2010 was a PBX watershed year. It was a watershed not because businesses once again began acquiring PBX systems after being sidelined in 2009. Yes, that happened. But 2010 was a watershed because the force driving new PBX purchases was businesses' incentive to cut expenses. This is both counterintuitive and unique.
Businesses didn't have less to do in 2010, although many countries' economies suffered; they just had fewer people to do it. Unemployment was high in almost all developed countries. It was higher in every OECD (Organization for Economic Cooperation and Development) country, with the exception of Luxembourg and Germany (see figure below).
Buying a PBX in 2010 equated to a vote for ratcheting-up employee productivity. A new PBX, costing $1,200 per seat on average, gave companies permission to hold the line in other areas. That might be said to include payroll.
Productivity improvement drove 38% of all PBX purchases in 2010, according to an Eastern Management survey of IT managers. This was 15% more than those who got a new PBX to replace an "old one". Moving and company expansion were responsible for only a modest proportion of PBX sales worldwide.
Interestingly, despite the fact the developed world's economy remains stalled, global PBX purchases may continue to show resiliency. For how long? 2010 may just be the early stage of a PBX upgrade cycle for businesses that, barring the bottom falling out, could last for years.
There is clearly a PBX upgrade cycle going on. Eastern Management Group's latest survey of IT managers finds that depending on the size of business, between one-third and one-half of all organizations are already in a PBX upgrade cycle.
Is Your Business in a PBX Upgrade Cycle?
Global PBX Market
The global market for PBX systems in 2010 was $59 billion. This is $7.5 billion larger than 2009. We ascribe the growth to investments in improving employee productivity.
Global PBX shipments increased 14% to a total of 50 million lines or seats. While 2010 sales were strong in North America, growth in that region lagged behind both EMEA and APAC, which remained ahead in total sales as well as Y/Y growth (see pie chart below).
PBX Sales By Region
50 Million Lines Sold Worldwide in 2010
Source: The Eastern Management Group
Market Leaders
Seven companies accounted for about 80% of 2010 PBX sales. Cisco had the largest global market share at 19%. Avaya was second, controlling 15% of the market. Avaya's achievement was noteworthy because it represented a significant improvement over the company’s 11% global market share in 2009. Avaya's surge reflected a 54% year over year increase in PBX shipments for the company, including add-on lines to old Nortel systems. Avaya, which closed its Nortel acquisition in December 2009, had little sales assurance entering 2010, before elbowing its way to success.
Both Cisco and Avaya's 2010 global market share are less than their shares of the North America market which were 35% and 23% respectively. Why the difference? While both players have good distribution outside North America, hometown teams tend to perform well in their own markets.
In 2010 Alcatel-Lucent commanded an estimated 55% share of the market in its home, France. Siemens, a colossus in Western Europe, commanded 16% of the overall EMEA market in 2010.
In APAC, NEC and Panasonic collectively controlled almost half the market. We estimate Panasonic sold 52% of its worldwide shipments in Japan. Panasonic is the world's third largest supplier of PBXs and the dominant player offering inexpensive phone systems to small companies and office branches worldwide.
Aastra played out a novel strategy that gave the company 15% market share in EMEA. It achieved this by largely eschewing global strategies and tactics in favor of local everything. Operating with a decentralized model, Aastra's 2010 value was responsiveness to the local markets and the customers of companies Aastra acquired. These businesses effectively remain intact, retaining former product lines, installed base and distribution channels, even as they come under the ownership of Aastra. While Aastra comes across as a local play, it is also represented on global opportunities, since the Ericsson acquisition set Aastra up in 100 countries.
Source: The Eastern Management Group
9 out of 12 PBX Companies Did Well in 2010
A 2010 survey of IT managers by Eastern Management found that 56% acquired a new PBX only after receiving multiple proposals. This shows the majority of 2010 sales were up for grabs all year long. Put another way, 2010 assured no PBX company a place at the table at the onset of the year. Avaya and Cisco, while strong, faced off against what became impressive sales gains by NEC, Mitel, ShoreTel and others. At the end of the year 9 of the 12 leading PBX companies had increased their sales and fortunes.
How Eastern Management Analyzes the PBX Market
Eastern Management's 2010 PBX market analysis is based on 8,000 interviews with IT managers in more than 150 countries. Data gathering and fact checking is supplemented with the cooperation of PBX manufacturers and distributors. Eastern Management proprietary models and Monitor platform are used to identify 40,000 line items of PBX sales data by business size, industry and geography.
About Eastern Management:
The Eastern Management Group is one of the world's premier strategic research companies. By delivering product research, market research and analytical tools to clients, Eastern Management facilitates decision making by IT Professionals and Technology Companies.
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