AMI: IP Telephony Grows in the SMB Space

AMI Partners writes – Although U.S. small and medium businesses significantly increased their use of IP telephony solutions over the past year, AMI-Partners still sees major growth opportunities ahead for vendors of products and services in this marketplace. A new report from AMI-Partners, titled 2004-2005 U.S. SMB Telecommunications Market Overview and Assessment, shows that 42% of small businesses say that they currently use or plan to use some form of IP telephony over the next 12 months, while for medium businesses it is even higher at 61%. AMI-Partners forecasts that in 2005 U.S. SMBs will spend nearly US$63 billion on telecommunications solutions, so the opportunity for IP telephony vendors to supplant even a portion of this spending is huge.
U.S. SMBs with multiple branch offices, large numbers of customers and suppliers, and higher percentages of mobile and telecommuting employees, are especially good candidates for IP telephony solutions, whose most well-known benefit is the substantial cost savings possible due to routing voice calls over digital and converged networks. However, in the long run they will also provide the platform for new kinds of real-time interactions that promise business benefits like improved customer service, easier access to information, and great employee productivity. For example, with the unified messaging and collaborative applications that are enabled with IP telephony, employee productivity can be significantly increased.
And medium businesses in particular will look to integrate voice communications into their business process applications such as CRM and ERP, with the potential for greater levels of bonding with customers and suppliers.
AMI’s research shows that U.S. SMBs possess a strong Internet
and high-speed network infrastructure, enabling them to take
advantage of the benefits of IP telephony. Among medium
businesses (those with 100 to 999 employees), the penetration
rate of broadband Internet access is nearly 95%, with DSL
service providers still holding a wide lead over the cable
multi-service operators (MSOs). Even among small businesses, 62%
of companies who own at least one PC are using broadband
Internet access today, with an 84% adoption rate predicted for
In addition, the bright economic outlook for U.S. SMBs is likely
to stimulate adoption of emerging technologies such as IP
telephony. Another factor driving IP-based telecom adoption is
the shrinking lifespan of communications products and services.
According to AMI, the average life of a phone system among small
businesses is less than three years. Many SMBs are ready to
replace their aging PBXes and key systems, and both the business
and the technology decision makers in these firms are open to
hearing about the many benefits offered by the new generation of
IP telephony products and services.
Success of IP Centrex vs. IP PBX
As for the potential among SMBs for IP telephony solutions in
the form of IP-enabled PBXes and hosted IP services – often
called IP centrex – AMI predicts that total spending among SMB
customers will grow by over 40% annually through 2009. “However,
the jury is still out on whether the incumbent local exchange
carriers (ILECs) and other service providers will be more
successful with hosted IP telephony services than they were with
centrex services,” said Janet Stone, director of AMI-Partners’
telecommunications practice. “Considering the richer and more
differentiated feature set available with today’s IP centrex
platforms, along with carriers’ greater sophistication in mass
marketing and use of channel partners to reach the SMB customer
base, there is potential for greater success today. And the
appeal of an outsourced phone solution with no upfront capital
expenditures and minimal ongoing staff support is even more
compelling in today’s business environment where companies must
focus on their core competencies.” However, this opportunity is
balanced by the reality that today’s service providers are faced
with intense competition from myriad IP PBX vendors with rapidly
evolving product lines and aggressive marketing and sales


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