The Death of the PBX
By Brian McConnell, Hello Direct, Inc.. September 1998.
All products have life cycles. Just as organisms are born, thrive, and eventually die, products also go through a similar cycle. The PBX (and the circuit switched telephone network it is connected to) has enjoyed a long and prosperous life. However, it is reaching the end of its life cycle, and will be displaced by next generation technologies which do more, cost less, and are easier to administer.
PBX vendors seem not to realize that they are not fighting a specific technology. If they were, they could just buy a few PC PBX vendors, repackage the products as their own, and.. problem solved. If the problem were this simple, it would already be solved. It isn't that simple because several important technology shifts are occuring simultaneously.
To put this in perspective, the computing industry has undergone several major shifts in the past 20 years. The introduction of the IBM PC was one such event. The introduction of the graphical user interface (Macintosh) was another. The introduction of computing magazines drove a widespread shift away from mom and pop retailers to catalog merchants, direct sellers and superstores. The emergence of the worldwide web redefined how computers and related products were sold in the past two years. However, each of these shifts has occurred independently of the others. The telecommunications industry, however, is faced with several sea changes at the same time.
First, the underlying technology behind telecommunications networks is being rethought from the ground up. Circuit switched networks are giving way to packet switched networks. This technology change is fundamental because networking vendors (i.e. Cisco, 3Com, etc) have been doing packet switched networking for years. Currently, the Internet is dependent on the circuit switched PSTN. However, in the future, this role is likely to be reserved. The PSTN will be a general purpose network which, among other things, can transmit voice. A network which just handles voice, or forces data to be transmitted as voice (i.e. modems), has reached the end of its useful life (though it will experience a long and painful death).
Second, customer premise equipment is undergoing a similar revolution. While PBX vendors are critical of PC based PBXs, it is important to note that they are not just competing with PC PBXs. They are also competing with ATM PBXs (such as Sphere's platform), IP based PBXs (such as Selsius and NBX), hybrid IP/circuit switch PBXs (such as Shoreline Teleworks CrystaLAN and the Touchwave Webswitch), and virtual PBX services. Customers can pick the architecture which makes the most sense for them. Some will prefer simple, turnkey appliances. Some will prefer systems which integrate with their LAN.
Third, many PBX services can be delivered by the telephone network itself. Advanced Queuing Systems' Crosspoint VirtualPBX is an excellent example of what is yet to come. They provide all of the call processing capabilities of a PBX/ACD without requiring the end user to buy any equipment. Thus, a small business can outfit itself with a complete call processing/ACD solution without buying any equipment. Competitive Local Exchange Carriers (CLECs) are looking closely at enhanced services as a way to differentiate themselves from the incumbent RBOCs. So, if you can order a complete telecomm solution (including PBX-like functionality) without buying a $20,000 switch, what reason is there to buy a PBX? Sure, it's nice to have a phone with 30 blinking lights to show off how important you are, but is it really that valuable to real customers?
Last, but not least, the internet is completely redefining the way all types of products are sold. PBXs are one of the last remaining products for which product information is not widely available to buyers. Try to look up pricing for a typical office PBX on the web. You can't do it. Yet, you can look up the price for a used 1992 Subaru (as well as pictures, repair history, etc). Like it or not, the web is making it easier for buyers to research and buy products, and to shop for deals. The days of 100% margins on equipment are over. A lot of people in the industry are still in denial about this. Just look at AutoByTel, Realtor.Com or any number of marketplace websites.
All of these technology shifts are occurring simultaneously. While they don't spell immediate doom for CPE vendors, the handwriting is on the wall if they don't reinvent themselves and their products.
The problem for PBX vendors is not that PBXs are inferior. PBX technology is fine, it's just limited. The problem is that PBXs are an increasingly outmoded technology in an era when data communication is as important, or more so, than voice, and when the public telephone network is evolving into a public data network (which can also carry voice effectively). The PBX, in order to survive, needs to be reinvented as a multipurpose platform which interoperates with computer networks, and with next generation telephone networks.
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