VoIP technology has evolved dramatically in the new millennium.
Whereas phone systems designed for VoIP service were once mere replacements for traditional phone systems, they are now capable of integrating various communication modes (e.g., voice, video, chat, desktop sharing, text and email). This shift has led to an explosion of new terms and concepts around VoIP technology.
We interviewed market experts to help decision-makers navigate this confusing tangle of jargon surrounding VoIP terms. We also used Google Trends, a tool for comparing the relative popularity of search terms, in order to track market shifts.
Mobile, UC and Cloud Terms Trending in 2014
The following chart compares the lowest level of popularity for all of the telecommunications terms referenced in this report with their popularity in August 2014: the last month for which Google offered complete data at the time of writing.
This graph clearly shows some of the most recent trends in telecommunications. For example, “bring your own device” (BYOD, which refers to the integration of employees’ personal mobile devices into corporate IT infrastructure) has been trending far more dramatically than terms for more established technologies, such as “videoconferencing.”
Additionally, the term “mobility client”—meaning an app that extends UC capabilities to mobile devices—has soared in popularity over the past few years.
Popularity Levels for Telecommunications Terms
We can identify more trending terms by looking at the following table, which ranks terms according to how recently they’ve peaked in popularity.
Telecommunications Terms Ranked
According to Peaks in Popularity
We can see that terms for cloud-based delivery models for unified communications (UC) services (e.g., UCaaS, or “unified communications as a service”) are among the most recently trending terms in the list, since these delivery models have just begun to emerge in the past few years.
However, we needed to dig deeper into the data and consult industry experts in order to identify other shifts in the market for Internet-based telephony solutions.
The PBX Is Moving to the Cloud
The shift to cloud-based delivery models has affected nearly every category of software used in the workplace—but this shift has a different meaning in the context of telecommunications, where software frequently works in conjunction with hardware (e.g., routers, switches and dedicated servers) and network infrastructure.
Only a decade ago, it was common for businesses to invest in their own hardware for routing voice traffic over a broadband connection. Now, however, businesses are increasingly adopting managed solutions that deliver communications as a service, rather than as a piece of equipment that demands an experienced IT team to install and maintain.
Jeff Valentine, chief marketing officer at Fonality (a leading provider of hosted PBX services as well as on-premise solutions), has been tracking this shift. He explains that the move to the cloud is, in some ways, a return to an earlier era of telecommunications.
“In my view, what’s old is new again,” he says. “If you look back at how the phone network started, it’s always been delivered as a service. Long ago, the cost of phone lines was so high that businesses had to start putting in PBXs to share a few phone lines amongst many employees. Now, companies are going back and thinking to themselves: ‘Why is it, again, that we have a PBX?’”
However, for some businesses, there are still some good justifications for investing in an on-premise system.
David Zahn, senior vice president of marketing at TelePacific Communications, explains that there is still a place in the market for on-premise systems—particularly amongst larger enterprises.
However, he notes that “hosted PBX has been gaining in both acceptance and adoption, especially with the SMB [or small to mid-sized business] segment. … SMBs appreciate the flexibility and ease of accommodation for … multi-location companies that a [hosted system offers, which a] traditional premises-based PBX cannot compete with.”
Charles Studt, vice president of product marketing at IntelePeer—a provider of SIP trunking and hosted unified communications services to enterprise customers—adds that for small businesses, “there [are] a lot of economic arguments to be made in favor of hosted rather than on-premise, both in terms of the feature set and the total cost of ownership [TCO].”
Due in part to the growing popularity of hosted PBX services among small businesses, Valentine says he expects the market for on-premise systems to decrease over the next decade, and the market for cloud-based systems to expand substantially.
“Around one-fifth of the market today is willing to buy a hosted, cloud-based phone system, and the total share of the market that has bought is much smaller,” he explains. “I expect that within the next 10 years, however, this ratio will flip, and only one-tenth of potential buyers will be willing to consider an on-premise system.”
The data from Google Trends backs up Valentine’s prediction:
Relative Popularity of ‘IP PBX,’ ‘Hosted PBX’ as Search Terms
Data source: Google Trends (www.google.com/trends); legend created by Software Advice
Though the overall popularity of the search term “hosted PBX” peaked back in 2006, the term shows a fairly steady level of popularity, whereas “IP PBX” has gradually fallen off. “Hosted PBX” has only ever achieved 53 percent of the popularity of “IP PBX” at its peak—but recently, the term has begun to consistently overtake “IP PBX” in popularity.
We can infer from these numbers that hosted PBXs will only continue to overtake traditional IP PBXs in popularity as the decade wears on.
Business Phone Systems Are Now ‘UC’ Systems
Over the years, the PBX’s position at the heart of business telecommunications infrastructure allowed it to take on additional functions.
In Valentine’s words: “The PBX grew into much more than a PBX over time. While it was originally just a switchboard for allowing people to save money on phone calls, it grew into much more of a business communications tool—allowing companies to collaborate internally and, later, to enable unified communications capabilities.”
Whereas unified communications was once the province of the enterprise, the market has witnessed explosive growth over the past decade, and is predicted to grow to $88 billion by 2018. And the line between the functionality of a hosted PBX and a UC system has increasingly blurred through technological advancements—to the point where nearly all PBXs offer some UC features.
Zahn explains that new demands from software buyers have, to some extent, motivated the evolution of hosted PBXs into full-fledged UC solutions.
“Incorporating instant messaging, softphones and video calling with hosted PBX service has certainly changed what customers expect from their phone systems,” he says. “There has also been a heavy push from customers to include all features [for each user] for a single price, whether they will be used or not.”
Matt Peterson, chief information officer at Jive Communications (a leading provider of hosted UC services), concurs with Zahn on the issue of pricing, and adds that there is a push to deliver these features “without the complicated [pricing by feature] schemes typically seen in the telecommunications industry.”
In other words: The demand for unified communications is changing the licensing models for VoIP services.
While UC systems have made it possible to integrate communication tools within a given company, there’s still a lot of work to be done to make communication and collaboration easier between companies. The goal of interoperability between corporate communications systems is known as “federated communications.”
“It’s a pretty powerful capability to be able to pull supply-chain partners and vendors into unified communications systems. … Extending [collaboration capabilities] out to trading partners and customers really improves ROI [return on investment],” says Studt.
Valentine cautions that there are significant technical challenges to ensuring interoperability between the communications environments of different companies, but adds that businesses will see a payoff if their IT teams are willing to devote their time to federation.
Mobile Devices Integral to Communications Deployments
The need to incorporate mobile devices into business communications infrastructure has spurred much of the recent evolution in PBX and unified communications systems.
Grasshopper, for instance, is a provider of hosted PBX services that enables businesses to run their phone systems entirely on cell phones. In this respect, Grasshopper resembles a BYOD solution for small businesses.
Grasshopper’s Ambassador of Buzz, Taylor Aldredge, observes that “our system isn’t tied to a physical phone, but whatever forwarding number you enter that works for you.” This platform-agnostic approach is an indication of the mobility-oriented direction in which PBX service is headed.
Whereas systems such as Grasshopper focus on adding basic PBX functionality to users’ existing devices, UC features can also be extended to mobile devices via dedicated apps known as “mobility clients.” These clients are far more than mere softphones, as they enable features such as videoconferencing, unified presence across devices, call recording and even contact center functionality. Mobility clients have seen a dramatic rise in popularity and sophistication over the past few years, as have desktop UC clients.
By way of example, Valentine observes that Fonality measured the usage of its desktop client (known as Heads Up Display, or HUD) and found that “people use HUD about 10 times more than they use their [desk] phones.”
Zahn notes that compatibility with a range of devices is a critical selling point for software buyers, as well.
“As hosted PBX services mature, more and more customers have existing hosted PBX devices that they will want to reuse. ‘Bring your own device’ is quickly becoming a ticket to play and is on TelePacific’s roadmap for 2015,” he says.
A comparison of search terms for some of the most popular UC features (videoconferencing, unified messaging, presence information and desktop sharing) in Google Trends reveals the dramatic rise to prominence of mobile clients:
Relative Popularity of UC Features as Search Terms
Data source: Google Trends (www.google.com/trends); legend created by Software Advice
“Desktop sharing” has traditionally been the most popular of these terms, followed closely by “videoconferencing.” Both terms have exhibited a steady decrease in popularity since 2004, when Google began tracking data for them.
While the term “mobility client” just arrived on the scene in October 2010, it first overtook “videoconferencing” in popularity in May 2012. “Presence information” (i.e., information about user availability displayed in contact lists and directories) is also trending, overtaking “videoconferencing” for the first time in November 2012.
In addition to the progressive integration of mobile devices within PBX and UC systems, such devices are increasingly being used to place VoIP calls over Wi-Fi data connections, instead of sending them over cellular networks.
This method of transmitting calls is known as “mobile VoIP,” and it’s poised to change the nature of global telecommunications within the next five years: Some analysts predict 1 billion mobile VoIP users by 2017.
“Interestingly enough, this shift is actually being driven by the mobile operators,” says Neil Griffith, vice president of product management at IntelePeer. “There’s no more spectrum [e.g., available frequencies for transmitting signals] to buy, and communities aren’t going to tolerate cell phone towers on every corner.”
It remains to be seen how this shift will impact the VoIP market, but it’s another sign of how central mobile-device strategy has become to business communications initiatives.
WebRTC Promises to Enhance UC (Eventually)
WebRTC is a standards-based application programming interface (API) that enables the development of applications for direct communications, such as voice and video calls, between Web browsers (i.e., users don’t need to install plug-ins).
Over the past few years, WebRTC has received a good deal of media coverage, thanks in part to its potential to decrease the cost and difficulty of videoconferencing.
However, it seems that WebRTC is merely another step toward the streamlining of existing tools for IP-based voice calling and videoconferencing, rather than being a new communications paradigm. This is one reason why WebRTC adoption has been somewhat slower than anticipated.
“When [WebRTC] standards were being developed, there was a ton of buzz around the standards,” Zahn says. “But once they were agreed upon and the industry was able to take a step back and ask, ‘How are we actually going to use this technology?,’ progress slowed.”
Though adoption of WebRTC is still far from universal, some developers of IP PBX software and providers of hosted unified communications services are already beginning to experiment with it.
“One of the areas where you might see early adoption of WebRTC is customer support—for example, using WebRTC for click-to-call links to enable audio and video interactions with customers,” Zahn says.
Peterson also notes that Jive is planning to use WebRTC to streamline “upcoming releases of integrated videoconferencing and screen-sharing features in our UC suite.”
He admits that “as with most telecommunications technology, adoption of WebRTC is following a belated path … [but] the ideas behind WebRTC are too good and too simple to stay in the shadows for long.”
Data from Google Trends shows that “WebRTC” is clearly gaining in popularity since June 2011 (when Google started tracking the search term). The term’s most recent peak in popularity was October 2013—which suggests that its popularity has yet to crest.
VoIP Security Measures Still Not Widely Implemented
A recent spate of data breaches has inspired endless discussion of security standards and mechanisms among businesses, IT professionals and the general public. Even though this discussion has shed light on the issue of VoIP security, most experts in the industry agree that more work needs to be done to secure VoIP calls.
This isn’t to say that there aren’t yet effective tools for securing voice traffic. Secure real-time transport protocol, for instance, is a profile that allows for the encrypted transmission of voice streams. However, SRTP has not yet seen widespread adoption.
Zahn notes that SRTP “received a ton of hype and discussion when it was first developed, but it has had very little implementation from service providers.”
He adds that this “lack of support is primarily due to the fact that encryption adds overhead, increasing the system needs for both customers and service providers—but there have been few instances of voice traffic interception, so the [demand for support] is almost non-existent.”
Even though noteworthy cases of voice traffic interception have been scarce, Valentine explains that the lack of existing security mechanisms means that it’s only a matter of time until we start seeing cyberattacks of this nature.
“None of the SIP trunks that people are buying today are encrypted—you could listen to every phone call in the country if you had enough computers,” he says. He thinks that SRTP only requires a high-profile case of voice-traffic interception to get off the ground.
“One day, somebody’s going to post online all the phone calls that the CEO of a major company makes to a competitor, but until that happens, nobody knows about the problem,” says Valentine.
“[The only security we have is] security through obscurity: There are so many voice packets flying right and left that reassembling them is impossible, but when somebody invents an easy way to reassemble everything, there will be a huge Wikileaks of phone calls.”
According to data from Google Trends, “SRTP” reached a peak level of popularity back in 2005 and 2006, which confirms Zahn’s point. However, its popularity has remained relatively steady since then. “Transport-layer security (TLS)”—a protocol used to encrypt the SIP messages that control communications sessions—has remained consistently more popular than SRTP.
“TLS is actually more important than SRTP for businesses worried about denial-of-service attacks,” Griffith notes. The fact that TLS has remained at a consistently higher level of popularity is most likely due to its applications beyond SIP encryption (such as website encryption for ecommerce).
Market for SIP Trunks Growing, but Not at Peak Monetization
SIP trunks are direct connections to Internet telephony service providers (ITSPs) that allow users to send voice traffic over the Internet without sacrificing quality. Generally, the ITSP manages the connection in order to resolve quality and connectivity issues.
SIP trunks have other benefits, such as increased savings and scalability, when compared to traditional PSTN trunk lines: Businesses simply purchase additional bandwidth rather than additional trunk lines in order to add new employees to the phone system. This is one reason the market for SIP trunking has been growing by 50 percent annually.
Zahn predicts that this rapid growth won’t fall off anytime soon.
“There is still significant growth projected for SIP trunking, driven by its integration with unified communications and the continuing implementation of advanced trunking features,” he says.
In other words: As the demand for unified communications increases, businesses will increasingly switch to SIP trunks to make sure that streaming phone calls and videoconferences take priority over other forms of data on their connections.
“Anywhere from 30 to 40 percent of enterprises are in some form of migration to SIP, so we’re still not at peak monetization,” Studt adds. We can infer that if enterprises still haven’t fully migrated to SIP, then there’s even more room for growth in the SIP trunking market for SMBs.
We’ve seen that the PBX is not only moving to the cloud, but expanding vastly in its functionality in order to integrate communications tools ranging from fax to desktop sharing. The major line of evolution has been toward allowing users to display the same corporate identity across all of their devices.
In line with this development, mobile and desktop UC clients have begun to spike in popularity much more drastically than more traditional telephony features (e.g., call waiting, call forwarding etc.). These clients allow users to transform desktop and mobile devices into multi-purpose communications hubs for conferencing, chatting and even call center operations.
WebRTC promises to further streamline the user experience of UC solutions, particularly for videoconferencing, by extending UC capabilities to Web browsers without using plug-ins.
Finally, in a technological and economic landscape where the cloud is becoming the natural delivery model for communications services, the market for SIP trunks is booming. Businesses can use SIP trunks to fully harness the features of UC solutions and also to scale their communications infrastructure as they grow in ways that were impossible with traditional PSTN connections.
All data was collected from Google Trends in October 2014. Because only partial data was available at this time for the month of September, we examined popularity for the terms covered in this report from January 2004 (when Google Trends started tracking data) to August 2014.
Since Google Trends tracks the proportion of the overall search traffic in a given region received by a specific term over time, the charts in this report do not represent the total numbers of searches for these terms, just their changing levels of popularity. If a term bottoms out at “0,” then Google probably lacks the data to calculate its popularity at that point in time—see its explanation here.