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IP Phones Will Never Beat 2008 Record
Perhaps “mourn” is too strong; its decline will be slow. Death in this industry is extremely slow--consider all the dead digital phones still freshly manufactured every day. So while death may be a point of contention or exaggeration, decline should not be. The IP phone peaked, and for the most part we missed the party.
The IP phone is a technical marvel. The technology in a basic VoIP phone today was quite literally a "pipe dream" back when Amazon only sold books. But it isn’t enough. We now demand multifaceted communications from our devices. One of my favorite lessons in life (I like it so much I keep learning it) is that people don’t buy technology, people buy applications. And the IP phone never really delivered anything more than the digital phone experience. I've been saying that statement now for quite some time, and the response typically goes like this: Are you crazy? How can you say that? Digital phones were Cat-3. What about unified messaging? What about click to dial? Blah blah blah. Let’s just settle this right now--99% of the benefits, features, breakthroughs associated with VoIP have to do with either the desktop computer (dashboards, feature access, click to dial, etc.) or the IP enabled phone system (SIP trunks, IP trunks, unified messaging, click to dial, etc.). The desktop VoIP phone, though technically radically different than its predecessors, remains both stagnant and confusing. The 1% of new value on the actual phone relates to the veritable microbrowser built into most IP phones. This powerful and secure browser has little practical use and it’s rare to spot applications in the wild.
"Stagnant and Confusing"--that really should be a contradiction. If phones have not changed, they should be familiar and simple--not confusing. That is actually a very key point; hold that thought--first an explanation of stagnant and confusing. "Stagnant" because you can go back to the 80s and find digital phones with features such as touch-tone dialing (with alphanumeric keys as long as you don't need a Q or Z), and all time favorite buttons such as Hold, Transfer, and Speaker. As I am sure someone said in the 80s--why mess with something good--so the basic design and use of the phone remains largely unchanged. Today's phones are improved--a top-of-the-line IP phone today can do hold, transfer, speaker with a touch screen and color display for about $800. In fact, I just saw a new phone that even has a photo screensaver that works almost as nice as the digital picture frame I got at Wal Mart for $40. So the core value of the phone remains basically unchanged for about 40 years. Almost all other technologies evolve. My typewriter is now a computer, my 1990s cell phone and my 2009 cell phone don't even appear to be related, my toaster-oven is now a microwave, but my rotary Bell phone still works great. Few desktop accoutrements don’t evolve (stay away from my HP-12C).
The "Confusing" part is no one really knows how to work their phone. PBX pop quiz: 3-way conference, you are talking to Joe and want to include Bob, you press Transfer/Conference (sometimes labeled simply "Transfer," sometimes "Flash" (my current Mitel phone uses an arrow, vertical line, and 3 heads) dial Bob, wait for Bob to answer (very important), but unfortunately the call goes to voice mail. What do you do? According to my extensive statistical research, 73.2% do the wrong thing. Now Bob calls you on line 2 realizing he missed your call, now how do you bridge the calls together? These types of features are available on virtually all PBX systems, but few benefit from them (don't get me going on call park). Here's another favorite: the PBX phone has a headset jack on the back (RJ-11); there are something like 316 headset models at the store; what is the probability of selecting a headset that A) will work with your phone and B) that you will like? This requires advanced Erlang mathematics, but the answer is exactly 8.43%. If a different store only has 20 models to choose from, the probability decreases to 2.832%.
Just to make my point abundantly clear, let's repeat these quiz questions with the cell phone--wow, 98.6 (normal) can abort a 3-way call successfully, bridge a second call into a conference, and find a compatible and desirable headset for their phone. Can you hear me now? While the desktop phone is stagnant, confusing, and expensive; emerging technologies such as cellular phones and now our desktop computers are becoming quite intuitive, friendly, and powerful voice alternatives. Cell phones are killers, not just of pagers and payphones; they leave a trail of obsolescence in their wake. A potentially more relevant example is the home phone line. Around the turn of the millennium the home line flourished (remember the dire phone number shortage crisis). Now the home line is on the endangered list. The writing is on the wall--Microsoft compares the (IP) desktop phone to the obsolete Brother Word Processor, every major switch vendor offers a powerful soft phone, inexpensive SIP soft phones, and solutions that enhance the value of the cellular phone.
The desktop phone hit its peak; it will slowly decrease and simply fade away. The vast majority of VoIP phones only support 100 Mbps LAN connections; when the next upgrade (GB LANs?) goes mainstream, are organizations really going to replace all these phones with new faster ones? There is a wonderful place in the sky for obsolete communications devices--currently filled with smoke signals, telegraph machines, telex machines, pagers, and soon desktop phones. There are simply too many factors aligning against its survival; they are:
* Increasing voice capabilities of the desktop computer
* Virtual Number
* Increasing Need for Mobility
* Love Affair with the Cell Phone
Economy: The economy is slow. Spending has dramatically slowed and a FULL recovery does not appear in the near term cards. In a recent Walt Mossberg interview with Steve Ballmer, CEO of Microsoft, Ballmer described it as a "different recession;" normal recessions have dips and gains. In this case, it appears to be money that just needs to come out of the economy. We are really resetting the economy. We need to change our thinking, that today is normal and yesterday was a blue-bird.
The desktop phone will decline very slowly--probably over 20 years. My confidence referring to 2008 as the peak year in sales is largely due to the economic situation for the short term. Phone system sales have dramatically slowed. New system sales include more upgrades rather than replacements, and even replacements don't always include phones. When the economic dust settles and buyers go shopping again, they are going to find new offerings.
Price/Value: We all know the drill when it comes to technology--over time tech devices become faster, smaller, and cheaper--unless of course we are speaking of the desktop phone. Oddly, these devices if anything have gotten bigger and more expensive; but not more functional. Obviously some will take offense to that--today's phones have things like the aforementioned microbrowsers. The big improvements in phones over the past few years have been larger brighter displays, touch screens, and better speakers. The core functions--hold, transfer, redial, etc. remain largely unchanged. In fact, even the techno-fiction imagineers behind the television show "24" could not come up with anything for the high-end IP phones in the White House. Throughout the series, Jack and the President use all sorts of techno-fiction from Cisco to do their jobs, but the only thing those $600 White House phones could do (besides hold, transfer, redial, and speaker) was display the White House logo in rich detailed color. The reality is, the desktop phone is getting squeezed by the cell phone (see below) and the desktop computer. Its increasing price tag and limited functionality are beginning to smell. It won't be much longer for the CFO to ask why the organization is paying for multiple phone systems. The cell phone and desktop PC are multifaceted devices that do email, IM, voice, video, and more. They are highly personal devices and the obtuse desktop phone finds itself odd man out.
Commoditization: Commoditization is good for consumers; it means lower prices. Polycom has flooded their channel with IP phones to the point that dealers make much lower margins on the SoundPoint IP phones. In some cases, dealers are saying just buy your own phones--they can't afford the costs associated with inventory and warranty at such thin margins (but Polycom appears to be doing well). Phones represent a large part of the revenue and profit for the traditional manufacturers and dealers. PBX phones have been proprietary since the analog phone lost favor in the 80s. But as proprietary gives way to open SIP standards and offshore manufacturers, it is likely the switch vendors will focus their efforts more on their remaining proprietary technologies. The switch makers' conversations won't be about the phone any more--quite simply the phone will be removed from the value part of the conversation. Once the conversation and profit move elsewhere, so will the attention, focus, engineering (and demand). This is already starting.
Polycom, Snom, Aastra, and soon HP will be fighting over phone opportunities. Although Avaya, Nortel, Mitel and Cisco make SIP based phones, they typically aren't competitive on sales outside their platforms. The question is, can they remain competitive within their platforms as the industry migrates away from proprietary phones? Even if the answer is yes, it won't be at historical margins.
Increasing voice capabilities of the desktop computer: For heavy users, such as attendants, the computer replaced the phone years ago. But now everyday users are benefiting from phone applications. Anyone can dial a phone, but transferring a call directly to voice mail or muting a specific user on a conference call are tricky endeavors from a normal phone. Computers offer large displays, presence information, a full keyboard, and mouse. USB headsets work great. Add in portability on laptops and related communication solutions such as IM, video conferencing, and collaboration, and the desktop phone pales in comparison. Sure the phone could be strengthened, but since most phones are placed directly next to a desktop computer, why bother? At a minimum, desktop phones will become simpler if not fewer, pushing the high-end features to the desktop computer.
Virtual Number/Cloud: How important is the desktop phone when calls can be taken anywhere? Mitel's recent Series-X is a great example of this. Here is a traditional PBX player telling the world you don't need to buy Mitel phones with their latest offering. Just have it direct your calls to whatever phone(s) you use--desktop, cell, home, legacy. They don't care--and they will convert those phones into feature rich phones including ACD capabilities and other advanced features. Google Voice can turn a home phone into a reasonably rich office extension with click to dial, call record, unified messaging, conferencing services, and more. Intelligence is no longer needed in the desktop phone to get the features desired.
Increasing Need for Mobility: Remember when the cell phone was a status symbol? Only doctors had cell phones, they save lives. Now my 9 year old niece has one. The ultimate slap in the face; the high-end country clubs are now banning them; too Plebeian. So it becomes a simple logic test: if the requirement is everyone needs a cell phone and everyone does not need a desk phone; which do you solve first?
The modern PBX is now embracing the cell phone, even as far as seeing it as an actual extension. There are great solutions for partial desktop solutions--one is hotelling or sometimes called hotdesking. Various cubicles and offices have phones in them, they are courtesy phones until someone logs into them and makes them their phone. Other tools include cell phones and soft phones. Between these and other tools, a comprehensive solution can involve a reduced set of desk phones.
I Heart Mobile Phone: We love our cell phones. Blackberry phones were the first with broad email adoption and quickly earned the nickname "Crackberry" based on its users' inability to put it down. People work their cells everywhere; meetings, at the gym, in the bathroom, while driving. We use them for SMS, email, Twitter, and an increasing pool of applications that we can't seem to live without. The stalwart desktop phone remains an anachronism unable to change. QWERTY keyboards aren't desirable on desk phones and their numeric keypads are too limiting. They can’t easily synchronize with our desktops without several administrative and security issues that we don’t want to mess with. The phone remains an island and then is criticized for it. Corporate and personal spending on cell phones continue to increase, as does their utility.
Emotions aside, the cell phone is a powerful tool and we are increasingly working in mobile environments--not just as road warriors, but corridor warriors as well. Most smart phones today can already take the place of desk phone as a Wi-Fi SIP extension. Some even have the capability to hand off a call to the cellular network when moved out of range. That is just SIP; proprietary VoIP applications can't be much further away. Wi-Fi is tough on those batteries, but a DECT version could come too. Admit it, how many times do you use your cell phone at your desk because it is easier?
Apathy: This one is simple. No one cares. There is no Save the Desk Phone foundation. Though if the cell phone was endangered you can be sure a committee would be organized. The desk phone is loved by no one. The day the CEO announces there will be no more desk phones will raise a few eyebrows, but no tears will be shed. In fact, there may be a few parties. Many people have a passive hatred toward their phones.
The desk phone is getting much better. New codecs supporting wideband or HD voice, integrated video cameras, DECT technology, and better screens are improving the capabilities and experience of the phone. But overall sales will continue to decline due to both economic conditions and viable alternatives. The decline will be slow; there is no organized movement to kill the desktop phone. But it does appear that multiple forces are at work to ensure its decline. I watch old shows and see phone booths and pagers and realize how dated they have become. Soon, it will be the desktop phone that represents an era gone by.
Dave Michels is a guest prognosticator for NoJitter and maintains a blog at www.pindropsoup.com .