IP Telephony Sales Dip, But VoIP VARs Riding High
Andrew R. Hickey
The IP telephony market in North America dropped 2 percent from the fourth quarter of 2007 to the first quarter of 2008, according to Infonetics Research. In addition, the market fell 4 percent year over year, said Matthias Machowinski, an Infonetics analyst.
"Sales aren't falling off a cliff, but I think there's some hesitation in the marketplace due to the current economic climate in the U.S.," Machowinski said.
The picture's quite different in the VoIP trenches, however.
"Our VoIP sales have been up year over year about 20 percent, not down at all," said Don Gulling, president of Verteks Consulting, an Ocala, Fla.-based solution provider. "My theory on the overall sales picture is that the 'easy pickings' aren't plentiful and now we're earning the business a bit more. Larger deals are taking longer to close than they used to in my experience because customers are evaluating more options, looking for more info on ROI, and being more thorough during the buying process."
VoIP Supply LLC., a Buffalo, N.Y.-based voice solution provider, also continues to see steady month-over-month growth. Garrett Smith, VoIP Supply's director of business development, said the market downturn could be caused by the change in the type of customer looking for IP telephony solutions.
"We've hit a second wave of adopter of VoIP and that second wave seems a little more cautious about the technology," he said, adding that the new wave requires more education and deals are taking a bit longer to complete, pushing out sales cycles.
VoIP Supply has actually seen the size of its VoIP deals grow since last year, Smith said, when more SMBs were buying VoIP solutions. "Market growth has stalled because bigger deals take longer," he said. "But we're growing by leaps and bounds, and I don't see this marketplace slowing down. People still want this technology."
Verteks' VoIP sales have yet to feel the pinch of economic uncertainty, according to Gulling. "I'm not sure if economic conditions are the primary reason for the dip, but I'm sure that could be a factor in some customer segments, especially anything related to construction," he said.
Infonetics' Machowinski agreed, adding that the weakness in the North American market could likely be attributed to companies not expanding or building new locations. "Worldwide economic uncertainty could have a larger impact on this market [North America] than on others, since one of the prime drivers of PBX sales is the creation of new [businesses] and the expansion of existing businesses," he said.
Gulling said luck has also played a part. "In our business, we've seen steady growth because we've focused on sales and marketing activities-"and we've had some good fortune as well," he said. "3Com and ShoreTel have brought us in on deals that we've been able to close in a 90-day window."
The longer sales cycles definitely play a part, Gulling stressed. "What I'm hearing from other dealers is that their sales are generally up, but in some months and quarters they might be flat or slightly down due to the longer sales cycle," he said. "I'm hearing that sales opportunities are higher than usual, which would make me think that the extension of the sales cycle is the primary reason for the downward trend."
And while Infonetics found that IP telephony sales may be slumping slightly in North America, the market is continuing to grow elsewhere. Infonetics indicated that the worldwide enterprise telephony market inched up 2 percent between the fourth and first quarters, reaching $2.5 billion, with TDM, pure IP and hybrid equipment sales all posting low-single-digit sequential growth.