Magic Quadrant for Corporate Telephony in EMEA, 2003
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1 Markets, S. Blood, C. Lock Research Note 2 September 2003 Magic Quadrant for Corporate Telephony in EMEA, 2003 Cisco and Alcatel continue to offer the market's most comprehensive corporate propositions. Siemens and Avaya join Nortel in the Leaders quadrant, but still have some work to do to match the strongest vendors. Core Topic Enterprise Networking: Voice Applications Key Issue Which vendors will be successful in nextgeneration voice technologies? Companies are migrating to IP telephony, but slowly. With IT budgets still tight, companies have to squeeze the last use out of their legacy PBXs. IP telephony got more of the limited money available in 2002 than PBXs, partly because there were fewer new shipments in Western Europe (see "Premises Switching Equipment: Western Europe, ," TCEC-WW-MS-0345, and "Premises Switching Equipment: Middle East and Africa, ," TCEC-WW-MS-0347). The evolutionary pace of adoption reflects a "replacement mentality." Telecom managers expect next-generation solutions to provide the same capabilities as the traditional platform, for a lower initial investment and total cost of ownership. This is because many companies do not realize that IP telephony's value is best tapped by using it to improve communication, which has a positive impact on business process (see "IP Telephony Can Revolutionize Business Communications," SPA ). Companies are still investing in hardware to expand their traditional PBX networks. Although this supports short-term business requirements, not all proposals from legacy PBX vendors protect user investment. Favor vendors that are migrating toward standards-based architectures; for example, appliance servers running Pentium processors and standardsbased operating systems such as Linux, VxWorks and Windows To be included in the Corporate Telephony Magic Quadrant (see Figure 1 and Note 1), vendors needed to have: 1. Sales and operational presence in more than one country in Europe, Middle East and Africa (EMEA) 2. Demonstrable telephony solutions for corporate enterprises Gartner Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.
2 3. A lot of enquiries from Gartner clients Figure 1 Magic Quadrant for Corporate Telephony in EMEA, 2003 Challengers Leaders Ability to Execute Ericsson Ascom Philips Tenovis Siemens Enterprise Networks 3Com EADS Telecom Cisco Systems Alcatel Nortel Networks Avaya Mitel Networks As of August 2003 Niche Players Visionaries Source: Gartner Research (August 2003) Completeness of Vision Note 1 Evaluation Criteria Vendors were evaluated against the criteria set out in "Criteria for Magic Quadrant for Corporate Telephony, 2003," M : Completeness of Vision Corporate Strategy Market Message Technical Innovation Services Strategy Ability to Execute Mind Share/Market Share Product Capabilities Financial Capabilities Channel Distribution Leaders Cisco Systems' main sources of influence in the corporate telephony market are its strength in corporate network infrastructure, popularity with IT decision makers and growing influence with service providers across EMEA. Cisco has extended its capability to integrate with traditional PBX networks, offering more compelling migration propositions for the edges of networks. Several network service providers are proposing Call Manager as a value-added service for Cisco-based managed data network contracts, either to retain the contract, or to encourage companies to change suppliers. Cisco's relationship with the major service providers in Europe gives its customers access to lots of choice in managed services. Alcatel continues to execute well in the EMEA markets. The development of service providers is essential to competing against Cisco and to winning greater market share from incumbent telephony providers. Alcatel was quick to develop SIP 2 September
3 for its OmniPCX Enterprise and ecommunication Center to deliver unified communications solutions. The company has signed with systems integrators like IBM, Logical Networks and Getronics, as well as network service providers. This multivendor strategy is essential to complementing NextiraOne, which is developing into a multivendor channel. Companies should expect Alcatel to extend its managed services propositions through service provider channels. Nortel Networks improves its position in the Leaders quadrant by restructuring and refocusing on the corporate market and some innovative product development. Recreating the Enterprise Networks business unit enabled Nortel to focus in its strength on enterprise solutions. New channel partnerships with Damovo and NextiraOne strengthened the sales and support facilities available to pan-emea companies. The Multimedia Communication Server 5100 (formerly Succession Multimedia Xchange) is an innovative development for peer-to-peer internal communication. Nortel's demand stimulation programs have yet to improve channel sales. Companies should watch for evidence that Nortel is succeeding with new partners. Siemens Enterprise Networks moves to the Leaders quadrant because of its strong vision regarding its latest IP solutions (known as the second-generation IP initiative) and its development of OpenScape with Microsoft. Siemens recognized early that IP telephony contributes to business productivity. The company's "Real Time Communications" vision can be fulfilled by developing OpenScape. Acquiring Cycos, a unified messaging application, computer-telephony integration and call center vendor, will cement this vision. Enterprise Networks has remained profitable, but is struggling to sell outside its installed base. Siemens sells most of its products and services directly, limiting competitive channels for the HiPath portfolio. Siemens could serve its customers better by making use of its strong brand value. With more sales channels and partners, users would have a wider choice of sourcing and service options. Avaya moves to the Leaders quadrant because of its increased focus on telephony solutions for companies in EMEA. The MultiVantage suite became more visible following strongly targeted marketing of its telephony and highlighting of Avaya's strength in contact center solutions. Avaya concentrates only on the enterprise market that is, it does not manufacture mobile, optical or carrier network products (unlike most competitors) so its focus is much stronger. Its market leadership in North America has yet to translate to market share in EMEA. Avaya is returning to profitability, mostly through the strength of its services business. Global Services, launched earlier in 2003, is positioned to support Avaya's comprehensive channel program 2 September
4 in EMEA. Companies need to ensure the momentum behind Global Services does not introduce channel conflict with existing suppliers, making it more difficult to manage relationships. Challengers Tenovis moves into the Challengers quadrant following improvements in its ability to execute. Tenovis is emphasizing its business as a vendor with the acquisition of COM-ON to extend its unified communications capabilities. The company has been late to complete testing of Integral software on appliance servers running Linux, but this is now due for launch in Tenovis traditionally sold its products directly and maintained this approach for key markets in Europe. But it is exploring indirect distribution, adding channels like Telecom Italia and Telecom Austria. In an increasingly competitive market, companies may find that Tenovis' exclusion of its channel partners in key markets will limit choice for its product portfolio. Visionaries Mitel Networks is improving its market awareness of IP communications solutions, but most of its growth comes from the U.S. market. Mitel has a vision for enterprise communications, and developments in its 3300 ICP portfolio offer a smooth and cost-effective migration from its legacy SX2000 product set. Although Mitel has partnered with companies like Damovo and IBM to extend its market awareness across Europe, product sales have not delivered the expected revenue. Companies should expect Mitel to focus its strength in key vertical markets and develop value propositions for target channels to market if it is to challenge the market leaders. Niche Players 3Com has improved its position in the Niche Players quadrant through strong financial performance and sales of telephony in new markets. With the sale of CommWorks, 3Com is now solely focused on enterprise markets. Retention of intellectual property for voice products has enabled it to develop the VCX V7000 currently under trial in the U.S. market. Complementary development with NBX should enable 3Com to offer scalable communications solutions for distributed corporate networks. But companies will only get mainstream access to 3Com's telephony solutions if it develops its services proposition for channels to market. Ericsson Enterprise has yet to launch its next-generation replacement for the legacy MD110, originally planned for 2Q03. Its strategy is to mobilize companies by combining the 2 September
5 functionality of an enterprise PBX with the connectivity of a cellular network. Although mobility is increasingly important to companies, few will adopt cellular-based solutions enterprisewide. Ericsson continues to have a strong market share in EMEA, partly due to the low total cost of ownership for the legacy MD110. Because it is part of "Other Business," a division of Ericsson that is struggling, Ericsson Enterprise appears to be starved of funding to develop and market enterprise-oriented solutions. EADS Telecom recently divested its interest in Nortel Networks as part of a deal to swap the stakes each had in the others' telecom-related business. With the disposal, EADS Telecom has realigned itself in the market for defense and homeland security. Although security is a key issue for communications solutions and EADS Telecom retains a number of corporate customers, especially in France, Gartner expects the company to remain a niche market player for corporate telephony. Philips Business Communications (PBC) wasexpectedtobe acquired by Gores Technology Group in the first half of With the commitment in place, PBC has recently entered into partnership with NEC to co-develop IP telephony applications as well as announcing developments in its own Sopho product range. New ownership of PBC will increase the communications focus of the business, but at this stage it is not clear if the emphasis will be on product development or service provision. Ascom announced the sale of its Enterprise Communications division to Canadian Astra Technologies in July of The deal is due to be completed in the third quarter of With this acquisition, Astra adds enterprise communications to its portfolio of network access products and telephones. A key challenge for Astra will be to turn Ascom's PBX division into a profitable business while still understanding and developing to the needs of corporate customers. Bottom Line: As channels become multivendor, companies have increased choice in sourcing telephony products and solutions. Expect leading vendors to develop strong market propositions around the value IP telephony brings to the business, not just on the cost savings it offers for the IT department. Convergence enables companies to evaluate sourcing options for telephony. Network service providers will have strong managed service propositions as enhancements to IP virtual private networks, and will compete with integrated solutions from enterprise service providers. 2 September
By 2007, 80 percent of enterprise communications purchase decisions will require support for unified communications (0.6 probability).
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