Telecom 2.0: The Next Generation of Enterprise Telecom

by: Mark Evans

Here’s a guest post by Jeff Wiener, president of telecom equipment reseller Digitcom, who also writes The Telecom Blog, on his outlook for the telecom equipment market.

No, I don’t have a crystal ball but I wish that I did. I am looking at the next generation of telecom, and wondering where this rapidly evolving market is headed. I’ve been in the telecom business for 19 years – it’s almost like a 6th sense (although my sense is sometimes off).

With that in mind, let me offer my take of where the enterprise telecom market is going in the short and long term. Keep I mind I’m writing this post at a time when the customer premise-based equipment (CPE) market is at a crossroads.

Nortel’s (OTC:NRTLQ) bankruptcy and uncertain future has left many current and prospective customers wondering where to take their new telecom equipment business. Does it make sense for an existing Nortel customer to spend money on upgrading Nortel equipment, or, as my father explained in my early years in business, “never throw good money after bad”.

In other words, many of my clients are now throwing out their older Nortel gear in favor of new hardware, rather then spend dollars on upgrading their older Nortel systems.

Either way, Nortel is still a large player in the market but their absence at the table has left a void filled by their competitors. Of course, over the near term this issue will be resolved.

And what will follow in the enterprise telecom market?

In the short term, many customers looking for CPE will gravitate toward some of the larger players such as Cisco (NASDAQ:CSCO), Avaya (NYSE:AV), Mitel, and NEC (OTC:NELTY). I believe these players will continue to shuffle market share around ever so slightly. There are also some smaller players in the CPE market – notably ShorTel, Asterisk / Digium, and Microsoft (NASDAQ:MSFT).

Some thoughts on some of these players:

  • Microsoft hasn’t become the competitive threat I suspected they might – the enterprise market hasn’t adopted Microsoft’s OCS or Response Point telecom equipment – yet.
  • Cisco is obviously making headway into the larger space but their SMB products haven’t been that widely adopted – yet.
  • Asterisk, although a threat, isn’t taken that seriously within the enterprise market – yet. It seems that customers need a “manufacturer” to scream at!

The other spectrum of the enterprise equipment space is the looming threat of Hosted VoIP, Google (NASDAQ:GOOG), and Skype, which is hanging over the CPE vendors like a very dark cloud.

The world is gravitating toward an IP-centric model and the “cloud” at a rapid pace. Over the next few years, there will a gradual adoption of cloud telephony. In time, the technology will be widely adopted as the technology evolves and becomes more reliable.

As a CPE vendor, I view the threat that companies such as Google and Skype hold over the CPE market with some fear. Not today, but certainly in the future. Cloud telephony represents a paradigm shift – something to be watched, and shortly, feared. I am going to label this next generation of telephony as “Telcom 2.0”.

What does Telecom 2.0 look like ?

Speaking along the lines of paradigm shift, the next generation of phone systems will be a highly intelligent server, much as they are now. The talk/communicate medium will not necessarily be the bulky phone on your desk, but rather a variety of end point devices.

Skype, Google, Facebook, iPhone, Blackberry – these all-in-one appliances will be the talk/communicate path, and the server at the backend will bridge these technologies together. And with the recent news of Silver Lakes (Avaya’s parent company) being part of an investment group buying a 65% stake in Skype, it will now bring together the old and newer emerging technologies.

In the meantime, I’m now watching the race for Nortel’s enterprise asset – the winner will change the landscape considerably.

What do you think? Where is Telecom 2.0 heading?