Down but not out - Industry Trend or Event

Communications News, May, 2001 by Sean Kelly

While several studies point to an increasing number of companies switching from traditional to IP PBX systems, the traditional PBX is not going the way of the dinosaur--yet. IP-PBX and other alternatives are gaining ascendancy among enterprises. Traditional PBXs, however, are still a long way from becoming museum pieces.

The Phillips Group says 17% of U.S. businesses began implementing IP LAN telephony in 2000 to replace or transform existing phone systems--30% more than previously anticipated. The study also projects that the percentage of enterprises likely to adopt the new technology will increase to more than 80% in four years. Enterprises that have invested heavily in their traditional PBXs are not necessarily rushing to scrap their systems although they may upgrade them with server-based technology.

"Large financial institutions are more reluctant to replace their PBX systems because it is a much greater investment," notes Peter Buswell, COO of COM2001.com, which makes an IP-PBX unified messaging system. "They are, however, implementing departmental servers for areas such as customer service and outside sales reps. Small and midsize companies have less of an investment in PBX systems, so they are migrating toward server-based technology."

According to Buswell, some of the factors behind IP telephony's growth among enterprises are: costs of managing separate data and telephone infrastructures; toll reduction and remote office integration; and growing demand for managed data bandwidth to drive multi-media applications, which has created space that voice can fill--improving the return on investment for a voice-over-IP system.

The Yankee Group projects that IP PBX new extension shipments will grow from just more than two million in 2001 to about 12 million in 2005, surpassing traditional PBX-KeySystem-Centrex extension shipments--which will decrease from 18 million to about 11 million.

The old PBX system will not be disconnected anytime soon--thanks to a good track record and end-user apprehension.

"Traditional PBXs are proven and reliable," says Dan Dearing, vice president of marketing for Nextone, which supplies voice virtual private network (VPN) capabilities to service providers, allowing them to offer VPN services to enterprises. "The thought of migrating users from an existing PBX is not relished by many telecom managers, since user behavior will have to change. In addition, the cutover can be messy--users are not happy when phone services stop."