“The top six vendors account for approximately 60 percent of the market and are fiercely competing amongst themselves. IP (Internet Protocol) telephony continues to replace traditional PBX (private branch exchange) systems, but price pressures have diluted the additional revenues expected of IP telephony, hence contributing to the overall tepid revenues,” notes Frost & Sullivan senior research analyst Anoop Manghat.
Countries such as Australia, India, Thailand and the Philippines however displayed strong growth in Q2, with the top vendors capitalizing on these growth markets.
Of the product segments, PBX and KTS (key telephony systems) bore the brunt of the slowdown with a 3.0 and 2.6 percent (respectively) dip in revenues quarter-on-quarter. The IP telephony (IP-PBX) segment registered a high growth of 6.5 percent in Q2 2006, as IP continues to replace traditional telephony. The preference for IP-based solutions is expected to sustain the future growth of this segment.
As it stands, IP telephony endpoints and digital handsets are at near-equal prices as part of the vendor push, and as replacement trends pick-up over the course of the year(s), the segment is expected to gain momentum; but not without challenges to match. The diverse regulatory environment across Asia Pacific continues to restrain IP adoption, particularly in countries such as India and China.
The intense competition is further fuelling price declines in enterprise telephony hardware, forcing vendors to continually explore new revenue streams. Moreover, applications such as unified communications are yet to generate the requisite customer adoption, and vendors will have to position offerings with a strong business case tailored to customers’ needs.
“Intense competition in the market is reflected in the downward pricing trends seen across customer segments in the region,” says Manghat. “Success in the marketplace will require the right pricing and distribution model for the SMB (small and medium business) segment, while moving away from mere box-pushing to up-sell service expertise and vertical-specific applications.”
With vendors, distributors, telcos and Internet service providers (ISPs) all vying for the same customer dollar, vendors in the Asia Pacific enterprise telephony market need to clearly articulate a strong business case showcasing the benefits of moving onto an IP platform. Although cost savings may continue to be the principal driver for migration to IP, garnering greater mind- and market share in the long-run will require demonstrating the larger benefits of the platform such as global connectivity, mobility, integrated communications, and customized applications.
