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Is There a Tomorrow for Yesterday's PBX Suppliers?

Nortel's bankruptcy announcement is another in the continuing shake-up of the traditional enterprise communications system supplier fraternity. This is the second major shake-up since the beginning of the open interconnection era that began 40 years ago.The first instance took place in the 1980s when GTE and ITT, the two biggest North American communications system manufacturers behind AT&T's Western Electric, withdrew from the market. Since the beginning of this decade Lucent Technologies (the manufacturing arm divested by AT&T), Siemens and Ericsson have each decided to abandon their roots of origin by spinning or selling off their customer premises communications business. Lucent's enterprise unit became Avaya; Siemens Enterprise Communications is now majority-owned by Gores Group; Ericsson's enterprise unit has been absorbed into Aastra Telecom (consisting of the former Intecom, Matra Communications, and Ascotel businesses). Nortel's future remains uncertain, but there is a distinct possibility that its enterprise and public network businesses may be sold or split into different companies down the road.

During the past decade Cisco Systems has muscled itself into the leadership position (if not yet in shipments or revenues, but in universal public perception) and two companies who have been on the periphery of the market are making their moves to establish strong central positions: Microsoft and IBM.

Neither of these two leaders in their respective fields, software and computers, respectively, are novices in the enterprise communications market. IBM once manufactured and sold its own PBX systems (the ill-fated 1750 and 3750 models in the European market) and also acquired Rolm in an ambitious move against AT&T in the mid-1980s, but its efforts quickly fizzled within a few short years.

Microsoft's first foray into voice communications dates back to its CTI TAPI platform of during the early 1990s. More than a few analysts are predicting that IBM and Microsoft may join Cisco as future enterprise communications leaders, replacing several or all of the traditional PBX system suppliers within the next decade.

There is yet another potential competitor who can rank with Cisco, IBM, and Microsoft as a first tier provider of enterprise communications solutions: Google. The long term shift from a hardware- to software-centric solutions for voice communications support benefits Google, as does the evolving concept of Cloud Computing. Is it possible that the traditional PBX system suppliers, none with a dominant market position, will succumb to a new guard of competitors? Cisco has proven that it is possible to leverage a dominant market position (data communications networking) to expand into the voice communications market and grab a large share of the market with a product portfolio filled with feature/function gaps. Microsoft's current OCS 2007 solution is where Cisco was about ten years ago, IBM's Unified Telephony is even further behind and Google has not even started, but time is on their side. The race is a marathon, not a sprint, and customers have shown a willingness to take a chance on new suppliers if they are large and strong enough to fulfill product promises.

It is also possible that Microsoft and IBM will not be able to make significant dents in the voice communications market and that Google does not even try. Avaya may continue setting the agenda for the traditional enterprise communications system suppliers and Nortel could emerge from bankruptcy a viable competitor. If I was able to predict the direction of the market with 100% accuracy I would also certainly use my forecasting skills to place a humongous bet on the upcoming Super Bowl and retire with my winnings to a life of leisure and debauchery. As Christopher Lloyds's character Dr. Emmett Brown said in the movie Back to the Future, the future is not yet decided, but shaped by our future actions. Keep tabs on No Jitter to see how it plays out (and don't forget to sign up for VoiceCon Orlando to attend my market update/analysis session).