The global Call Control (PBX/IP PBX) extensions and licenses market (excluding Micro PBX products) in the calendar year (CY) Q2 2016 continued to follow the expected downward trend and fell by 2% year-on-year, reports MZA.
The greatest declines were seen in the SME market (solutions ?100 extensions/licenses) as it fell by 3% year-on-year, compared to a 2% decline in enterprise (solutions >100 extensions/licenses).
MZA's analysis suggests that globally small businesses employing ten people or fewer are moving away from CPE systems and towards multi-tenant hosted services* at a faster rate and this was emphasised this quarter with the largest declines seen in solutions ?10 extensions/licenses, as it fell by 7% year-on-year.
Contrastingly in enterprise, growth was seen in solutions >1000 extensions/licenses, up 6% year-on-year, partially driven by virtualised platform sales to large enterprises that have multiple sites. For these types of businesses, single system solutions held in data centres* are projected to increase, according to MZA's recent forecast publication, and replace the combination of CPE Call Control (PBX/IP PBX) deployments multi-site enterprises previously deployed. Such enterprises are seeking to benefit from the technological advancements of virtualisation such as simpler centralised management and a single common platform.
*Note: All extensions/licenses deployed on premise or within a public or private multi-instance or single instance environment are counted within MZA's Call Control (PBX/IP PBX) analysis, multi-tenant services are excluded. An additional service on Hosted/Cloud Business Telephony will be published later this month and provides insight on trends for deployment models for single-instance and multi-instance call control solutions together with multi-tenant services.
Despite the proliferation of pure mobile and multi-tenant cloud services, it is important to stress that any directly related significant declines observed due to these technologies have been generally restricted to certain mature developed markets where these services have been launched and promoted by network operators.
Although harder to quantify, MZA's analysis suggests that continued economic and political problems have played a greater part in the falls in the global Call Control (PBX/IP PBX) market in recent years, with business investment in the regional markets of Latin America and Eastern Europe hit the hardest.
Business confidence in emerging markets picked up a little in Q2 2016. Anxieties about a short-term downfall in China's growth have diminished and the related rise in commodity prices in Q2 2016 has taken some of the worry off commodity-producing economies, particularly in MEA. In developed markets, however, business confidence fell again in Q2 2016 and the UK's EU referendum was an important influence, even before the vote itself. Business confidence in the UK in Q2 2016 was at its lowest levels in over four years, and the uncertainty appears to have affected the rest of Western Europe as well.
The pick-up in business confidence in emerging markets, however, has not been matched by an improvement in capital expenditure and in every region there are far more firms scaling back capital investment rather than increasing it. For many vendors recurring revenue is more commonplace even for on premise deployments and essential in order to arrest continued CAPEX revenue declines. As a consequence of global Call Control (PBX/IP PBX) market value declines, as projected in MZA's recent forecast analysis, further consolidation in the Call Control (PBX/IP PBX) market can be expected in the coming years.
In recent quarters, business investment has been hampered further by price rises due to exchange rate fluctuations, and largely any significant growth in the leading global manufacturers' shipments witnessed in Q2 2016 was constrained to vendor's home markets.
Sequentially, the market rose by 9% quarter-over-quarter, although this should be of little consolation to manufacturers hoping for a recovery to the higher historical volumes of the past. Seasonality tends to mean stronger volumes in the second quarter of the year compared to the first quarter. In the case of Q2 2016, volumes were set against significantly low quarterly volumes in Q1 2016**.
For the first half of the year, global volumes are down 4% year-on-year, closely in line with MZA's forecast analysis published this August.
**Note: Q1 2016 volumes were the lowest global volumes since Q2 2009
In EMEA, Call Control (PBX/IP PBX) market volumes fell by 7% year-on-year. The increasing political and economic uncertainties in Western Europe helped to drive the regional volume levels downwards once more with extensions/licenses falling by 5% year-on-year. Middle East and Africa, notably affected by recent declines in oil tax revenue in the Gulf region and falls in tourism in North Africa, saw volumes fall by double-digits. The Eastern European market fell again against extremely low historical volume levels in Q2 2015. The Russian market continued to drive the decline, as it fell by 20% year-on-year, with international vendors witnessing greater declines in the country, as the Russian government continued to push the platforms of local vendors.
Following a slow start to the year, strong sales in solutions >100 extensions/licenses for market leader Cisco and top three vendor Mitel in the United States helped to see the North American market grow by 4% year-on-year. Within the enterprise market in the United States, growth in the established virtualised platform market helped to drive overall market growth in the quarter. Asia Pacific enjoyed a third successive quarter of year-on-year growth, driven by NEC and Huawei who enjoyed double-digit growth in the region. Price fluctuations, inflationary pressures and high interest rates continued to impact the Latin American market, as it fell by 23% year-on-year.
Competitive Landscape - Q2 2016
With Q2 2016 marking of the end of Cisco's fiscal year Cisco's collaboration revenue grew by 6% year-on-year, when adjusted for the sale of its SP Video CPE business last year. In terms of Call Control licenses, Cisco witnessed a strong uplift in the United States as it retained its 12% share and the first position it held in Q2 2015.
Against Q2 2015, NEC again witnessed strong double-digit growth in its home market of Japan, as it gained a percentage point in global market share to supplant Avaya to take second position and an 11% market share.
Home sales in home markets was an especially significant factor in the performances of the leading vendors, with Avaya dropping a position with a reduced 10% share, down one percentage point. Despite a better performance against the market internationally than both Cisco and NEC, Avaya's overall volumes fell in the United States. Meanwhile, Huawei overhauled Mitel and Panasonic, largely through increased sales of its eSpace platform in China.
Mitel had a good quarter in its core markets outperforming the market and retaining fifth positon, notably its volumes in North America and Western Europe grew as a consequence.
Panasonic remains a true global player with one of the most extensive distribution networks globally and witnessed decent growth in Q2 2016 in a number of emerging markets in MEA and Asia Pacific. Panasonic repeated its Q2 2015 share of 8%, despite falling to sixth position. Alcatel-Lucent Enterprise, Unify, Microsoft and Samsung completed the global top ten.
In solutions ?100 extensions/licenses (excluding Micro PBX products), NEC overhauled Q2 2015 market leader, Panasonic, to take first position although both vendors collected 15% market shares. Avaya, Mitel and Alcatel-Lucent Enterprise remain in third, fourth and fifth positions respectively.
Cisco comfortably led the >100 extensions/licenses market in Q1 2016, with a market share of 20%. Huawei supplanted Avaya for second position as it took a 14% share up two percentage points.
World IP Extensions/Licenses Market
IP extensions/licenses grew by 4% year-on-year with TDM extensions falling by 8%. Global IP penetration (% of IP extensions to the desktop out of total extensions) rose to 53% in Q2 2016 from 50% in Q2 2015, aided by strong growth in North America and Asia Pacific. IP penetration fell against Q2 2015 in MEA leaving the region with the lowest IP penetration rate globally at 35%.
Cisco continued to lead the global IP licenses market with a 20% share, with Avaya in second position on 14%. Mitel retained third position ahead of Huawei and Microsoft.
Note: This analysis refers to user license/extension volume performance, due to the fact that this is the key performance indicator provided by all contributing parties, with no vendor providing sector specific analysis of revenue performance.