The document provides an overview of the business phone systems market, including key definitions such as hosted versus on-premise systems, trends toward VoIP adoption, and the competitive vendor landscape. It discusses important considerations for buyers such as identifying requirements, understanding available features and pricing models, evaluating vendor support, and factors that influence total cost of ownership. The goal is to prime readers with essential background knowledge to help guide their selection and purchase process.

1. Phone Systems Market Primer
Focus Research
Phone Systems Group
May 2009
Focus Research © 2009 All Rights Reserved

2. Introduction
Despite a voice communication system’s critical role in an enterprise, many people aren’t aware of the myriad available
options and recent developments in the voice communication market. Focus’s Phone Systems Market Primer provides
insight into this market for potential buyers, decision makers and other stakeholders. The report is an introduction to
our Buyer’s Guide, which aids prospective buyers in the purchase process.
The Primer covers key aspects of business phone systems that you should understand before you decide to purchase. It
is structured around these areas:
Table of Contents
1 Phone System Basics: Market definition and key points . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. 3
2 Market Summary: Market trends, vendor landscape and product in depth . . . . . . . . . . . . . p. 6
3 Product in Depth: Requirements, implementation and support , cost and benefits . . . ..p. 10
4 Tools: Glossary, vendor list, signs that you need to upgrade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. 16
Our Phone Systems Market Primer is one of several research reports based on the Focus Research
Methodology, which is designed to support your entire Phone Systems purchase process.
you are here Phone Systems Market Primer — Want to know what a Phone System is?
Phone Systems Buyer’s Guide — Want help defining your requirements?
Phone Systems Market Primer Focus Research ©2009 2

3. 1 Business Phone System Basics
Business Phone System Defined
A business phone system caters to the voice communication requirements of an organization, effectively managing the
incoming and outgoing calls of the business. Solutions rely on both hardware and software components, depending on
the type of phone system being used. There are a number of telephony solutions in the market: PBXes (Private Branch
Exchanges), KTSes (Key Telephone Systems) and hosted VoIP phone services. The appropriate option primarily depends
on the business case in question. Business phone systems can be broadly classified into two categories:
Hosted Phone System:
A hosted system is a managed service operated from a remote location. Telephony services can be offered as VoIP or
over traditional PSTN (public switched telephone network). Limited equipment, such as phones and routing devices, are
present at the customer site. It can cater to the needs of SMBs seeking basic voice services at affordable costs as well
as to large enterprises requiring advanced and standard functionalities.
On-Premise Phone System:
This can include a KTS or a small office PBX system meeting the basic communication requirements of a small business
(with 50 or fewer employees). This can also refer to an enterprise TDM/IP-based PBX system providing enterprise-level
business phone services to large businesses.
Why Do Businesses Buy?
The telephone system is the most important office equipment for many organizations. Most companies buy a new system
or upgrade the existing system for the following reasons:
1. To lower ongoing business communication/IT costs and provide better ROI
2. To add scalability features and keep pace in a dynamic business scenario; easy addition/removal of extensions
3. To meet additional business requirements, such as starting a call center or a telemarketing firm
4. To attain additional features not present in the existing system
5. To be compatible with the latest telecommunication technology
Phone Systems Market Primer Focus Research ©2009 3

4. Prime Yourself: 7 Key Points about Business Phone Systems
1. IP (Internet Protocol) PBX or TDM (Time Division Multiplexing) PBX: Depending on the technology being
used in a phone system, it can be classified as an IP PBX or a traditional TDM PBX.
2. Hosted or on-premise: Users have the option to choose between an on-premise or hosted phone solution. Further,
vendors are also segmented based on the solution being offered – pure-play hosted PBX service providers, enterprise
on-premise PBX solution providers, and solution providers providing both hosted and on-premise solutions.
7 Things You Should Know About
Business Phone Systems
1. It can be IP-based or traditional TDM-based
phone system.
2. The main business solution models available
are hosted or on-premise.
3. The business case drives the adoption of a
particular solution.
4. Evaluate various pricing models and watch out
for hidden costs.
5. Knowledge of products features/vendors in market
critical to successful selection.
6. Vendor support is crucial.
7. Cost is the most influential factor for selection.
3. Business case: Business requirements, cost considerations and future business strategies all determine the final
choice between a hosted or on-premise solution. Whereas a hosted VoIP solution can help realize immediate costs
savings, an on-premise solution can be cost-effective in the long term, especially for enterprises with skilled staff to
manage the system.
4. Pricing models and hidden costs: Feature-based pricing is the most common model for phone systems, wherein
the cost increases as features are added. Another pricing model is adopted for hosted and on-premise phone solutions.
To avoid hidden costs, users should seek clarifications and a complete breakdown of the price; for instance, they should
inquire whether on-site support visits are included in the standard contract.
Phone Systems Market Primer Focus Research ©2009 4

5. 5. Knowledge of features/vendors: An understanding of product features and vendors equips the buyer with
relevant background information. Users can opt for basic phone systems having standard calling, voice mail and
conferencing features or they can choose full-featured PBXes having CTI (Computer Telephone Integration) and unified
messaging functionalities.
6. Vendor support policies: Users must be trained to operate the advanced features of a phone system. Vendor
support services should be tapped to teach users.
7. Bottom line: While meeting business requirements is a basic criterion for selecting a system, cost remains the most
influential factor.
Phone Systems Market Primer Focus Research ©2009 5

6. 2 Market Summary
Market Evolution
Traditional PBX systems gained popularity when companies realized that, to efficiently handle constantly increasing
call volumes, a centralized communication system was in order. Before the advent of PBX systems, each telephone
connection in an enterprise required a direct line to the public telephone system, thus incurring an individual line charge.
This issue was resolved by PBX systems, making voice communication cost-effective and efficient. PBXes have evolved
significantly during the past several decades, and will continue to do so. The diagram below gives a brief depiction of the
evolution of PBXes, followed by a summary of key highlights.
Meets my feature requirements 4.7
Reliability and performance 4.3
Customer service 4.1
Vendor would be a good partner 4.1
Proven experience with similar buyers 4.1
Cheaper total cost 4.0
Vendor’s reputation
More compelling product roadmap 3.5
More flexible pricing model or financing 3.3
2 3 4 5
Source: TEQConsult Group
SPC (Stored Program Control): In this telephony system, the PBX was controlled by a computer program
stored in system memory. Because computer technology was evolving in the 1960s and 1970s, the incorporation of
microprocessors into a PBX was a major breakthrough in business communication systems.
Digital Switching: This brought about an era of digital telephony in the business domain, an arena previously
dominated by analog voice transmission. Along with other benefits, it resulted in improved capacity and quality of the
PSTN.
Phone Systems Market Primer Focus Research ©2009 6

7. Packet Switching/VoIP (Voice over Internet Protocol): The increased use of packet switching by companies for
managing data networks and the availability of the Internet as a global platform for data transfer increased the popularity
of packet switched communication. These factors eventually led to the evolution of VoIP technology that compresses
voice (audio) data into packets that can be efficiently transmitted over data networks and the Internet, and converted
back into voice at the receiving end. This led to the evolution of features, such as integration with Web-based applications,
which could not be realized using traditional networks. Further, companies realized significant cost savings by using this
technology.
PBX as Hosted Service: The increasing focus of enterprises on core businesses, along with the arrival of VoIP-based
telephony, led to the emergence of the hosted PBX service. Enterprises began outsourcing their telephony operations to
third-party service providers that offer telephony services based on a SaaS (Software as a Service) model. This eventually
enabled the SMB sector to access enterprise-level phone features at an affordable cost.
UC (Unified Communications): This is the latest significant development in business communication. UC integrates
voice, video, email, fax and similar communication systems into one infrastructure or platform that can be accessed
by employees working at their desktops as well as other mobile ones. It enables individuals, groups and companies to
interact and perform more efficiently and accurately along with increase in mobility. Key technologies include IP PBX,
VoIP, voice mail, email, audio/video/Web conferencing, UM (unified messaging) and IM (instant messaging). A UC
solution allows users to add advanced telephony, messaging and conferencing features to a communications system
without a major overhaul of IT infrastructure. As a UC solution mainly results in increased employee productivity, improved
business processes and lower TCO of communication infrastructure, the degree of ROI (return on investment) for a
business will depend on the following:
a. Type of work force – A highly distributed work force stands to benefit the most from the solution.
b. Number of processes that will be streamlined with better communication – A telemarketing firm will enjoy the
maximum benefit due to reduced customer-response time.
c. Condition of existing networking/IT infrastructure – The integration and interoperability of various equipment is
imperative for the success of a UC solution.
Market Trends
The most recent and significant trends in the business phone system market include the following:
1. Increasing adoption of VoIP as a telecommunication service: VoIP offers an affordable alternative to
traditional TDM/ISDN-based voice services, especially for the SMB segment. Further, market trends indicate an
increasing adoption of VoIP technology as compared with the traditional TDM PBXes. This was indicated in the key
findings of the AMI Partners’ 2007 research study, “Making the Move To Hosted VoIP or Premise-Based IP-PBX,” which
estimated a CAGR (Compound Annual Growth Rate) of 31.7 percent for the total equipment purchases of IP-based
equipment (IP PBX, VoIP gateways, soft switches, VoIP application servers and IP phones/adapters) in the SMB space,
an increase from $2.4 billion in 2005 to a overwhelming $9.7 billion in 2010. Further, there was a decrease in traditional
Phone Systems Market Primer Focus Research ©2009 7

8. TDM spending in the SMB industry at a negative CAGR of 33.5 percent from $3.3 billion in 2005 to $438 million in
2010. The report also forecasted SMBs’ hosted VoIP spending would increase at a CAGR of 61 percent from $344
million in 2005 to $3.7 billion in 2010; the majority of this increase is being to the small-business segment.
On the other hand, factors such as the perceived complexity of IP telephony solutions, a wide variety of VoIP solutions
and the lack of adequate IT resources at SMBs are slowing the adoption of VoIP solutions. Nevertheless, it is estimated
that most companies will eventually adopt VoIP solutions in the next four to five years.
2. Open source IP PBX solutions to counter hosted VoIP services for better ROI: Low startup costs, quick
ROI, scalability, reliability and advanced features at affordable cost are some reasons that drive the SMB segment to opt
for hosted VoIP services over on-premise IP-PBX solutions. However, open source IP PBX solutions have the potential
to reverse this trend. Open source IP PBX eliminates the licensing fee that is a major portion of a traditional IP PBX’s
startup costs, making it 30 to 50 percent less than its traditional counterpart. As operating expenses of hosted VoIP
are significantly higher than those of IP PBX, the open source IP PBX solution can become profitable within two years,
whereas traditional IP PBX solutions do so in approximately four years.
3. UC (Unified Communications) – The answer to an SMB’s Woes?: Increasing competition in the global
market, coupled with the grim global economic scenario, increases the challenges that SMBs face. Consequently, there
is increased focus on operational efficiencies and employee productivity. According to a 2007 AMI Partners survey of
U.S.-based SMBs, mobility, enhanced connectivity and business continuity are among the top strategic priorities of SMBs.
A UC solution can meet these needs. Whether or not an SMB can realize the benefits of a UC solution in the near-term
depends on how much the organization stands to gain in a number of areas, including organizational structure, business
processes and the compatibility and interoperability of existing infrastructure with advanced UC functionalities.
Vendor Landscape
A large number of vendors offer a variety of telephony solutions for both the SMB and enterprise markets. Major
telecommunications players such as Cisco, Avaya and Nortel have a strong presence in the international market.
However, their products are not inexpensive and their offerings evolve quite slowly. Well-established tier-two players such
as 3Com, Toshiba, NEC and Mitel have a good track record and offer comparatively cost-effective solutions. The market
also has a good number of niche players such as Altigen Digium, Fonality and Vocalocity that offer innovative, flexible
telephony solutions with special focus on the SMB segment. Based on the type of telephony solution offered, vendors
can be broadly categorized as follows:
1. Pure Play Hosted PBX Service Providers
A range of service providers have emerged offering hosted VoIP services, due to the increase in demand for enterprise-
level voice communication features from SMBs. Local telecom providers, traditional cable companies and communication
service providers have begun offering hosted VoIP services in partnership with equipment vendors. Some of the vendors
in this segment include Aptela, Covad, M5 Networks, Nextiva, 8x8, Qwest, Speakeasy and Vocalocity.
Phone Systems Market Primer Focus Research ©2009 8

9. 2. Enterprise On-Premise PBX Solution Providers
Global: Global providers, including Avaya, Cisco, Nortel, NEC Sphere and Siemens, offer traditional and IP telephony
solutions to large enterprises. Regional: Regional providers, including Alcatel, Mitel and Toshiba, have a strong presence
in regional markets.
3. PBX (Hosted and On-Premise) Solution Providers
These providers, including Altigen Communications, Dialexia, Fonality and Spherecom, offer both hosted as well as
on-premise solutions depending on customer needs.
Emerging vendors: Vendors offering UC solutions: Software vendors such as Microsoft and IBM are leading providers
of UC solutions. They have a software-centric approach for implementing the solution, and put the integration on the
server and desktop level. Other vendors, such as Cisco and Avaya, adopt a network-centric approach and place the
integration at the network level.
Vendors offering open source IP PBX solutions: Open source IP PBX reduces the entry price for IP PBX
systems, and SMBs are realizing its implications. Vendors, such as Pingtel, Digium/Asterisk and Zultys, are providing open
source software solutions that can be embedded into IP PBX.
Phone Systems Market Primer Focus Research ©2009 9

10. 3 Product In-Depth
Before defining requirements and beginning the buying process, prospective purchasers must familiarize themselves with
the following three key areas:
1. Product: Features, packaging, and so forth
2. Vendor: Selling, implementation, and support background
3. Benefits and costs: Buyer profiles, reasons for buying, costs and so forth
What is a Business Phone System?
A business phone system meets all the voice communication requirements and effectively manages
the ever-growing voice communication traffic of an enterprise (an SMB or a large firm).
Some basic features of a phone system include the following:
• Call Management
• Messaging – Voice Mailbox
• Automated Call Routing
• Monitoring and Reporting
• Conferencing
Some advanced features of a phone system include the following:
• Advanced Call Management
• Unified Messaging
• Office Applications/Hardware Integration
• Unique Features
Phone Systems Market Primer Focus Research ©2009 10

11. Requirements and Packaging
Basic Features
Features that every business phone system must have to meet day-to-day business communication requirements include:
1. Call management: This includes activities that can be performed on an incoming call, such as:
• Call forward – redirect the incoming calls to a specified number
• Call transfer – direct a call to an extension without routing to the central switchboard
• Call park – place a call on hold, allowing anyone to dial an extension and pick up the call
• Call hold – enables the user to put a caller on hold while a second call is answered or made
• Camp on – a call can wait for a busy extension to become free; the dialer’s extension will ring with the call when
the originally dialed extension is free
• Call wait – receive a tone or a light indicating that another call is waiting for attention
• Call pick up – take a parked call off hold
• Call recording – feature to record a conversation or a conference call
• Do not disturb – ability to ignore all incoming calls; it can be achieved by keeping the ringer on “mute” mode or by
keeping the phone on “busy” mode
2. Voice Mailbox: A system that receives and manages telephone messages from callers when the call is not received
3. Monitoring features: Applications, such as Caller ID, display identification (number, name) of the caller.
4. Reporting features: These allow users to capture and monetize their phone usage. One such feature is call
accounting, an application that records and captures call data.
5. Conferencing: Allows a number of users to have a telephonic conference meeting
6. Speed dialing: Permits fast dialing of frequently called numbers
7. Direct Inward Dialing: Allows users to connect directly to the desired extension without the operator’s assistance
8. User directories: Personalized user directories that update name, address and other details
9. Password-protected security features: To prevent unauthorized access to voice mail, for example
10. QoS (Quality of Service) and bandwidth management utilities: Parameters for measuring the quality and
performance of phone communications, with a contractual guarantee of uptime and bandwidth
Phone Systems Market Primer Focus Research ©2009 11

12. Advanced Features
Most companies have communication requirements that are very specific to their business. For example, a small business
with an extremely mobile work force faces issues in communicating with workers. Thus, business phone systems offer a
whole gamut of advanced features to meet such specialized business needs. An overview of advanced features includes:
1. Advanced call management
Advanced calling features equip individual users with more flexibility, making them more efficient and productive.
These include:
• Call queuing – a method of handling calls until they are answered
• Hunt groups – a group of extensions organized in a specific order to process some particular calls
• Call flip – transferring the call from a landline to a mobile phone without any interruption
• Night answer – re-routing incoming calls at night or at specific time to a desired destination
• Find me/follow me – an extension of call forward feature; call is forwarded to multiple numbers in a specified
sequence
2. Automated call routing
Automate call routing facilitates faster, more efficient handling of a huge number of incoming calls; important features
include the following:
• Automated call attendant – an automated system designed to answer and route incoming calls; guides a caller
through the options of a voice menu
• Automated call distribution – a specialized device for handling and routing large volumes of incoming calls to
designated stations in a predefined order
3. Unified messaging
A single messaging infrastructure that is accessible through a computer or a telephone that manages voice, fax and
email messages
4. Office applications/hardware integration
This feature allows users to integrate their devices (fax machine, mobile phones and so forth) and applications (Microsoft
Outlook, CRM applications and the like). It provides a range of useful applications, such as voice mail–to-email feature
that allows users to receive and access voice messages via email accounts.
5. CTI (Computer Telephony Integration)
This technology helps combine telephony with computer systems. Computers handling calls in call centers or customer
care departments are CTI implementations, wherein computers take incoming calls and route them appropriately,
depending on the call number and caller ID. CTI has replaced traditional PBXes with advanced systems that are aptly
capable of handling incoming calls, outgoing messages, faxes and online communication.
Phone Systems Market Primer Focus Research ©2009 12

13. 6. Advanced security features
These include tools to audit the security status of every extension in the system or advanced password security
configuration procedures.
7. Advanced reporting features
These features provide customized reports on call details, real time status of call queues, system events and users.
8. Unique features
• Interactive Voice Response (IVR): A software application that enables users to input information by voice or enter
data using keypads
• Soft phone support: Allows users to operate their computers as telephones for making and receiving calls
• Compatibility with analog, digital and IP phones
• Advanced voice mail features, such as voice mail and email forwarding
Hosted vs. On-premise
There are primarily two types of phone solutions for businesses to choose from: hosted PBX or on-premise PBX; both
can be operated over the PSTN or Internet network.
A Hosted PBX solution is delivered as a service by the provider and usually is billed on a monthly basis. The equipment
on the customer’s site is limited to phones and some routing devices only, and the rest of it is managed by the service
provider. Buyers frequently choose a hosted PBX solution for the following reasons:
• Focus on competencies: allows a business to focus more on its core competencies rather than managing the
complex business communication infrastructure
• Easily scalable: increase/decrease the number of lines as needed without concern for infrastructure
• Seamless around-the-clock service
• No burden of maintenance/upgrades
• Flexible pricing model: add and drop features to suit business needs and remain within an allocated budget
By contrast, a premise-based PBX solution requires complete PBX infrastructure to be present on the customer’s
site. This solution accounts for more start-up costs as the organization must install, manage and upgrade the PBX system.
The buyer has the following factors in its favor when buying an on-premise PBX solution:
• More control: Unlike the hosted solution, the customer can upgrade the system as needed.
• More flexibility in terms of the use and the features of the system
• Customization needs can easily be met.
Phone Systems Market Primer Focus Research ©2009 13

14. Implementation and Support
Implementing the product
After you have identified the vendor and the product, the next step is to ensure smooth implementation of the solution.
Focus on the following factors during implementation:
a. There should be a clear understanding/analysis of requirements and the existing infrastructure.
b. A backup of critical data should be available.
c. A checklist of all the important activities, with timelines, should be available.
d. There should be close involvement with the vendor throughout the implementation process.
Supporting the product
The vendor’s support service is critical, as it enables a business to realize the benefits of the solution in practice. It
ensures that your phone system is running 24/7. Questions to ask to gauge the quality of support services include:
a. Is the attending staff smart and knowledgeable?
b. Does the vendor have rigorous customer satisfaction metrics?
c. What is the vendor’s definition of “uptime”? Does it conform to your business needs?
d. Does the vendor maintain and share metrics for reliability of the network and equipment, responsiveness and
accuracy of programming, and other metrics that help measure the QoS (quality of service) offered?
Cost and Benefits
Who buys?
When buying a new phone system or upgrading an existing system, large businesses usually prefer a feature-rich
on-premise enterprise PBX system. In addition to meeting their specialized needs, enterprise PBX systems afford large
businesses greater control of their business communication systems. SMBs often prefer hosted PBX services that
provide enterprise-level business communication features at an affordable price.
In addition, a wide range of roles are usually involved with the purchase and implementation of a business phone
system, such as:
• Procurement Department Head
• Procurement Manager
• Administration Officer
• IT Operations Manager
• Telecommunications Manager
• IT Team
Phone Systems Market Primer Focus Research ©2009 14

15. What are they willing to pay?
The pricing model, to a large extent, depends on the type of solution that a buyer selects. A customer goes for either a
hosted or an on-premise solution, and follows the respective pricing model. Thus, a cost-benefit analysis is essential for
making the final decision, as both options have their pros and cons.
The hosted model is characterized by significantly lower startup costs, which helps in realizing immediate cost
savings. However, monthly service charges rise considerably as more advanced functionalities are added. On
average, a typical, full-featured hosted PBX service with unlimited calling can cost between $30 to $50 per
extension per month. This estimate does not include the setup costs, which can vary from $70 to $2,000 or more
depending on existing infrastructure.
On the other hand, an on-premise solution can be more cost-effective for some customers in the long-term, especially
for customers with proper in-house expertise. A standard PBX system can be purchased for approximately $5,000
for a small office. However, the price can easily scale to as much as $10,000 to $25,000 for an office with 20 to 40
employees. Additional/advanced features come at additional price. Along with initial setup/installation costs, regular
maintenance costs and internal staffing costs should be considered.
Phone Systems Market Primer Focus Research ©2009 15

16. 4 Tools
To assist you in simplifying a complex subject, we’ve included a set of tools that can help you understand Business
Phone System jargon, the vendors currently offering solutions to SMBs and whether your company should upgrade
its Phone System.
Glossary of Key Terms
Signs That You Need to Upgrade Your Business Phone System
Phone System Vendor List
Phone Systems Market Primer Focus Research ©2009 16

17. Glossary of Key Terms
Automated call attendant: An automated system designed to answer and route incoming calls; guides a caller
through the options of a voice menu.
Automated call distribution: A specialized device for handling and routing large volumes of incoming calls to
designated stations in a predefined order
Basic three-way conferencing: Allows a number of users to have a telephonic conference meeting
CAGR (Compound Annual Growth Rate): The year-over-year growth rate of a figure
Call accounting: Application that records and captures call data placed to or made from the telephone system
Call flip: Transfers a call from a landline to a mobile phone without any interruption
Call forward: Redirects incoming calls to a specified number
Call hold: Enables the user to put a caller on hold while a second call is answered or made
Call park: Places a call on hold, allowing anyone to dial an extension and pick up the call
Call pick up: Takes a parked call off hold
Call queuing: A method of handling calls until they are answered
Call recording: A feature to record a conversation or a conference call
Call transfer: Directs a call to an extension without routing to the central switchboard
Call wait: Sends the user a tone or a light indicating that another call is waiting
Caller ID: Displays identification (number, name) of the caller
Communication service providers: Solution providers such as CSPs (Commerce Service Providers) and ISPs
(Internet Service Providers) that offer e-commerce solutions and Internet access to customers
CTI (Computer Telephony Integration): This technology helps combine telephony with computer systems.
Computers handling calls in call centers or customer care departments are CTI implementations. Here, computers take
incoming calls and route them appropriately depending on the call number and caller ID. CTI has replaced traditional
PBXes with advanced systems capable of handling incoming calls, outgoing messages, faxes and online communication.
Phone Systems Market Primer Focus Research ©2009 17

18. Digital switching: Switching facility that establishes and maintains a connection, under stored-program control, to route
binary-encoded information between an input port and an output port
Do not disturb: Ability to ignore all incoming calls; it can be achieved by keeping the ringer on “mute” mode or by
keeping the phone on “busy” mode
Direct Inward Dialing (DID): Customized phone line allowing internal users to directly call within the organization
without seeking help from front-desk personnel. Although callers outside the company can access a DID line via a central
telephone number, enterprise users cannot call from outside, as DID does not offer a dial tone.
Find me/follow me: An extension of call forward feature; call is forwarded to multiple numbers in a specified sequence
Hunt Groups: A group of extensions that are organized in a specific order to process some particular calls
IP PBX (Internet Protocol Private Branch eXchange): Companies in which VoIP is the primary means of
exchanging voice conversations use an extended form of PBX known as IP PBX. IP PBX performs all the functions of
a traditional PBX such as handling conference calling, transferring calls, connecting employees to the network using
extension numbers and more. The key difference is that in the case of IP PBX, voice transmissions are not sent via
normal phone lines, but in the form of voice packets over a data network (Internet). IP PBX systems are available as
hardware and software.
ISDN (Integrated Services Digital Network): Developed by the CCITT (Consultative Committee on International
Telephony and Telegraphy), a component of the TSS (Telecommunications Standardization Sector), ISDN is the standard
for integrated multimedia transmission. ISDN offers much higher data transfer speeds than those achieved with traditional
telephone wires. Such high speeds enable easy transmission of voice, image and data. It requires the subscriber as well
as the service provider to replace their modems with ISDN adapters.
IVR (Interactive Voice Response): IVR allows callers to interact with an automated computer system without the
intervention of customer care operators. IVR saves customers the time they would have spent waiting for customer care
representatives, particularly when the representatives are extremely busy. Moreover, companies can successfully use
smart IVR systems to perform tasks such as billing, booking tickets, determining account balance, finding stock prices
and more.
KTS (Key Telephone System): Refers to the private enterprise telephone system consisting of as many as 130 multi-
feature lines and/or telephone equipment. Installed within the business premises, a KTS may function in combination with
a central PBX or independently.
Local telcos: A local exchange telephone carrier
Packet switching: With this method of data transmission, messages are divided into packets before they are sent.
Each packet is then transmitted individually and can follow different routes to its destination, where all the packets are
recompiled into the original message.
Phone Systems Market Primer Focus Research ©2009 18

19. PBX (Private Branch eXchange): A PBX is a telephone switch or switching device that is owned by a business. It
connects all phones owned by a business to the PSTN (Public Switched Telephone Network). In companies where VoIP is
the primary means of exchanging voice conversations, an extended form of PBX — known as IP PBX (Internet Protocol
Private Branch eXchange) — is used.
QoS (Quality of Service): A method of performance assessment and maintenance of network and telecommunication
services. With QoS, services can be guaranteed to a certain extent. Bandwidth and system uptime, for instance, are key
measures of network quality.
PSTN (Public Switched Telephone Network): The worldwide interconnected public circuit-switched telephone
networks; also referred to as POTS (plain old telephone service)
ROI (Return On Investment): Percentage of profit or revenue generated by a specific investment
SIP (Session Initiation Protocol): A standard signaling protocol used for creating, modifying and terminating voice,
video and data conferencing over packet-switched networks. VoIP systems incorporate SIP at the application layer to
successfully integrate IP telephony with other Internet services. Some of the features of VoIP managed by SIP include
call setup, routing, authentication, authorization and communication with different service providers.
SMB (small and midsize businesses): Companies with as many as 100 employees are classified as small
businesses. Companies with 101 to 500 employees are considered midsize businesses.
TDM PBX (Time Division Multiplexing Private Branch eXchange): Interconnects analog/digital telephone
extensions to one another as well as to the outside PSTN network
Traditional cable companies: MSOs (multisystem cable operators) that operate and own local cable TV systems
UC (Unified Communications): A communications system that includes three or more of the following elements:
voice, unified messaging, video, mobility, Web/data collaboration, conferencing and presence management
UM (Unified Messaging): Integrates the delivery of diverse data including voice mail, email, fax and video to one inbox
that can be accessed from a variety of devices. Unlike a multimedia email, UM also integrates voice mail from a telephone
with other forms of messaging. Recipients can access messages from various devices such as computers, cell phones
and conventional telephones.
Voice mail box (and voice mail features): A system that receives and manages telephone messages from callers
when the call is not received
VoIP (Voice over Internet Protocol): VoIP or IP telephony is the generic term for technologies that allow the
exchange of voice and other forms of information over the Internet or other IP-based network. This information exchange
has traditionally been carried over the PSTN. VoIP is superior to traditional telephony in that it avoids all toll charges,
making it less expensive.
Phone Systems Market Primer Focus Research ©2009 19

20. Signs That You Need to
Upgrade Your Business Phone System
To survive in today’s ever-changing business environment, it is imperative for a business to adopt the latest innovations in
communication technology. Is the time ripe for replacing/upgrading your existing phone system? Which solution will best
suit your business? Assess your needs by asking the following questions:
• Is your existing phone system becoming technically obsolete? Check the compatibility and interoperability of your
phone system with existing upgraded IT/networking equipment.
• Does your phone system have scalability features? Are you able to add more extensions/users? Scalability is an
important feature, particularly for a business with substantial growth plans.
• Is your phone system able to effectively handle the increasing number of incoming and outgoing calls? Check for
network congestion. Increase in call volume is normal for a growing business, and the phone system should be
well-equipped to handle the boost in traffic.
• Does your phone system support VoIP telephony? Transporting your voice calls among branches via an IP
network, which you already use for email and data transfer, can save your inter-branch telephone costs. Other cost
saving can be realized using VoIP.
• Does your phone system have a multi-office support feature? If you plan to open new sites at multiple locations,
your phone system should be able to manage and remotely administer extensions at those locations — or
home-based offices — as easily as if they were on-site.
• Does your phone system allow your mobile work force stay connected and accessible? For your front-end sales
executives and other staff members, who are on-the-move most of the time, enhanced connectivity is a requisite
operational feature.
Signs That You Need a Hosted Phone System
• Do you have multiple office sites? With a hosted phone solution, multi-location offices are easily served. The
service provider can assign a virtual number to the office location of your choice.
• Do you want to outsource the technical services that support your business communication and focus more on
your core business? With a hosted phone solution, the entire telephony infrastructure, except phones and related
equipment, resides at a remote location and business communication is managed remotely.
• Are a large number of your employees on the move most of the time? A hosted phone solution enables
employees to stay connected remotely using a broadband Internet port via an IP phone or a computer with a
soft phone.
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21. • Do you have specific calling features requirements? Is “find me/follow me” a must-have? Would an “auto
attendant” be more effective at managing your incoming calls? A hosted phone system solution provides the
flexibility of choosing the features that best suit your needs.
Signs That You Need an On-Premise Phone System
• Do you have customized business communication requirements that are not met by off-the-shelf solutions?
• Do you want control over your telephony infrastructure? Do you have strong in-house IT expertise? The
implementation, maintenance and support of on-premise PBX system call for a well-built infrastructure and
operational IT/networking expertise to carry out integration, customization, routine upgrades and related tasks.
• Is your organization large? Are you looking for a long-term integrated business communication solution? Your
investment in an on-premise solution can ultimately be more cost-effective than any other solution.
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22. Vendor Landscape
The following is a list of key vendors offering business phone systems for small and midsize businesses.
Pure-play hosted PBX solution providers
8x8 Nextiva
Aptela Qwest
Bandwidth.com Ring 9
Cbeyond Speakeasy
Covad Vocalocity
iCore VSGi
LightEdge Solutions Whaleback Systems
M5 Networks
Enterprise on-premise PBX solution providers
Avaya Nortel
Cisco Siemens
NEC Sphere
PBX (both hosted and on-premise) solution providers
Altigen Communications Spherecom
Dialexia Zultys
Fonality
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23. About FOCUS
Our Mission
Our mission is to support business professionals’ critical purchase decisions by creating and distributing the highest
quality, most relevant purchase research and tool sets.
Our Approach
To ensure maximum insight and relevancy, Focus has designed a four factor approach to buyer-centric research. All
research at Focus begins with defining the buyer factor. Categorized in our research as Buyer Types, the buyer factor
identifies the buyer needs and preferences in a market that make a difference in selecting the right product and vendor.
Buyer Types are studied and developed based on Focus’ interaction with thousands of buyers across a category. The
buyer factor in turn shapes Focus recommendations on how buyers approach three other critical factors: 1) product
requirements, 2) cost considerations and 3) vendor relationships.
Buyer Feedback
In addition to speaking with industry experts and other participants, a critical priority is to integrate feedback
from experienced buyers. We speak with thousands of buyers each month and conduct our formal buyer surveys
throughout the year.
For more information on our research approach, please visit Focus.
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