Mid-Market Is 28% of Hosted PBX Sales and Accelerating

The hosted PBX mid-market is the second largest one for cloud PBX, and it's picking up steam. It now accounts for 28% of all hosted UC licenses, according to a new Eastern Management Group report "Worldwide Hosted PBX Market 2017-2022."

The Eastern Management Group defines mid-market businesses as being between 50 and 1,000 employees. The mid-market is flanked by the small market, which accounts for two-thirds of licenses sold (see related No Jitter post), and the enterprise market (companies with more than 1,000 employees).

The mid-market is the flagship for many of the best-known UCaaS vendors. Why is that? Below 50 employees, hosted PBX sales are defined by small systems, small dollar sales, small profit, small follow-on sales, and big dollars spent to support pretty much everything. The enterprise hosted PBX market entails a rather long sales cycle and is often attractive just to those customers already using cloud for other applications.

The mid-market is different. First, it's gaining converts. In a recent Eastern Management Group study, 25% of all mid-market IT managers, including those with and without hosted PBX, said hosted PBX would be used for most corporate communications in five years, irrespective of the type of PBX in use today. In other words, mid-market hosted PBX is in the early growth stages.

Second, monthly recurring revenue (MRR) for hosted PBX can be around $4,500 for the mid-market customer, and that's financially attractive to sellers. These customers buy more profitable add-on or pull-through services to supplement the UCaaS seat licenses purchased in the initial sale. Managed services, third-party services, and systems integration are a few pull-through examples. Overall, mid-market service revenue is growing 18% yearly, and not infrequently 30% for some vendors.

Third, channel partners like selling to mid-market customers, where the sales are bigger than in the small market, customers have more locations for SIP trunk sales, commissions are bigger, and the dealer might possibly be selling cloud PBX to an own existing IP PBX customer.

Preferred Service for Mid-Market Customers

Mid-market customers may receive preferential service from vendors all too glad to provide it. Based on our research, examples of such service include:

  • Flexible contracts
  • Field staff to manage mid-market customers
  • Specialized mid-market sales and service teams
  • Dedicated sales force
  • Specialized contact center support
  • Cradle-to-grave life cycle support
  • Managed separately from small customers
  • Permanently assigned technology manager
  • Direct NOC access with tier 3 support
  • Single point of contact (SPOC)

It would be inaccurate to report that all mid-market hosted PBX customers revel in their vendor experience. Just 82% like the support, and 79% are satisfied with the vendor's contact center, although customer satisfaction varies considerably from provider to provider. Keep in mind that dozens of providers aren't specialized enough to meet the product and service needs of all mid-market customers. With hundreds of UCaaS providers, customers must be discerning when making vendor choices. Some UCaaS vendors, such as West Unified Communications, Fuze, and Vonage Business, expressly focus on the mid-market. This can be good for the larger customer.

Our experience is that administrators and IT managers should identify a half-dozen or more excellent candidates. Then investigate the kind of support each will be providing before signing on the dotted line.

This article is based on Eastern Management Group's hosted PBX vendor consulting experience and the company's extensive "Worldwide Hosted PBX Market 2017-2022" report. For any questions ask our researchers.