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Overall premises-based PBX revenues continued to hold up in 2015, despite attrition in unit shipments, and the impact of substitution by hosted PBX, according to a new report by BMI-TechKnowledge.
The market showed signs of a recovery in 2015 in revenue terms, with the overall solutions market increasing by 16%. However, this is likely to be a temporary revival, says BMI-TechKnowledge senior analyst Selvie Naicker, the report’s author. On the whole, vendors reported a relatively good year in 2015, but many are experiencing a noticeable slowdown in sales in 2016 thus far, which may be partly attributed to general economic uncertainty. It also reflects the ongoing reality of a maturing market, which the longer term trend line clearly shows.
Within some specific categories average deal sizes have fallen; however, category shift from legacy PBXs to softswitch-based IP Telephony (IPT) systems has resulted in higher deal sizes in the blend, resulting in revenue growth despite declining unit shipments.
Hosted PBX
The report also covers Hosted PBX and Unified Communications, including disruptive phenomena like Skype, and notes that the substitution effect of Hosted PBX services on premises based systems is happening slowly but surely.
“A lot of the action is at the high end of the market,” says Naicker. “Vendors have reported a number of big tenders and requests for quotation for both premises-based and cloud hosted PBX options. In the end the former is generally selected, but the hosted option is certainly gaining traction.”
Leading platform vendors have solutions that can be deployed in either premises-based or cloud hosted configuration, or a hybrid of the two. Traditional PBX vendors are moving strongly into the hosted market, thus representing more of an opportunity for them than previously, when it was seen principally as a threat to their business.
Handsets – indicators of underlying growth
Overall desk phone unit shipments declined by 6% from 2012 to 2014, but showed signs of positive growth in 2015 with a 3% increase.
For the first time, 2015 saw sales of IP handsets overtake traditional analogue handsets, which can be attributed to a combination of falling IP handset prices, vendors pushing the product through the channel, and customers wanting to “future-proof” any new purchases they make. The hosted PBX market contributes to this growth in IP phones – which are not yet being ditched in favour of softphone clients and mobile phones connecting to the PBX through Wi-Fi.
IP handsets continue to dominate in revenue, which is forecast to grow at an average rate of 9% pa. The growth rate is moderated by ongoing price attrition for IP handsets; conversely, annuity revenue for Hosted PBX services grows more rapidly in step with the cumulative base. This is the real nub of the matter: hosted PBX players are cultivating an annuity revenue stream from their service model.
“We are approaching the stage when 10% of annual revenues will come from cloud hosted PBX services,” says Naicker. “If we factor in the projected annuity value of hosted PBX deals happening right now, we are already at the 10% level. However, the South African market lags behind the global market; for example, we are about four years behind the USA, and even more so when considering SME adoption, which is already quite advanced in that country, but still quite embryonic locally.”