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Mar. 10, 2009

Research firm Frost & Sullivan predicts that the number of hosted IP telephony lines will climb to about 3.6 million in five years from now. That number is higher by one million from actual numbers published last year.

Frost & Sullivan says applications providing the most opportunity include UC (Unified Communications) applications like chat, presence and conferencing call features, as well as business applications like content rights management, ERP and communications-enabled BPs (business processes).

The research firm also notes that, despite the obvious benefits offered by integration, significant technology enhancements to IP-based hosted solutions and extensive private branch exchange vendor channels do present some barriers to further market penetration, however.

F&S Global Program Director Elka Popova says "overall, small businesses will continue to be attracted to hosted IP telephony offerings primarily for cost-efficient voice communications, although some of them will also select a hosted offering for the ability to gain some access (limited or not) to a complete UC package from a single provider."

"On average, medium and large businesses will also appreciate the economies of scale provided by hosted IP telephony. However, they will also seek such solutions mostly so they can focus on their core business processes and gain access to enterprise applications and functionalities that they can test thouroughly without making a large capital investment."

But Frost & Sullivan expects that the North American market will continue to remain very fragmented due to low barriers to entry, limited demand for next-generation hosted telephony and IP-based services among the market’s Centrex customer base and the overall reluctance of local exchange carriers to boost market share for fear of cannibalizing their legacy service revenues, both short and long term.

F&S says IP telephony vendors will have to develop better channel strategies because most companies in the market are small, next-generation providers with a tiny geographic footprint and limited service support capabilities that have no established customer base or brand recognition.

The research firm also notes that the large majority of IP telephony vendors also lack the capital resources that are so vital to the industry.

F&S concludes that wireless service providers should expand and diversify channels and strengthen customer relationships based on specific portfolio requirements, and specific customer needs in their local markets.

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Source: Frost & Sullivan.