Marty Parker
Marty Parker brings over three decades of experience in both computing solutions and communications technology. Marty has been a...
Read Full Bio >>

Marty Parker | October 25, 2011 |


Show Me The ($59B) Money! A Surprise Behind the Curtain

Show Me The ($59B) Money! A Surprise Behind the Curtain Vendor services, VARs, and OEMs are playing an ever-bigger role, and are making up more of the PBX market.

Vendor services, VARs, and OEMs are playing an ever-bigger role, and are making up more of the PBX market.

Last month, John Malone of The Eastern Management Group posted a report headlined, "Global PBX Sales Surged to $59 Billion in 2010." The article is well written and has a lot of information. I'm sure the complete report has even more value.

However, the report has been bothering me ever since my first reading. The $59 billion may be the right number, accurately reflecting the surveys of 8,000 customers. But, that number definitely is not the product revenues of the vendors shown in the market share rankings (including "Other" at 13%) on page 3.

During my years as a corporate strategic planner, one very smart VP taught me that I should never quote to him the total revenue of a market unless I could prove that number by looking at the major players in that market. Right! That was the problem. The $59 billion doesn’t match the major players' revenues.

Three of the twelve companies listed in the market share report are pure-play PBX companies that are either public (Mitel and ShoreTel) or have published financials (Avaya--see “A Perspective on Avaya’s Public Stock Offering”). As you can see in the graph on page three of John's article, these three companies comprise 20% of the total market share (4%, 1% and 15% respectively). Now, if you study those three companies' financials, the approximate product revenue is $3.598B ($0.57B, $0.14B, and $2.88B). If this is 20% of the market, then the total market is $17.99B. Since ShoreTel and Mitel are small percentages, if you use only Avaya at 15% and $2.88B, the total market estimate is $19.25B. This would be only 32.6% of the total market represented in The Eastern Management report.

So, we're looking for another $40 billion of revenue that is not product shipments by the PBX vendors. Some of this might be explained by all the other vendors having much higher prices for their products, but that doesn't make sense when over half the new system sales in the enterprise PBX market are controlled by competitive RFPs.

Thus, the challenge here: Show Me The Money!

By looking at a number of recent PBX RFPs that we have seen in our consulting practice, the answer comes into focus. The graph below shows where that other $40B seems to be.

Our estimate would have the other 67% of the market in the following three categories:

* Vendor Services at 7%: This includes installation services performed by the vendor (assumed at 20% of installation services; other 80% by VARs); first year maintenance contracts (usually required by the vendor for the software licenses); and additional-year maintenance (the customers likely report this as part of the cost in The Eastern Management Group survey, but actually is amortized in vendor financials, so this is really maintenance sold in prior years' sales).

* VAR Services at 34%: It seems that the VARs are adding more value than the vendors in the global PBX market. In our estimate, their contribution comprises markup on the equipment (the service of selling the products); design and installation services (which are showing up as 40%-50% of the product values these days, since IP Telephony is so complex to deploy and install); the VARs' share of first year and additional year maintenance (help desk, local dispatch, on-site techs, Tier 1/2/3 services, etc.); services related to non-PBX Unified Communications products; and services for customization of contact centers, auto-attendants, call flows, and UC products.

* Other Equipment Manufacturer (OEM) Products at 26%: Every PBX sale is accompanied by many other hardware and software products that are required for a complete solution. Customers buy from OEMs because either the OEM has best-in-class or corporate standard products, or the required products are not sold by the PBX vendor. Examples include: IP network equipment, gateways, SBCs, wireless access points, etc.; application servers (Windows, Linux) or virtual machine servers; UC products beyond the PBX such as presence/IM, collaborative workspaces, web portals, advanced mobility products, etc.; video conferencing and video end points; mobile Wi-Fi or cellular devices including tablets; management software for operations centers, reporting, and billing; and supplemental applications such as E-911, notification services, call recording servers, etc.


March 7, 2018

Video collaboration is experiencing significant change and innovation-how can your enterprise take advantage? In this webinar, leading industry analyst Ira Weinstein will present detailed analysis

February 21, 2018

Business agility has become the strongest driver for enterprises to begin migrating their communications to the cloud-and its a benefit that enterprises are already realizing. To gain this benefit

February 7, 2018

Enterprises are starting to grasp the critical importance of security and compliance in their team collaboration deployments. And once the risks are mitigated, your enterprise can integrate these n

March 12, 2018
An effective E-911 implementation doesn't just happen; it takes a solid strategy. Tune in for tips from IT expert Irwin Lazar, of Nemertes Research.
March 9, 2018
IT consultant Steve Leaden lays out the whys and how-tos of getting the green light for your convergence strategy.
March 7, 2018
In advance of his speech tech tutorial at EC18, communications analyst Jon Arnold explores what voice means in a post-PBX world.
February 28, 2018
Voice engagement isn't about a simple phone call any longer, but rather a conversational experience that crosses from one channel to the next, as Daniel Hong, a VP and research director with Forrester....
February 16, 2018
What trends and technologies should you be up on for your contact center? Sheila McGee-Smith, Contact Center & Customer Experience track chair for Enterprise Connect 2018, gives us the lowdown.
February 9, 2018
Melanie Turek, VP of connected work research at Frost & Sullivan, walks us through key components -- and sticking points -- of customer-oriented digital transformation projects.
February 2, 2018
UC consultant Marty Parker has crunched lots of numbers evaluating UC options; tune in for what he's learned and tips for your own analysis.
January 26, 2018
Don't miss out on the fun! Organizer Alan Quayle shares details of his pre-Enterprise Connect hackathon, TADHack-mini '18, showcasing programmable communications.
December 20, 2017
Kevin Kieller, partner with enableUC, provides advice on how to move forward with your Skype for Business and Teams deployments.
December 20, 2017
Zeus Kerravala, principal analyst with ZK Research, shares his perspective on artificial intelligence and the future of team collaboration.
December 20, 2017
Delanda Coleman, Microsoft senior marketing manager, explains the Teams vision and shares use case examples.
November 30, 2017
With a ruling on the FCC's proposed order to dismantle the Open Internet Order expected this month, communications technology attorney Martha Buyer walks us through what's at stake.
October 23, 2017
Wondering which Office 365 collaboration tool to use when? Get quick pointers from CBT Nuggets instructor Simona Millham.
September 22, 2017
In this podcast, we explore the future of work with Robert Brown, AVP of the Cognizant Center for the Future of Work, who helps us answer the question, "What do we do when machines do everything?"
September 8, 2017
Greg Collins, a technology analyst and strategist with Exact Ventures, delivers a status report on 5G implementation plans and tells enterprises why they shouldn't wait to move ahead on potential use ....
August 25, 2017
Find out what business considerations are driving the SIP trunking market today, and learn a bit about how satisfied enterprises are with their providers. We talk with John Malone, president of The Ea....
August 16, 2017
World Vision U.S. is finding lots of goodness in RingCentral's cloud communications service, but as Randy Boyd, infrastructure architect at the global humanitarian nonprofit, tells us, he and his team....
August 11, 2017
Alicia Gee, director of unified communications at Sutter Physician Services, oversees the technical team supporting a 1,000-agent contact center running on Genesys PureConnect. She catches us up on th....
August 4, 2017
Andrew Prokop, communications evangelist with Arrow Systems Integration, has lately been working on integrating enterprise communications into Internet of Things ecosystems. He shares examples and off....
July 27, 2017
Industry watcher Elka Popova, a Frost & Sullivan program director, shares her perspective on this acquisition, discussing Mitel's market positioning, why the move makes sense, and more.
July 14, 2017
Lantre Barr, founder and CEO of Blacc Spot Media, urges any enterprise that's been on the fence about integrating real-time communications into business workflows to jump off and get started. Tune and....
June 28, 2017
Communications expert Tsahi Levent-Levi, author of the popular blog, keeps a running tally and comprehensive overview of communications platform-as-a-service offerings in his "Choosing a W....
June 9, 2017
If you think telecom expense management applies to nothing more than business phone lines, think again. Hyoun Park, founder and principal investigator with technology advisory Amalgam Insights, tells ....
June 2, 2017
Enterprises strategizing on mobility today, including for internal collaboration, don't have the luxury of learning as they go. Tony Rizzo, enterprise mobility specialist with Blue Hill Research, expl....
May 24, 2017
Mark Winther, head of IDC's global telecom consulting practice, gives us his take on how CPaaS providers evolve beyond the basic building blocks and address maturing enterprise needs.
May 18, 2017
Diane Myers, senior research director at IHS Markit, walks us through her 2017 UC-as-a-service report... and shares what might be to come in 2018.
April 28, 2017
Change isn't easy, but it is necessary. Tune in for advice and perspective from Zeus Kerravala, co-author of a "Digital Transformation for Dummies" special edition.
April 20, 2017
Robin Gareiss, president of Nemertes Research, shares insight gleaned from the firm's 12th annual UCC Total Cost of Operations study.
March 23, 2017
Tim Banting, of Current Analysis, gives us a peek into what the next three years will bring in advance of his Enterprise Connect session exploring the question: Will there be a new model for enterpris....
March 15, 2017
Andrew Prokop, communications evangelist with Arrow Systems Integration, discusses the evolving role of the all-important session border controller.
March 9, 2017
Organizer Alan Quayle gives us the lowdown on programmable communications and all you need to know about participating in this pre-Enterprise Connect hackathon.
March 3, 2017
From protecting against new vulnerabilities to keeping security assessments up to date, security consultant Mark Collier shares tips on how best to protect your UC systems.
February 24, 2017
UC analyst Blair Pleasant sorts through the myriad cloud architectural models underlying UCaaS and CCaaS offerings, and explains why knowing the differences matter.
February 17, 2017
From the most basics of basics to the hidden gotchas, UC consultant Melissa Swartz helps demystify the complex world of SIP trunking.
February 7, 2017
UC&C consultant Kevin Kieller, a partner at enableUC, shares pointers for making the right architectural choices for your Skype for Business deployment.
February 1, 2017
Elka Popova, a Frost & Sullivan program director, shares a status report on the UCaaS market today and offers her perspective on what large enterprises need before committing to UC in the cloud.
January 26, 2017
Andrew Davis, co-founder of Wainhouse Research and chair of the Video track at Enterprise Connect 2017, sorts through the myriad cloud video service options and shares how to tell if your choice is en....
January 23, 2017
Sheila McGee-Smith, Contact Center/Customer Experience track chair for Enterprise Connect 2017, tells us what we need to know about the role cloud software is playing in contact centers today.