News
Issue #2003 - 15 (May 2003)
(Updated May 8, 2003)

TECHNOLOGY

2003 - The Year Of The IP Phone?

In this economy and in the business telecom market in general (both of which are down, as you likely know), so-called LAN Telephony (meaning business phone systems that are by their nature tied to the local business datacom network) grew in Station Set shipments some 60% over the previous year. In-Stat/MDR says this is the year where "when IP station shipments first exceed traditional PBX stations."

"This market's size is tied closely to two things: the size of the enterprise voice market and the percent of enterprise voice solutions that migrate to IP," says Brian Strachman, a Senior Analyst with In-Stat/MDR. 
"While the overall enterprise voice market is down, the percent of migrations to LAN Telephony is up, resulting in growth, and while few companies are scrapping perfectly good PBXs in favor of an IP system, an increasing number are choosing IP instead of a traditional PBX."

In-Stat/MDR has also found that:

• In 2001, 23.7% of enterprise telephone stations sold in the US were IP based, while in 2002 that number jumped to 46.3%. This stellar growth was predicated by improved products, increased numbers of traditional vendors offering IP, and a movement in the buying community towards future-proofing their networks. 
• Cisco Systems remains the 500 pound gorilla in the enterprise VoIP space (as well as the enterprise networking market) and there is no sign that will change in the near future. Cisco's sales constitute over 1/3 of the total market, with their closest competitor barely halving that amount. 
• Although the enterprise telephone system market was down by 18%, in 2002 from 2001, the IP PBX market continued to grow. Therefore, IP PBX is garnering a larger piece of a shrinking pie and every year an increasing percentage of the voice systems that are sold are IP. The IP PBX will continue to have success, particularly if the economy improves and the total number of enterprise voice system sales increases.

The report, "LAN Telephony 2003: IP or Nothing", looks at the overall LAN Telephony market, specific verticals, technology changes and market drivers. It includes a profile on the products and strategy of all of the major vendors, as well as market shares. It then forecasts revenues the LAN Telephony market by lines, systems, and revenues, through 2007. 

Source: In-Stat/MDR Report

MobileInfo Comments and Advisory: IP phones will stay as a novelty for the enterprise customers for some time. There is a lot of ground to be covered by IP phone manufacturers and a lot of software to be debugged before users can get the reliable and high-quality service that they are used to. Let us start with building the functionality in future PBXes and switches first and start trying these things out in niche applications. Some day in future (several years hence), we can start using IP phones on true end-to-end IP networks of the carriers and at still a later date, on enterprise IP networks. Are we putting cold water on IP phones? Not at all, we are just cognizant of the time it takes to turn a technology over, especially when we are used to the reliability of current voice networks networks. Nonetheless we must start somewhere. With more and more PBXes with IP phone support, we should start seeing limited action. Ever-increasing popularity of Wi-Fi and IP phones make the market more viable but also more complex. Can we build an IP phone that will work with LANs as well as on PBXes? NEC is doing that. Having said that, is anybody designing Wi-Fi networks with the assumptions that most of our phones might be IP-based. Not that we know of. At least the first version of WiFi networks will not support much of IP traffic.

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