Paradoxically, Low Adoption Means High Opportunity

Paradoxically, even if small and medium business adoption of hosted IP communications is relatively low, considering the amount of time such services have been sold, potential therefore is quite large.

In other words, most of the potential buyers remain to be gotten.

Although IP adoption rates have increased over the last decade, the new survey sponsored by Edgewater Networks and Metaswitch Networks clearly shows that a large percentage of the small and medium business (SMB) market in the United States, “perhaps more than expected,” still uses TDM systems and services.

While adoption rates are higher in larger organizations, as high as 36 percent for organizations with 500 or more employees, adoption for smaller SMBs (less than 100 employees) is less than 25 percent.

Put another way, 66 percent of the medium-sized organization IP communications business is yet to be gained, while 75 percent of the small business opportunity likewise remains outstanding.

The low adoption rates mean that the market for IP services is “extremely large, the study reports. “We estimate that the U.S. market alone is worth over $26 billion annually,” said John Macario, Edgewater Networks VP.

That is a larger forecast than many have offered, but is based on simple extrapolation from a number of other data points, including U.S. Census Bureau data on the number of U.S. businesses in various categories, the number of employees and some basic assumptions about lines needed per employee.

That generates an estimate of potential seats for hosted IP communications, and based on recurring revenue, the potential market size, and

Perhaps the greatest sensitivity in that model is the assumption that each employee requires an account, and that the market potential is defined by the number of employees still using legacy phone services and systems.

Both assumptions build on the notion that every employee requires unified communications. You might note that those are very different assumptions from past legacy system principles, which generally assumed that the key input was the ratio of trunk lines to people or “numbers.”

Requirements arguably are quite different when messaging is a core requirement and expectation. It might be quite rational to expect that every employee requires email and messaging tools, irrespective of the number of circuits or trunks required to support “voice.”

In other words, what we used to call the concentration ratio, or trunk lines required based on the number of employees, assuming some sharing, is an inaccurate way to describe demand for messaging and unified communications.

In fact, as we see in the case of mobile communications, messaging is the preferred medium, voice a secondary medium. So old rules about concentration ratios (trunk lines to support multiple users) do not hold.

That is to say nothing of the physical reality that IP communications does not build on “trunks” or “circuits.”


It can be argued that the mobile revolution, and advent of messaging, is driving much of the interest in unified communications. Firms that have adopted unified communications report using mobile and desktop clients that unify access to voice and instant messaging apps; transfer calls between mobiles and desk phones and provide a single voicemail.

IP and TDM users both place a high degree of value on unified communications and mobility features and are requiring them when looking to upgrade from their current environment.


Across the SMB market, decision makers said that having an offer with the right economics from a service provider they trust are the key purchase drivers.

The point is that the reputation of the supplier really does matter, and that especially is true for small businesses. Medium-sized organizations tend to care more about product attributes, says Macario.

Also important are access to phone system features from mobile devices.


The study was conducted In March 2015 of decision makers from 1,250 SMB entities.
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