Western Europe have the highest penetration rates.
IP adoption will continue its steady climb as more SMB organizations recognize the benefits of IP telephony and older telephony platforms reach the end of their useful life (obviously, as the installed base of older systems is replaced, new systems and add-ons will be IP as opposed to TDM). Today, most new system installations include at least a portion of IP users, with office workers almost exclusively on IP lines. Frost & Sullivan expects IP PBX lines shipped into the SMB space to enjoy a CAGR of around 12.2 percent over the next seven years, and IP telephony penetration to increase to around 31 percent over the same time period.