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SIP Phone Market Can Support More Manufacturers

8/29/2013
SIP phone market is large and growing.  Yet in every region of the world the door is wide open for an additional 2 - 4 phone manufacturers to capture substantial market share.  Based upon our research and analysis, some of the best opportunities exist in the United States, Canada and Western Europe.
 
The market for SIP phones is both large and growing. Yet in every region of the world the door is wide open for an additional 2 - 4 phone manufacturers to capture substantial market share.  Based upon our analysis, some of the best opportunities exist in the United States, Canada and Western Europe.  
An Eastern Management Group global SIP survey of 17,000 information technology managers and vendors, found that few SIP phone manufacturers have more than 10 percent market share in any region. In the U.S. three vendors, Polycom, Aastra and Grandstream have at least 10 percent share. In Canada there are two with this level of market share.  In Western Europe the number is three.  No region has more than four. We think 10 percent minimum market share is achievable for new competitors. In our opinion, every region of the world can well support 4-6 SIP phone vendors, each with a minimum of 10 percent share.  
Not that the SIP market is without strong players today based on our survey. No vendor approaches Polycom’s substantial market share of 46 percent in the United States. Aastra is a strong player in Canada. Yealink overshadows its competition in the Middle East and Africa. All these companies, as well as snom, are above 10 percent in at least two regions. Yet very few competitors have this kind of market share in several regions.   Only one competitor, Grandstream, was identified as having such penetration in all regions (with the exception of Canada).
While there are more than 50 SIP phone manufacturers in the world, the majority of these companies have less than 1 percent share. Many of them only sell to customers in APAC. 
Eventually every region may have 5 or 6 vendors with substantial market share, controlling better than 80 percent of the market.
What strikes one about the lack of formidable competition is both the large total available market size and substantial growth rate of the SIP phone market. Millions of SIP corded, wireless and softphones are purchased annually. Our research also shows SIP phone sales will at least double between now and 2018.
Just what has kept some obvious telephone set manufacturers out of the SIP market? At least a dozen manufacturers of proprietary PBXs only support their own instruments. Some say that to offer an open standard SIP phone invites competition and may result in loss of customer control.
What’s behind the substantial growth of SIP phone sales? From our interviews we identified many drivers. There are several we consider significant. The sheer number of analog instruments that are currently installed worldwide is massive. Their replacement over time is virtually assured and most replacement PBXs will use IP phones. Open standards and open source PBXs are another large driver. They represent more than 10 percent of all SIP phone sales.  Hosted PBX sales are a third driver and alsoare thriving. Hundreds of service providers are in the hosted VoIP market and that will grow to thousands of SPs in the near term. SIP phone sales can soar in this market. Case in point: Demand for hosted PBXs doubled in the past two years and yet still has not fully taken off.  Other drivers of SIP phone sales are unified communications, collaboration, mobility, and call center applications. These are all growing, and as they do so do the sales of SIP products.
The next wave of SIP phone vendors to occupy a sizeable share of the market could come from multiple directions. One would be PBX manufacturers whose current phones are SIP adaptable.   Companies like Cisco and Mitel, who may not aggressively target the SIP market, do have measurable SIP phone market share in parts of the world. Based on the customer surveys, it is common for IT managers eager for alternative solutions to repurpose these telephone sets.  
Another avenue available to SIP phone entrants is established PBX manufacturers entering a new market such as hosted VoIP or transitioning to open standards. These competitors can leverage an existing customer base, and an established distribution channel.  
Yet another group of possible competitors is established vendors that currently make telephone sets or phone systems for the SMB and SoHo markets. Some of these companies have experience selling low-margin products through established channels. 
Lastly, we conclude there are potentially big market share opportunities available to engineering-driven customer-focused manufacturers delivering applications in a new way, such as through customized and localized phone application development tools. Digium is doing some of this today with significant market share results.
The Eastern Management Group SIP research and market report is a detailed examination of each of the world’s seven regions. Based on 17,000 interviews, it provides detailed market and competitive analysis by geographic region, customer size, and vertical market. The report is entitled SIP Market Size Analysis and Forecast 2013-2018 and is being released this month.  It may be purchased from The Eastern Management Group. For more information on the study and report contact:jmalone@easternmanagement.com.
The Eastern Management Group is a global research and consulting firm established in 1979. The company is based in New York. Visit us at www.easternmanagement.com  
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