Large enterprises, which historically have used significantly more robust voice systems than small and medium businesses (SMBs), have long been the focus for VoIP vendors. However, this is about to change.
As voice systems continue to move away from proprietary hardware and into software solutions, it becomes easier to produce cost-effective full-featured solutions for SMBs. As IP telephony vendors reach the saturation point with the first deployments of IP in larger businesses, the SMB voice market is poised to see a resurgence.
This renewed SMB focus will initially lead to further fragmentation of the market landscape, both of the vendors and of the solutions offered. At the same time, it will be an opportunity for vendors to increase SMB market share.
LARGE ENTERPRISES HAVE BEEN THE QUICKEST TO ADOPT IP VOICE
When an enterprise today is considering modernizing its voice system, one key question is asked: What is the state of the data infrastructure? Because large enterprises tend to upgrade their data equipment more often--typically four years for a wiring closet switch--and usually add more features with the upgrade--such as Gigabit Ethernet, power over Ethernet (PoE), security, and enhanced quality of service (QoS)--larger enterprises are generally better prepared for the adoption of IP telephony.
Small businesses, on the other hand, often keep their data equipment in excess of six years, and their purchases tend to be less feature rich. Because of their older data infrastructure, most SMBs are burdened with the cost of purchasing both a PBX and newer data equipment in order to create a reliable converged network. Even the simplest deployment of VoIP to the desktop requires significant intelligence in the data network to ensure voice quality.
With large enterprises better positioned to adopt VoIP, and possessing a larger addressable market, most vendors initially focused their development efforts on IP-based solutions for larger enterprises. Their efforts have paid off.
Figure 1 shows the faster adoption of IP among large enterprises. In just the last two years, the delta between the percent of IP lines in the large and SMB segments grew from just 20 percent in 2005 to over 30 percent in 2007. In 2007, more than half of the lines shipped into large enterprises were IP, as compared to only 25 percent for SMBs. IP lines in large enterprises have grown by 10 percent annually each of the past three years, while SMBs have increased their IPT lines by only 5 percent annually in this three-year time period.
Clearly, large enterprises have been faster at switching to IPT, but we believe this diverging trend of adoption rates between large enterprise and SMBs will begin to change this year.
VENDORS ARE NOW REFOCUSING EFFORTS ON THE SMB
Now that territories in the large enterprise space have been staked, vendors are switching their focus to the next big greenfield opportunity: SMBs. While they were concentrating on capturing business with large enterprises, most vendors did not significantly change their offerings available to SMBs. So, despite new technological innovations, the divide has remained between features and functions on voice systems targeted at larger businesses versus those targeted at small businesses. This gaping hole has encouraged more vendors to enter the SMB race and to more aggressively develop SMB solutions.
Despite significant consolidation among vendors in the SMB space over the past three years, there are still more than 40 vendors competing for SMB voice dollars. Further illustrating the divided landscape, the top six IP telephony vendors--Alcatel-Lucent, Avaya, Cisco, NEC, Nortel, and Siemens--are responsible for only about 50% of global SMB line shipments, compared to more than 70% of global large enterprise line shipments (Figures 2 and 3).
