Which PBX Manufacturers will Survive?

October 17, 2007

The following is a sidebar to the Publisher’s Outlook Column Microsoft’s Big Unified Communications Launch in the November, 2007 issue of Unified Communications Magazine.

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There are many PBX companies – well over 25. I am surprised how many of these companies survive “under the radar” thanks to their strong dealer network. Telephony is an interesting business in that relationships can be more important than technology and, oftentimes, price.

Having said that, it is obvious that more and more companies will start looking for UC solutions and not just a plain vanilla IP-PBXs. This means every PBX company must immediately have ready UC solutions either capable of adding value on top of Microsoft’s solutions or else sold as a viable alternative. They must find a way to position themselves for the future and convince customers they are leading, not trailing, in UC technology.

From there, they need to start producing leading-edge software. In fact, the PBX business is becoming a software business. Over time, PBX companies will either adapt or go away. Microsoft will tell you that partners make $3 for every UC dollar they make. This is great news for partners but it does not mean that the PBX business won’t go away. It likely will, over time.

A secondary strategy is systems integration. PBX companies will have to beef up their UC SI and consulting practices.

If the PBX can be likened to the modern equivalent of the mainframe, and if we are confident that it will soon meet the same fate, let’s look at how the King of Mainframes, IBM, managed to keep evolving. Interestingly, IBM continues to grow rapidly despite the decline in mainframe revenue. That’s because IBM is now much more a software and consulting business relying heavily on open-source. What we can learn from this is that there is a great deal of money to be made in these spaces and software to make Microsoft’s solutions better is another great area you can play in.

Of course, one problem with this latter strategy is that if you’re really successful, Microsoft will likely compete with you in future releases.

So the business communications business will not go away; it will, however, transform. In some ways, Microsoft coming into the space from the desktop angle blunts Cisco’s network-based approach. This means PBX vendors can leverage Microsoft to sell a PBX as a strong Cisco alternative.

It is certainly difficult to predict precisely how this market will evolve but we know for certain the market will continue to transform at speeds never before seen. Just like natural selection in Nature, only those companies that can adapt to rapidly changing conditions will survive.