Frost & Sullivan released a report last week on the progress of the world enterprise telephony markets. The company found that suppliers had shipped more than 48.4 million lines in 2007 and estimates this to reach 62.1 million in 2013. According to the report, natural replacement remains the single most dominant trigger for new deployment in the installed base of the world enterprise telephony market, and greenfield sites are leapfrogging to IP systems.

In a prepared statement, Frost & Sullivan Unified Communications Program Director Elka Popova noted that, “replacement continues to be the main driver for market growth and, more specifically, IP telephony adoption. Approximately 71.7% of all lines shipped worldwide in 2007 were IP-capable."

On a regional basis:

• Central America/Latin America (CALA) is the fastest growing region followed by Asia Pacific (APAC). Both these markets have strong replacement activity in addition to greenfield deployments arising out of broad-based economic growth. For the first time, IP telephony revenues exceeded TDM telephony revenues in APAC in 2007.
• North America had the slowest growth, signifying high penetration levels of IP. However, IP penetration to the desktop remains low overall with North America boasting a relatively higher penetration than the other regions.
• EMEA remained the largest region in the world enterprise telephony market. Among tier-1 vendors, Cisco experienced the fastest growth in EMEA.

Not surprisingly, the report notes that a major challenge for IP telephony vendors is the fact that buying organizations prefer phased migration to forklift upgrades. Also, the report confirmed that suppliers are migrating from hardware to software models to preserve margins and improve competitive positions Vendors are also increasingly relying on off-the-shelf hardware components to lower the cost of their solutions and to be able to focus their efforts and resources on advanced application development.

Finally, commenting on the vendor environment and the opportunity for buyers, Popova said that "vendor consolidation might affect market confidence. A weakening supplier position will boost buyers' power, even as strong indications emerge of a price decline."

If interested in knowing more about the report or receiving a more detailed overview, please send an e-mail to Joanna Lewandowska, with your full name, company name, title, telephone number, company e-mail address, company Web site, city, state and country.

Steve Taylor is president of Distributed Networking Associates and publisher/editor-in-chief of Webtorials. Larry Hettick is a principal analyst at Current Analysis.