Business telephony is evolving beyond the simple private branch exchange (PBX). Currently, it encompasses a suite of new capabilities, which include conferencing, collaboration, messaging and mobility. software-as-a-service and network-based communication capabilities are gaining significant mind-traction.

A study, conducted by the enterprise communications research and consulting practice of Frost & Sullivan, says that the European enterprise telephony markets shipped approximately 21 million lines in 2006 and estimates this to peak at 25.8 million lines in 2008 before declining to around 24.6 million lines by 2010.

Capex investments improved; a positive trend that''s likely to continue in 2007.Enterprises'' new investments increasingly include IP technology although phased migration continues to remain in vogue. Enterprises that have already deployed IP in their networks are beginning to look for ways to leverage the technology. The idea that IP is only a means to achieve greater capabilities is gaining strong traction.

Despite being in the midst of a replacement cycle, the growth rate of the enterprise telephony markets is declining. In 2006, the total lines shipped approximated 21 million. The growth in line shipments marked a sharp increase over 2005. The seasonal variation in procurement was moderated in 2006. The second half of the year registered a sharp increase in uptake.

According to Shomik Banerjee, industry analyst Frost & Sullivan, "Poor uptake in France, Italy, Nordics and Spain has been responsible for the low growth rate of IP telephony deployments in Europe. Pure IP shipments are continuing to grow. However, the growth of IP-capable systems outnumbers the growth of IP usage."

At present, alternate business models such as managed services and hosted services are threatening the on-premise proposition. Microsoft''s entry into the unified communication arena has boosted the software-based solutions market. There is a sense of urgency amongst vendors. Legacy players have introduced aggressive marketing campaigns to protect their installed base by offering compelling schemes towards IP telephony migration.

According to the study, the entry of Microsoft into this arena is set to revolutionise the European enterprise telephony markets.

"The entry of Microsoft has not only made software-based solutions a de-facto alternative to hardware-based PBX, but has also propelled the case for enterprise convergence through unified communication," explains Banerjee. "Given the situation, developing a strong ecosystem is crucial for vendors to survive this transformation. Endorsing open technologies will also become crucial."