In just-completed research, the Eastern Management Group finds that open source represents a much larger segment of the market than many people might have thought.

Sales of traditional PBXs and key systems have moderated in recent years. Experts attribute this to a variety of factors. Companies, they report, are just keeping their phone systems longer. The wave of Y2K replacements that flooded the market, now almost a decade later, are still in working order. Demand is affected by the economy; enough said. True, these are relevant considerations, but they largely miss the point.

Digium, Polycom, Aastra, Sangoma as well as other vendors inside the Open Source PBX business see what’s occurring from a different vantage point, and arguably would dispute the experts. And they would be largely correct. A market shift is underway, and has been since Open Source PBXs arrived.

As Asterisk and other Open Source projects evolved, users have multiplied from geeks only, to early adopters, to the mainstream. That’s mainstream and not backwater creek. And we are not just at a tipping point, we are well beyond that. Traditional telephone system manufacturers are now, largely unknowingly, competing for a bigger share of a shrinking market. And growing sales may be increasingly difficult for the largest names in the telephone business unless each takes share from the other. Granted, some traditional companies must see this happening, which may account for Nortel’s acquisition of Pingtel and the new Nortel Software Communication System 500. But that is not yet the norm.

Because Open Source PBXs came into being like a garage band, they were somewhere between discounted and booed by most everyone. That was the early days.

WHY IS THERE SUCH GROWING COMMITMENT TO OPEN SOURCE PBXs?

But here’s what recently got my attention. Last year I witnessed three companies, for each of which I’ve been on the board of directors, replacing their traditional PBX with an Open Source PBX. Two were moving, and the other wanted a pure IP solution, not TDM and not converged. The bottom line to me was that if all three transitioned to an Open Source PBX system, and were pleased with the outcome as each was, this must be a larger market than people give it credit for.

Why did they each choose Open Source? Not because I told them to, because I didn’t. And not because they are all technology companies, because each is in the far reaches of technology and has no stake in Open Source. Each made the switch to Open Source because, they said, it proved to be equal in quality to the best traditional telephone system and it was cheaper. Not just a little cheaper, a lot cheaper. So cheap that no traditional PBX or key system approaches the cost of an Open Source PBX. Open Source PBXs are typically 40% or more below the cost of a conventional telephone system

Their decisions got my attention, because cost has been the single biggest phone system decision influencer since the 1968 Carterfone decision. Cost changes everything. Competition, and the importance of cost as the buyers’ key decision variable is mostly why PBX prices have and continue to drop 5-10 percent annually. And if nothing can touch the cost of an Open Source PBX, there’s a big market people have just not been counting.

Since The Eastern Management Group, as a research company, has been tracking traditional PBX and key system shipments for 30 years through its Quarterly Monitor Reports, we wanted to be the first to size the market for Open Source (OS) PBXs, and we had the tools to do it.

Our biggest questions were the most obvious. How much of the total PBX and key system market is accounted for by OS PBXs? Are all OS PBXs small (some say it’s all fewer than 30 end points) or are systems being installed to more than 100 end points, or 500? Do average businesses, say in Banking, Education, Government, and Health Care use Open Source PBXs, or are all the buyers merely technology companies who can self install? And would anyone buy a second one?

Sizing the real commercial market for OS PBXs has historically not been done simply because it’s difficult. Open Source is free software. People download it at whim on occasion, just to muck around with. A lot of it makes its way into laboratories. Techies put it in their homes just because they can. Others download multiple copies, to get the latest version, never turning one into a phone system for their business. These are among the non-commercial implementations and have to be subtracted from the total number of downloads of Open Source software available on the Internet. We too had to address all that in sizing the market for business OS PBXs.

To do so we began by performing three discrete studies, totaling more than 7,000 surveys.

The first survey had two phases, the initial being a test/control group of No Jitter readers. Several hundred surveys were completed, allowing us to evaluate the survey questions and responses. In the second phase, we conducted surveys of 6,734 IT executives chosen from a proprietary database of more than 80,000 individuals.

The second survey consisted of telephone interviews with 51 dominant vendors in the Open Source PBX business. The third survey was a telephone survey of 100 VARs.

All survey data was incorporated into market models The Eastern Management Group has built over several decades to track and forecast the size of the PBX and key system market, for our report services.