Advancement in the SIP Phone Market

The SIP phone market is one of the topics I am most passionate about inside the enterprise communications arena. It is a market that has been transforming considerably over the last years driven by multiple factors such as new technology innovation, competition, the economy and changing customer demands. While many still think that the years of the IP desktop phone market are numbered, we contend that these types of devices will still enjoy double-digit unit growth figures for at least the next four to five years. In fact, we estimate SIP phone shipments to more than double by 2015, reaching around 4.7 million in units sold around the world. Some of the main factors contributing to this growth include the productivity gains enabled by technological advancements that increase the overall value of the devices, declining prices along with the increasing popularity of SIP phones, and the    continuous introduction of new SIP phone models with new capabilities from leading manufacturers.

Although the line between proprietary versus open standards can often be grey, we define SIP phones as devices adhering to IETF specifications (with little or no proprietary enhancements) that should naturally offer integration with the majority of telephony providers.

This article intends to give some broad brush strokes on SIP phone market developments such as current and evolved characteristics of new SIP phones, growth factors by region, price findings, and evolution of the competitive landscape. We talked with some of the major independent SIP phone vendors. What follows is a summary of the conclusions drawn by us and the participants of this market.

Current & Evolved Characteristics of SIP Phones:

The SIP phone market continues a fast-paced evolution expanding the spectrum of markets and delivering more functionality to businesses. Today, almost all new medium-level SIP phone models incorporate advanced features such as wideband audio, color, touch displays, XML and video applications support – among others. As a result, more business customers are looking for high quality, feature-rich, yet economical devices. For example, many businesses are evaluating SIP phones that support HD voice, even in cases where the majority of calls are internal. Many businesses require their newly-acquired phones to be capable of extending different UC-related features to the desktop, as investments toward soon-to-be deployed UC solutions. Further, more organizations are evaluating high-end models that incorporate video through open standards as a way to secure their investment in terms of interoperability. The business case of video support has been more popular lately with the focus of service providers starting to deploy SIP phones to support video and other advanced services in attempts to reach a greater number of users. On the other hand, simplicity and cost are key, with a variety of sub USD 50 simple and affordable IP phone models in the market.

SIP Phone Growth Factors by Region:

All regions are doing well in terms of SIP phone adoption.

• In North America the adoption of SIP phones has been especially strong. North American adoption has not only been related to particularly strong VoIP adoption, but also to the integration of SIP phones as part of broader UC solutions. SIP phone use in this regard is expected to grow as Microsoft Lync matures and deployments of it become more pervasive.
• In Europe, where the market can be described as more traditional and conservative (except for the more advanced Nordic region), the region has displayed strong signals of SIP phone adoption. While customers tend to prefer whole solutions from larger, better known vendors, price considerations are opening the door for different SIP phone vendors to sell their solutions. The SMB segment specifically is showing notable in adoption in this region. Additionally, more Tier-1 carriers in Europe are beginning to offer SIP-based bundled services.
• In APAC, on the other hand, most of the well-established independent SIP phone vendors identify strong competition from local vendors as well as special regulatory constraints as obstacles to better penetration in this market. Establishing good relationships with leading service providers has been identified as key to momentum in this region.
• In the CALA region, although growth continues, there is a push in different countries (including Brazil and Argentina) towards local equipment manufacturing over imported goods, which pushes some of the large SIP phone vendors to manufacture locally in these countries.

SIP Phone Price Findings:

Like any growing technology, segment prices are showing a tendency to go lower as volume and competition increases. There is a growing sensitivity to price per seat and reduced CAPEX. Almost all vendors are showing great efforts to satisfy the market with lower-end, lower-price products, while at the same time adding rich functionalities that are more cost advantageous that what can deployed in a proprietary landscape. Also, new participants are affecting established vendors, who are now forced to lower their prices.. Today, SIP phone prices could be found from USD 40 to 300.

Competitive Landscape Findings:

Although competition in the SIP phone market is increasing, the contest has been recognized to come more from existing vendors with new offering than new vendors. In fact, almost all the established SIP phone vendors have made prominent efforts to set the barrier of entry higher by focusing on developing innovative products and trying to meet customers’ evolving needs. Grandstream, for instance, has almost doubled its portfolio of IP telephony terminals in the last 12 months in reaction to demand and competition. In spite of this, almost all vendors recognize new kids on the block that are bringing new excitement into the market, such as Asian manufacturer Yealink.

Although established vendors will always try to keep the barrier of entry high in this market, almost all vendors expect more names to enter the SIP phone market within the coming years, particularly from Asian manufacturers and service providers developing their own advanced video models.

Some of the competitive strategies of established SIP phone vendors that will be pivotal for success going forward include: UC-enabling thier devices; production of business media phones; partnerships with service providers looking to expand their solutions; the stronger, more pronounced fixed-mobile capabilities; and continued improvements in manageability and provisioning, both in the initial installation and day-to-day maintenance of the SIP phones. Last but not least, established SIP phone manufacturers should play close attention to the evolution of telephony vendors in their continuous crusade to open up their historically proprietary systems and more holistically adopt open standards.  

We would like to extend special thanks to the following market participants for providing us with their point of view on this subject matter: Aastra, Audiocodes, Grandstream, Polycom and Snom.