Open PBXs occupy 18% of the North American telephony market

    Posted by John Malone on 02/28/2009

    Sales of traditional office and PBX systems have declined in recent years. Experts attribute this to a number of factors. Companies, they said, simply operate their telephone systems longer. A wave of hardware replacement with Y2K-safe swept the market in the late 90s. Today, after almost 10 years, this equipment is still in working condition. Demand depends on the state of the economy, this is understandable. Of course, these considerations make sense, but they do not reflect the essence.

    Companies Digium, Polycom, Aastra, Sangoma, as well as other suppliers in the market of open exchange (Open Source PBX) observe what is happening from a different position and can argue with experts. And they will be, by and large, right. The market is changing, and these changes began with the advent of open exchanges.

    With the development of Asterisk systems and other open source telephony systems, the number of users has steadily increased. At first, these were units, gradually there were more and more followers, and, finally, these systems turned into the main direction of the telephony market. Now this is the mainstream, and not some seedy brook. And now we are not at the turning point, we are already much further. Manufacturers of traditional communication systems now, for the most part without realizing it, are fighting for a larger share of an ever-decreasing market. And increasing sales is becoming an increasingly difficult task even for the largest telephony companies if they do not take the market share of other companies. Let's say some traditional companies see what’s happening,

    Since open office PBXs were born as an amateur venture, they were cheap, but most people disapproved of them. But this is only at first.

    Why are we witnessing a growing commitment to open exchanges?

    This is what has recently caught my attention. Last year, I witnessed how three companies, in each of which I was a member of the board, replaced traditional exchanges with open ones. Two companies went the usual way, and the third wanted a “clean” IP solution, not hybrid or convergent. It was interesting for me that if all three companies switched to open exchange systems and were satisfied with the result, as it turned out in the end, this market apparently has more prospects than people can imagine.

    Why did they all choose Open Source? Not because I told them so, because I didn’t. And not because they are all technology companies, since they are all far from technology and have no share in Open Source. Each of them switched to open telephone exchanges, since, according to them, this system is not inferior in quality to the best traditional communication systems and is more profitable in price. It is not just cheaper, it is much cheaper. So much cheaper that no traditional office or mini-automatic telephone exchange can even come close in price to an open telephone exchange. Open office PBXs are typically 40 percent or more cheaper than traditional telephone systems.

    Their decisions attracted my attention because the price was the single most important factor in choosing a communications system since 1968, when a commission decision was made regarding the Carterfone switch. Price determines everything. Competition and the importance of price, as a key parameter of a decision for a customer, largely explain that office PBX prices have been decreasing and continue to decline by 5-10 percent annually. And if nothing affects the price of open telephone exchanges, then we will find a large market that people did not even know about.

    Since the research company Eastern Management Group has been analyzing the markets of traditional office and PBX systems for 30 years in its quarterly monitoring reports, we wanted to be the first to evaluate the open PBX market, and we had all the necessary tools for this.

    Our main questions were the most obvious. What share of the total market of institutional and mini-automatic telephone exchanges is occupied by open automatic telephone exchanges? Are all open exchanges small (some claim that they all include less than 30 endpoints) or can they be installed on 100 endpoints, or even 500? Do medium-sized enterprises, say, in banking, education, management and healthcare use open PBX systems, or are they only acquired by technology companies that can install these systems on their own? And would someone buy a second such system?

    Evaluation of the size of the commercial market for open exchanges has never been made simply because it is difficult to do. Open Source Systems are free software. People periodically download it just like that, with nothing to do. Many systems are routed to laboratories. Technically savvy people install them at home simply because they know how. Others download numerous copies, trying to get the latest version, but never implement them in the communication system of their organization. This applies to non-commercial use of systems and should be excluded from the total number of downloads of Open Source software available on the network. We also had to take all this into account when assessing the size of the commercial market of open telephone exchanges.

    To do this, we began three separate studies, during which more than 7,000 surveys were conducted.

    The first survey consisted of two parts, during the first of which an analysis of the test / control group of readers of the No Jitter site was carried out. Several hundred surveys were conducted, which allowed us to evaluate questions and answers. In the second part, we conducted a survey among 6734 IT professionals selected from a specialized database of more than 80,000 people.

    The second survey was a telephone interview with 51 of the largest providers of open PBX systems. The third study was a telephone survey of 100 VAR companies (Value Added Resellers).

    All survey data was integrated into market models developed by the Eastern Management Group over several decades in order to track and forecast the size of the market for office and PBX systems for our report.

    What we found

    After we took away those open exchanges that are not used daily as a communication system between company employees — and these nonprofit systems today represent the majority of downloads of open exchanges — we were able to conclude that 2.86 was installed in 2008 million open source PBXs. Nortel, the largest producer of traditional commercial telephone systems, lost 8% to Open Source systems, selling 2.63 million lines. (Despite Nortel’s recent problems, its historical power in all market segments has enabled the company to maintain its leadership, at least until today, according to our estimates of the total market share of communication system suppliers.) Next come Cisco and Avaya with 1.99 and 1.75 million lines, respectively.

    The total market volume amounted to 15.88 million lines, while open exchanges own a share of 18% of this market. Thus, Open Source systems are far ahead of all manufacturers of office and PBXs (see Figure 1).

    Figure 1: IP-PBX market shares

    If there were no open PBXs, then the market share of traditional office and PBXs could be more by these same 18%.

    Companies using open office PBXs cannot be reduced to one class. In addition to technology companies that could use them, we see a high concentration of open exchange systems in many vertical markets, especially in the areas of finance, education, management, healthcare, manufacturing (low-tech), retail and transportation. Of the 22 industries studied, which make up the main set of enterprises in North America, we observed various degrees of application of open exchanges in each of them. Almost 40% of companies using open PBX systems had nothing to do with technology.

    The size of the company does not affect whether it uses an open telephone exchange to provide production communications. The hundreds of companies that we have studied have over 1,000 employees. Dozens of companies employ over 20,000 people. Two-thirds of companies using open exchanges have several branches, but not always open exchanges are installed in each of them. This means that if companies using open exchanges are satisfied with the result, there are prerequisites for the introduction of additional systems in other branches. The study showed that 68% of enterprises have two or more branches, 13% have at least 11 branches, 3% have more than 100 branches (see table 1).

    Table 1: The total number of branches of companies with open exchanges

    More than half of the studied companies have more than one open exchange, often within the framework of one enterprise they install five or more systems.

    The study showed that the size of open exchanges varies from small, including up to 10 endpoints, to large, including hundreds of endpoints. 35% of systems have 1-10 endpoints, 40% have 11-50 endpoints, and 25% have more than 50 endpoints. Two percent of systems have more than 1,000 endpoints (see Figure 2).

    Figure 2: The total number of branches of companies with at least one open exchange

    Asterisk installed - the most common open exchange system, whose share in the Open Source market is more than 85%. The roles of company competitors in the market such as CallWeaver, FreeSWITCH, sipX / sipXecs and YATE are constantly changing.

    Customers often turn to the manufacturer to purchase and install an open exchange, as it's profitable. Almost half of this market is owned by Digium, but other companies, including Fonality and Aastra, are also represented on the market.

    It is not surprising that manufacturers of SIP-telephony products provide their products as part of systems based on open exchanges. Among them, we see high sales at Aastra, Linksys, Polycom, Grandstream and Snom. Polycom is the leader in using open PBXs compared to other SIP phone manufacturers with a market share of 11%.

    Digium is the largest manufacturer of interface cards, but there are other players on the market such as Cisco, Sangoma, AudioCodes, Dialogic, Grandstream, PIKA, Quintum and Rhino.

    Few surveyed manufacturers of traditional exchanges see open exchanges as a threat to their business. However, not one of the manufacturers of traditional exchanges knew that the share of open exchanges in the general market is 18%. And this share continues to increase.


    Regarding the success of Open Source systems, it can be assumed that the largest VAR-companies rushed to assess the capabilities of the nascent business. But that is not the point. We started an interview down the list of the largest VAR companies, starting with the most top names, but came to the conclusion that small VAR companies are more important for the development of the Open Source market. Thus, large VAR companies for the most part turned out to be less important for the open exchange market.

    In the future, a significant increase in the number of large VAR companies in the open exchange market is expected. All customers of enterprises that need support during the implementation will follow this path, as our study has shown, since these same customers have already switched to Open Source systems. Large VAR companies will inevitably follow a large customer. And this will contribute to the development of the open telephone exchange market.


    The economic climate for the next few years may be an advantage for the market and developers of open exchange systems. Many enterprises have already decided to purchase one or more IP-PBXs, and the prices of open PBXs are so low that they are attracting the attention of an increasing number of customers. Even if the market for all systems weakens, the demonstrated success of the open telephone exchange market has already secured a solid foundation that guarantees the stability of this technology in any climate.

    John Malone is president and chairman of Eastern Management Group, a leading telecommunications consulting and research company. Open PBX systems are an area in which the company has been providing consulting services around the world for over thirty years. Eastern Management's institutional and PBX monitoring services have included quarterly reporting of batch systems for 25 years. Eastern Management’s current Open Source research is called The Market for Open Source PBXs. You can get acquainted with the results of this study by contacting representatives of the Eastern Management Group through the company's website: .

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