PBX market still up for grabs

New playing field: Niche players are entering the market all the time with new products on the back of a rise in UC technology

With accelerated consolidation and uncertainty surrounding major vendors, the PBX market remains a dynamic one for the large number of smaller players trying to muscle into the top tier.

A recent report from analyst MZA found that the UK PBX market grew four per cent year on year during the second quarter of 2008. The report claimed this was a robust performance, but warned that the full force of the credit crunch could hit the market around the turn of the year.

Mitel, Cisco and Panasonic are among the leading vendors, with Nortel on top of the pile snaring 16 per cent of the UK market.

But the Canadian company has had its share of problems of late.
Last month it dropped its revenue forecast for 2008 and predicted a second consecutive decline in annual revenue. Its share price sank to a 25-year low and staff levels now stand at just over 30,000 having once been more than 90,000.

Alcatel-Lucent is another major player to have endured a period of uncertainty after its 2006 merger, culminating in the resignation of chief executive Patricia Russo and chairman Serge Tchuruk earlier this year.

Breaking barriers
Vendor ShoreTel is one of the chasing pack keen to break into the market’s upper echelons. Chief executive John Combs told CRN he wanted to swell his company’s market share to 20 per cent to enable it to play at the top table.

“Our biggest competitor is not being considered in the evaluation and does not have the chance to share our vision with the customer. When we are included, we have a significant win rate,” he said.

EMEA managing director Mark Swendsen claimed the UK was a fertile battleground for emerging vendors. “Certain markets are controlled by a national incumbent, such as Siemens in Germany. They dominate and they have been able to slow adoption rates, which is what Nortel and Lucent were unable to do in the US.

“If you look at countries like the UK and the Benelux countries, they do not have dominant vendors.”
Iain Milnes, president of vendor Zed-3, claimed he was delighted to have secured a UK distribution deal with Siracom, but cautioned that routes to market could often be problematic for smaller players.

“Getting the attention of quality distributors is tough,” he said. “Going to a distributor who is selling Cisco or Avaya and telling them your products would be a useful addition to their portfolio is a hard sell. They do not want to jeopardise the revenue they are getting through a tier-one supplier.”

Milnes knows as well as anyone the challenges faced by emerging players after losing control of his previous company Zultys two years ago.
“It is really tough to make a name for yourself in the US or UK; marketing is expensive and breaking into distribution is difficult,” he said.
“One of the mistakes I made was having a product developed for the US and the UK and then not focusing enough energy on both of those markets.”

Unified communications (UC) software vendor Communigate has a hosted PBX offering and UK managing director Simon Paton claimed technological developments could help niche players gain a foothold.

“What we are seeing, particularly in the SME space, is people are looking beyond PBXs and voice over IP (VoIP). They are looking at UC and what the best platform is to deliver multiple applications on.”

Paton also claimed the market was still ripe for new entrants and bullish niche players.

Opportunity knocking
“New players are popping up every other week in the VoIP market. Some will rise and fall, some will rise and rise. People are always coming along with new products or entering new markets,” he said.

The view from nearer the top of the tree seems to differ somewhat.
Avaya chief executive Charlie Giancarlo recently highlighted his own company alongside Cisco, Nortel, Alcatel-Lucent, Siemens and NEC as the market’s alpha males.

He went on to predict the market would ultimately shrink down to two or three titans. “During the next year one of these names will go away,” he said.

“Within a couple of years, two or three more will follow.”

Giancarlo also singled out the more varied SME market as a key battleground for all PBX vendors. He said: “SME is a great opportunity for us because it is very fragmented.”

But Milnes contended that the market could still open up for companies such as his own over the coming years. “People in the US and western Europe are paying too much for communications products,” he said. “Prices will come down and the tier-one vendors’ market share will remain the same or go down.

“But, I will tell you a secret; in three years’ time, I do not think I will be as big as Cisco.”