Cisco sees growth despite shrinking enterprise telephony market

When a business has thousands of employees, it makes more sense to keep communications on-premises.

It’s hard to argue against the benefits of the cloud. Moving certain systems off-premises to a virtual environment can not only help reduce capital expenditures, but such a move can make critical resources more available for employees as well.

In recent years, an increasing amount of businesses have been making the switch to cloud-based solutions. This is having quite the impact on the enterprise telephony market. But, despite the slowed spending and implementation, industry leaders like Cisco are still seeing growth and opportunity.

On-premises telephony solutions are still beneficial for large companies.
On-premises telephony solutions are still beneficial for large companies.

Away from on-premises and toward the cloud
CRN recently reported that the on-premises enterprise telephony market will experience a decline in the upcoming years. Dell’Oro analyst Alan Weckel told CRN that this market will likely decrease from its estimated $10 billion in 2015 to $8 billion in 2019. It appears the industry hit its peak in 2007, when it reached a value of $16 billion.

A separate report from IHN Infonetics shows similar decreases in the PBX and UC markets. In the Q1 of 2015, PBX spending declined by 6 percent, and spending on UC applications fell 5 percent during the same time period, according to Channel Partners Online.

Much of this decline is due to the increasing cloud market, where today’s businesses are focusing most of their IT spending. Now, instead of implementing on-premises technologies, companies are opting for solutions that are accessible via the cloud and hosted by a service provider or third-party partner.

“Having premise equipment is less and less important. Those functions are just going to be integrated into other equipment or come from the cloud,” Weckel explained.

“Despite the myriad advantages of the cloud, there are some situations when maintaining on-premises infrastructures is still ideal.”

On-premises still beneficial for large businesses
Despite the myriad advantages of the cloud, there are some situations when maintaining on-premises infrastructures is still ideal. Large enterprises, for example, will likely move some portion of their solutions to the cloud, but voice and other communications platforms may be more beneficial if hosted on-premises.

“[O]n the enterprise side as you get to scale, the ability of having thousands of connections to the cloud for voice really doesn’t make sense,” Weckel noted. “Cloud makes sense for a lot of SMBs and the large middle-size companies, but when it gets to thousands of employees, it makes sense to have premise-based solutions.”

For this reason, Weckel and other Dell’Oro analysts are predicting that IP and PBX providers, including Cisco, will see growth in the large enterprise sector in the coming years. Some vendors like Cisco are making their on-premises solutions work for the cloud, opening up new opportunities for their offerings. Weckel predicted that others in the marketplace may look to take up a strategy similar to Cisco’s.

“The large vendors, a lot of them are growing through acquisitions and consolidation,” Weckel said. “If you look at Cisco, they were look at selling to cloud providers to grow. So using Cisco equipment for the cloud offering, that will be a strategy vendors will use to expand the market – so not selling to the premise but selling to the cloud.”

Despite a shrinking on-premises telephony market, Cisco will maintain its industry-leading position in the marketplace. Cisco is just one of a number of successful vendors in iT1 Source’s partner network. To find out more, please be sure to contact iT1 today.