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Hosted PBX Market Is a Whopping $20B

Hosted PBX sales exceeded 18% of the total PBX market this year. But the real story, according to a new research report by Eastern Management Group, is the whopping total worldwide addressable market (TAM) for hosted PBX UC, also known as hosted UC and UCaaS.


At 54 million lines/seats, the worldwide addressable market for hosted PBX in 2018 is conservatively valued at $20 billion by the Eastern Management Group, as detailed in the report, "Worldwide Hosted PBX Market 2017-2022." But the revenue opportunity is even bigger yet when taking add-on UC applications like contact center and video into account, as well as factoring in pull-through services, such as systems integration and managed LAN.

In a four-year study, the Eastern Management Group examined hosted PBX and its place in the larger world of PBXs. That broader market, which includes traditional PBXs, IP PBXs, hosted and hybrid cloud systems, and server virtualization, feeds the TAM for hosted PBX. Eastern Management Group data collected this year from 3,500 IT managers around the world shows that enterprise, mid-market, and SMB shoppers all evaluate hosted alternatives when acquiring any business phone system. The type of system being replaced, whether from Avaya, Alcatel-Lucent Enterprise, Cisco, or any other vendor, is immaterial to buyers; they all explore hosted PBX options.

Businesses in North America are the largest purchasers of hosted PBX. But the U.S. accounts for about one-quarter of the TAM. Today we're seeing large hosted inroads in Western Europe and APAC. In fact, the five-year TAM for hosted PBX is larger in Western Europe and APAC than in the U.S.



10 Areas Where Hosted PBX Investments Are Likely to Go
The large TAM for hosted PBX will expand the sources of capital and ratchet up the total amount invested in the hosted PBX industry. We're already beginning to see this happen. We expect the money to go to these 10 areas:

  1. Expansion of the hosted PBX industry across Europe and APAC, with some emphasis on LATAM
  2. New UC collaboration services and managed services for enterprises
  3. Transition or expansion of established hosted companies into the mid-market as well as the enterprise market
  4. Network rollout by hosted companies
  5. Channel investments for partner training and direct salesforce growth
  6. Buildout of routes to market (there are more than 15 of them)
  7. Conversion of remaining premises PBX companies into hybrid premises-hosted providers
  8. M&A -- larger companies acquiring small players, as well as private equity investments across the board
  9. Hosted PBX buildout by thousands of tier 1, 2, and 3 service providers
  10. Venture capital for hosted PBX startups

What Money Can Buy
New money is going to attract more businesses with better technology. Cash will enable existing vendors that have struggled with a basket of customers averaging 10 to 15 seats to win over the mid-market and enterprise segments. More network operations centers deployed domestically and internationally will improve service uptime and support. Operations expansion will put resources nearer the customer, not oceans away. Investment dollars will buy self-serve software development, particularly at tier 1, 2, and 3 service providers.

Lastly, market expansion increases the enterprise value of existing hosted PBX companies as providers and investors pursue acquisitions.

This is the first in an eight-part biweekly series featuring research from Eastern Management Group's exhaustive "Worldwide Hosted PBX Market 2017-2022" report. For questions about the hosted PBX study please ask Eastern Management Group researchers.