Trends in the PBX equipment market - Part 1 - DrVoIP

From time to time a new technology comes along that causes a dramatic paradigm shift with significant economic impact. As it relates to the customer premise telecommunications world, there are a number of trends that have the potential of dramatically altering the telecom equipment market place. Many industry executives have witnessed the switching equipment transition from electro-mechanical technology to solid state and stored program control switching. Clearly the migration from circuit switch to packet switched technology is reaching Tsunami proportions. So what happens next? There are three trends coming into high relief on the technology adoption radar screen that will have significant impact on the telecommunications marketplace, the economics of the marketplace and ultimately define the employment requirements in that market place. I would summarize and simplify these trends as the commoditization of PBX hardware; the increased acceptance of SIP and the explosion of high speed wireless technology. The next few blogs will briefly examine each of these trends at the 100,000 foot level. This blog will take a look at the commoditization of PBX hardware. Unlike circuit switched technology, packet switched communications demands that the enormous economic investment necessary to the creation of high speed digital signal processing and the supporting semi-conductor technology be rewarded with high volume production. Production is a factor of demand and to increase demand, prices must be continually reduced. This reduction in price is achieved in large part by the adoption of the core technology by a wider base of equipment designers. This is an economic over simplification for purposes of blogging, but you do not need an MBA in economics to understand why the Apple Mac is now built on Intel chip technology. Nor do you need an MBA in marketing to understand the challenge of trying to convince an increasingly savvy consumer market that your brand of laptop is better than the other guys laptop brand! As goes the PC hardware market, so goes the media gateway market. Demand for gateway interoperability will make it increasingly more difficult to differentiate one box of DSP’s from another. For this reason telephone system manufactures will have to make a fundamental decision: are we in the the hardware business or are we in the software business? Are we planning to become the low cost, high performance provider of the VoIP building blocks? Or are we focusing on the applications (read software) that drive the need for building blocks? It is my assertion that you can not do both and be successful. A free market place will demand that “PBX” hardware be separated from “PBX” software. Consequently, the skill sets of VARs will be tested yet again. With the transition form TDM to VoIP, traditional PBX vendors had to develop network engineering expertise. In the near future, before many VARS have made this first transition, they will be asked to make yet another transition. Application level software integration expertise will become the underlying skill set demanded of the more successful VAR. So are you in the business of who can sell a ShoreTel SGT1 cheaper than CDW? Or are you in the business of executing the delivery of underlying technology and application solutions? Both the supply chain and the distribution channel will once again be redefined and that only question remaining is: just how fast will this transition occur?