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February 02, 2010

How Big Will Unified Communications Be in 2014?

By Gary Kim, Contributing Editor

It is possible to argue that unified communications will be no smaller than $6 billion and possibly as high as $10 billion by 2014, and that might represent the hardware, software and systems portion of the market, not managed services or hosted services.

According to Dell’Oro Group, the total PBX (News - Alert) market is forecast to exceed $6 billion in 2014, but will not return to its peak of over $7 billion reached in 2007. Because most observers consider IP business phone systems to within the unified communications, or “UC,” category, sales of UC products alone will be in the $6 billion range.
To the extent that PBX sales are called “unified communications,” then the market is shrinking.
But UC, as a concept that by definition integrates formerly-discrete forms of communication, makes such estimates very tricky. Most people would consider managed telepresence services part of UC, as well as messaging solutions, fixed-mobile integration and hosted IP PBX services.
Some consider SIP trunking to be part of the UC market. Others might add voice revenues provided by telecom service providers, if those services include UC features. In a strict sense, even Google (News - Alert) Voice and Skype provide some UC functions.
The point is that it probably doesn't make much sense to lump all those products together, call them “unified communications,” and think we then know something useful. Competitors and other observers probably were better off when we didn't try to lump so many disparate products together in a single category. Nor is it helpful to “rename” legacy products “unified communications” and then count sales of such products as “UC” sales.
That makes actual analysis of what is happening more difficult, not less difficult. Of course, there could be other reasons for using different nomenclature. Suppliers always like to point out new needs to create new markets, then freshen up existing product lines to meet the new needs. But a strict replacement of “PBX” sales with “UC” would show a flat to declining market.
Adding in various other services can “show” that the market is growing. But what is growing are other products, not phone system sales as such.
Most would agree that unified communications, merging IP telephony, conferencing and collaboration, messaging and other forms of integrated information exchange, are getting more adoption in the enterprise.
According to ABI Research (News - Alert), the portion of those activities not directly attributable to “phone systems sales” was just $302 million in 2008, but will rise quickly to nearly $4.2 billion in 2014.
But it probably isn't too helpful for most people to lump everything that could possibly be calledUC into a single category, as this clouds more than reveals where things stand.
To the extent that carrier softswitch platforms can provide UC features and hosted IP telephony, should sales of carrier class servers, switches and applications be lumped into UC? And if so, does that actually tell us anything useful?

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Kelly McGuire

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