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Downgrading the Telephony System Forecast
I earlier forecasted that this year's North America Customer Premises Equipment (CPE) shipments would be about 10.5 million line stations, a multimillion decline compared to 2008, but based on the latest unemployment figures and projected forecasts it appears that even that forecast may be too optimistic. I have personally been tracking the CPE market for close to three decades and have determined that there is a strong elasticity factor between line station shipments and the overall economy, especially unemployment data. With unemployment rates expected to top 10% later this year I have revised my North America CPE line station forecast downward to about 10 million, almost a 30% decrease from last year. New system line station shipments are naturally affected by the overall economy, but especially by the credit crunch that restricts business start-ups and existing business expansion. The rising unemployment rate has a direct effect on add-on line station shipments. Small businesses that would otherwise purchase new systems are increasingly turning to hosted system solutions to minimize capital expenses, and large enterprises are forestalling new system purchases until the economy improves. Installed system upgrades, rather than whole system replacements (and new line station shipments), have been on the uptake. Cisco Systems, with a smaller aged installed customer base than most of the other market leaders, has been particularly affected by the economic downturn as evidenced by its significant quarterly decline during the first quarter of this calendar year. Cisco was a strong contributor to CPE market growth the past few years and its performance has significant impact on shipment totals.
It is worth noting that many market research firms have also downgraded their IT shipment forecasts during the past few months. For example, IDC now forecasts that in the United States IT spending growth is expected to be 0.9% in 2009, much lower than the 4.2% growth forecast last August. Telephony systems, in contrast to software and computing systems, have far longer usable lives and when overall IT spending goes down, telephony systems feel the crunch especially hard. The problem with aging telephony systems is that they are usually functioning too well to throw out when a simple upgrade or addition will usually suffice. For example, SIP trunking requirements can be easily accommodated using peripheral gateway equipment, and Unified Communications (UC) applications can be implemented using third party peripheral systems, e.g., Microsoft OCS or Siemens OpenScape.