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UCaaS Takes Backseat to IP PBX as Future Enterprise Platform

The old guard of enterprise PBX providers may not get off the hook yet, but they can breathe a bit easier. The majority of large enterprises with more than 1,000 employees will continue to use premises PBXs for most of their business communications through 2024, and possibly longer.
UCaaS, despite all its popularity and growth, shows modest near-term penetration in the enterprise. Why? The average hosted PBX sale is about 13 seats. Although enterprises buy the product -- like spackling to fill holes -- UCaaS remains the workhorse of small business. Enterprises are buying premises PBXs for 75% of their communications. After that, server virtualization weighs in as the most widely purchased platform. Not so much is left around for UCaaS, particularly once you get beyond chain-store retail locations.
In a new Eastern Management Group report, “Worldwide Hosted PBX Market 2019-2025,” more than 3,000 IT managers told our analysts about the PBX platform that will account for the majority of their companies’ communications in five years. The answer is premises PBX.
This year UCaaS will account for 7% of PBX sales to companies with more than 1,000 employees. In 2024 just 13% of enterprises will claim UCaaS represents the majority of their communications; this is a far smaller percentage than we project from small businesses.
However, in five years, almost 20% of enterprises will use server virtualization for the majority of communications. An additional 15% will use hybrid systems for most communications. As the table shows, these cloud technologies can fill in the spaces caused by premises PBX losses.
Chart showing type of PBX platform growth

Source: Eastern Management Group

The established big-dog enterprise premises PBX providers -- those companies that control most of the installed base -- should have little to worry about. Companies like Mitel already have a complete equipment and cloud portfolio. That’s true for other providers like Unify. Even smaller vendors like Vertical Communications have backfilled their product suites, in Vertical’s case by adding 8x8 for UCaaS. For any enterprise vendor without UCaaS today, and in the interest of time, there’s ready-to-roll CPaaS and white-label options.
Does your provider have a comprehensive PBX portfolio?
The premises PBX vendors serving the majority of enterprise customers are Avaya, Alcatel-Lucent Enterprise, Cisco, Huawei, Mitel, Unify, and NEC. Smaller PBX vendors have garnered substantial enterprise customer bases, too; Vertical, for example, provides PBXes to companies such as CVS, DoubleTree, and Stop & Shop. What every enterprise customer needs to understand is the nature of its vendor’s portfolio mix. Does it touch all the bases? With many PBX architectures and the rapid pace of change, every vendor must be able to deliver all of the following solutions today:
  • IP PBX
  • A path forward for traditional PBX
  • Server virtualization
  • Hybrid cloud
  • UCaaS
Where does that leave pure-play UCaaS vendors?
UCaaS providers are moving upmarket from small, to mid-market, to enterprise customers with more than 1,000 employees. Many pure-play UCaaS providers have enterprise customers today. Much of this traction is in the form of branch store systems like Taco Bell (Nextiva) and McDonald's (8x8). Will UCaaS vendors stay in their pure-play lane? That’s unclear. Again, what’s more critical for enterprise communications managers to understand is their vendor’s portfolio mix.
More information about the report “Worldwide Hosted PBX Market 2019-2025” is available from Eastern Management Group or contact [email protected] directly.