Changewave Research: Corporate Voip Trends

ChangeWave Research: Corporate VoIP Trends

ChangeWave ResearchReport:

Corporate VoIP Trends

Corporate VoIP Deployments Double in 2004; Surge in Full Deployments

Overview

This report summarizes an October 14 – 19, 2004survey of ChangeWave Alliance members involved in or knowledgeable about decisions regarding Voice Over Internet Protocol (VoIP) services for their company. A total of 406 members participated. Here’s what we found:

Key Findings

Corporate VoIP Deployments Double in Past Year. A total of 14% of respondents say their company has deployed VoIP within the past year, while another 13% say their company has deployed VoIP for more than a year.

Surge in “Full” VoIP Deployments. Currently, 43% of respondents whose companies use VoIP characterize it as a “full deployment for a major part of their company’s mainstream voice capability” – up 15-percentage points from the previous survey (February 2004). Another 37% say VoIP is being used for a “unique application” for part of their company, while 18% say it is being used as a test or prototype.

One-in-Three Corporate Users Now 100% VoIP. In another indication of the growing strength of VoIP, one-in-three respondents (32%) whose companies deploy VoIP say they’ve used it to replace traditional phone service and are now 100% VoIP. The other two-thirds (66%) say VoIP is used as a “supplement” to their traditional phone service.

Cisco is Top VoIP Equipment Supplier. Cisco (44%) dominates the corporate VoIP equipment supplier market, with Vonage (9%), Nortel (8%), and 8x8 (7%) all far behind.

VoIP Customer Satisfaction Improves. Eighty-four percent (84%) of VoIP users are either “Very” or “Somewhat” satisfied with their primary equipment supplier, slightly higher than the 82% recorded in February 2004. The percentage reporting they are “Very” or “Somewhat” unsatisfied dropped from 11% in February to only 5% currently.

Spending Plans – Next Six Months. A total of 29% of respondents say their company will be increasing spending on VoIP Applications/Equipment in the next six months. Nearly one-third of this group (9% of the total), say they are planning a significant increase in spending.

Primary Reason for VoIP Spending Increase. Among respondents who said their company will increase spending on VoIP, better than a third (34%) said it is for “Full Deployment” while 32% said it is for a “partial deployment”. Another 31% said the primary reason is to “Test or Prototype” a system.

Cisco Benefits Most from Increased Spending in Next Six Months. Thirty-one percent (31%) of respondents say Cisco will benefit most from their company’s increased VoIP Applications/Equipment spending over the next six months. Well behind in second place is 8x8 (11%), followed by Nortel (8%) and Vonage (7%).

VoIP Long Distance Service Providers. Ten percent (10%) of respondents say their company currently has a stand-alone VoIP long distance provider, up from 8% in February 2004. Surprisingly, the percentage who say they are “considering” having a stand-alone VoIP long distance providerdropped to 15% in the current survey, down from 20% in February 2004.

AT&T Tops the List of Current Corporate VoIP Long-Distance Providers. AT&T (18%) is currently the top corporate VoIP long distance provider. Vonage (10%) is second.

Corporate Long Distance Spending – Next Six Months. Vonage (11%) looks to benefit most from corporate VoIP long distance spending over the next six months, followed by Verizon (9%) and 8x8 (8%). AT&T was also cited by 8% of respondents, but that is actually quite low considering the company is currently the top corporate VoIP long distance provider.

Satisfaction Rises for VoIP Long Distance Providers. Eighty-five percent (85%) of companies that currently have a VoIP long distance provider are either “very” or “somewhat” satisfied with their service, an eight-point improvement from the February 2004 survey.

Bottom Line:The survey findings show a big expansion in corporate VoIP demand –
with the percentage ofdeployments doubling in 2004 along with a surge in the number of companies reporting “full deployment for a major part of their company’s mainstream voice capability”. The findings point to continued strong demand during 2005, with 29% of respondents reporting their company will increase VoIP spending in the next six months.

Cisco, the leader in VoIP equipment, is one of the clear beneficiaries of these trends. In terms of corporate VoIP long distance service, AT&T is the top provider of long-distance VoIP service.Vonage looks to benefit most from corporate VoIP long distance spending over the next six months, followed by Verizon and 8x8.

The ChangeWave Alliance is a group of 4,900 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

Helping You Profit From A Rapidly Changing World ™

Table of Contents

Summary of Key Findings...... 4

Introduction...... 4

The Findings...... 5

ChangeWave Research Methodology...... 11

About ChangeWave Research...... 12

I. Summary of Key Findings

eader One

Introduction

This report summarizes an October 14 – 19, 2004 corporate survey of Alliance members involved in or knowledgeable about decisions regarding VoIP services for their company. A total of 406 members participated.

II. The Findings

Total Respondents (n = 406)

(1) Question Asked: Is your company currently deploying a VoIP system or application?

Current
Survey
Oct 2004 / Previous
Survey
Feb 2004*
Yes / NA / 20%
Yes, We Have Deployed VoIP for More Than A Year / 13% / NA
Yes, We Have Deployed VoIP Within the Past 12 months / 14% / NA
No, We Have Never Deployed VoIP / 61% / 71%
No, We Previously Tried VoIP But No Longer Deploy It / 3% / NA
Don't Know / 9% / 9%

*In the previous survey the question asked was “Has your company deployed a VoIP system or application over the past 12 months?”, and the eligible responses were ‘yes’, ‘no’, or ‘don’t know’.

Corporate VoIP Deployments Double in Past Year. A total of 14% of respondents say their company has deployed VoIP within the past year, while another 13% say their company has deployed VoIP for more than a year.

We also note that the combined 27% who say they are currently deploying VoIP represents a 7-percentage point increase over the results of our February 2004 survey.

These next few questions were addressed only to those respondents who said their company currently deploys a VoIP system or application.

(1A) Question Asked: Which of the following best describes the nature of the VoIP System deployed?*

Current
Survey
Oct 2004 / Previous
Survey
Feb 2004
Full Deployment for Major Part of Company's Mainstream Voice Capability / 43% / 28%
An Isolated System/Unique Application for Part of Company / 37% / 37%
Test or Prototype / 18% / 30%
Don't Know / 2% / 2%
Other / 1% / 2%

*Note that this question was addressed only to those members who said their company is currently deploying a VoIP system or application.

Surge in “Full” VoIP Deployments. Currently, 43% of respondents whose companies use VoIP characterize it as a “full deployment for a major part of their company’s mainstream voice capability” – up 15-percentage points from the previous survey(February 2004). Another 37% say VoIP is being used for a “unique application” for part of their company, while 18% say it is being used as a test or prototype.

(1B) Question Asked: And which of the following best describes how your company is actually using its VoIP system?*

As a supplement to traditional phone service / 66%
As a replacement for traditional phone service (we are 100% VoIP) / 32%
Don't Know / 2%
Other / 1%

*Note that this question was addressed only to those members who said their company is currently deploying a VoIP system or application.

One-in-Three Corporate Users Now 100% VoIP. In another indication of the growing strength of VoIP, one-in-three respondents (32%) whose companies deploy VoIP say they’veused it to replace traditional phone service and are now 100% VoIP. The other two-thirds (66%) say VoIP is being used as a supplement to traditional phone service.

(1C) Question Asked: Who is your company's primary VoIP equipment supplier?*

Cisco / 44%
Vonage / 9%
Nortel / 8%
8x8 / 7%
Avaya / 4%
Vocaltec / 1%
Don't Know / 27%
Other / 21%

*Note that this question was addressed only to those members who said their company is currently deploying a VoIP system or application.

Cisco is Top VoIPEquipment Supplier. Cisco (44%) dominatesthe corporate VoIP equipment supplier market, with Vonage (9%), Nortel (8%), and 8x8 (7%) all much further behind.

(1D)Question Asked: How satisfied is your company with its primary VoIP equipment supplier?*

Current
Survey
Oct 2004 / Previous
Survey
Feb 2004
Very Satisfied / 38% / 33%
Somewhat Satisfied / 46% / 49%
Somewhat Unsatisfied / 3% / 10%
Very Unsatisfied / 2% / 1%
Don't Know / 11% / 6%

*Note that this question was addressed only to those members who said their company is currently deploying a VoIP system or application.

VoIP CustomerSatisfaction Improves. Eighty-four percent (84%) of VoIP users are either “Very” or “Somewhat” satisfied with their primary equipment supplier, slightly higher than the 82% recorded inFebruary 2004. And the percentage reporting they are “Very” or “Somewhat” unsatisfieddropped from 11% in February to only 5% currently.

(2) Question Asked: Looking ahead, will your company be increasing spending on VoIP Applications/Equipment in the next six months?

Current
Survey
Oct 2004 / Previous
Survey
Feb 2004*
Yes / NA / 33%
Yes, we are planning a significant increase / 9% / NA
Yes, we are planning a small increase / 20% / NA
No / 49% / 35%
Don't Know / 21% / 32%

*Note in the previous survey there was only a response for ‘Yes’, while in the current survey there is a response for ‘Yes, we are planning a significant increase’ and ‘Yes, we are planning a small increase’.

Spending Plans – Next Six Months. A total of 29% of respondents say their company will be increasing spending on VoIP Applications/Equipment in the next six months. Nearly one-third of this group (9% of the total), say they are planning a significant increase in spending.

While nearly half of the respondents (49%) say their company has no plans to increase spending(up from 35% in February 2004), we note that of this group, 7-percentage pointsalready have corporate VoIP systems in place.

(2A) Question Asked: If the answer is yes, what is the primary reason for the VoIP spending increase in the next six months?

Current
Survey
Oct 2004 / Previous
Survey
Feb 2004
Full Deployment for Major Part of Company's Mainstream Voice Capability / 34% / 33%
An Isolated System/Unique Application for Part of Company / 32% / 20%
Test or Prototype / 31% / 38%
Don't Know / 3% / 1%
Other / 1% / 8%

Primary Reason for VoIP Spending Increase. Among respondents who said their company will increase spending on VoIP, better than a third (34%) said it is for “Full Deployment” and 32% said it is for a“partial deployment”. Another 31% said the primary reason is to “Test or Prototype” a system.

(2B) Question Asked: What VoIP equipment vendor will benefit most from your company's increased spending on VoIP Applications/Equipment in the next six months?*

Cisco / 31%
8x8 / 11%
Nortel / 8%
Vonage / 7%
Avaya / 6%
Vocaltec / 2%
Don't Know / 35%
Other / 5%

*Note that this question was addressed only to those members who said their company is planning an increase in spending on VoIP applications/equipment in the next six months.

Cisco Benefits Most from Increased Spending in Next Six Months. Thirty-one percent (31%) of respondents say Cisco will benefit most from their company’s increased VoIP Applications/Equipment spending in the next six months. Well behind in second place is 8x8 (11%), followed by Nortel (8%) and Vonage (7%).

Equipment Vendor Who Will Benefit Most by Respondents’ Company Size

1-10
Employees / 11-100
Employees / 101-1000
Employees / Over 1000
Employees
Cisco / 9% / 18% / 47% / 44%
Vonage / 9% / 18% / 7% / 0%
Nortel / 4% / 0% / 13% / 15%
8x8 / 17% / 9% / 20% / 6%
Avaya / 4% / 5% / 7% / 6%
Vocaltec / 0% / 5% / 0% / 3%
Don't Know / 57% / 45% / 7% / 26%

(3) Question Asked: Does your company currently have or are you considering having a stand-alone VoIP long distance provider?

Current
Survey
Oct 2004 / Previous
Survey
Feb 2004
Currently Have a VoIP Long Distance Provider / 10% / 8%
Considering Having a VoIP Long Distance Provider / 15% / 20%
Do Not Have and are Not Considering Having a VoIP Long Distance Provider / 49% / 45%
Don't Know/No Answer / 26% / 28%

VoIP Long Distance Service. Ten percent (10%) of respondents say their company currently has a stand-alone VoIP long distance provider, up from 8% in February 2004. Surprisingly, the percentage who say they are “considering” having a stand-alone VoIP long distance provider has dropped to 15% in the current survey, down from 20% in February 2004.

(3A) Question Asked: Who is your VoIP long distance provider?**

AT&T / 18%
Vonage / 10%
8x8 / 5%
SBC / 5%
Verizon / 5%
Skype* / 5%
Qwest / 2%
Don't Know / 15%
Other / 35%

*Note Skype was not included as a selection, but was provided as an ‘Other’ Response by 5% of respondents.

**Note that this question was addressed only to those members who said their company currently has a stand-alone VoIP long distance provider.

AT&T Tops the List of Current Corporate VoIP Long-Distance Providers. AT&T (18%) is currently the top corporate VoIP long distance provider. Vonage (10%) is second.

(3B) Question Asked: What VoIP long distance company will benefit most from your company's spending on VoIP long distance in the next six months?*

Vonage / 11%
Verizon / 9%
8x8 / 8%
AT&T / 8%
SBC / 6%
Sprint / 5%
Level 3 / 1%
Qwest / 1%
Don't Know / 33%
Other / 17%

*Note that this question was addressed only to those members who said their company currently has or is considering having a stand-alone VoIP long distance provider.

Corporate Long Distance Spending – Next Six Months. Vonage (11%) looks to benefit most from corporate VoIP long distance spending in the next six months, followed by Verizon (9%) and 8x8 (8%). AT&T was also cited by 8% of respondents, but that is actually quite low considering the company is currently the top corporate VoIP long distance provider.

(3C) Question Asked: How satisfied is your company with its VoIP long distance provider?*

Current
Survey
Oct 2004 / Previous
Survey
Feb 2004
Very Satisfied / 45% / 32%
Somewhat Satisfied / 40% / 45%
Somewhat Unsatisfied / 2% / 13%
Very Unsatisfied / 5% / 0%
Don’t Know/No Answer / 8% / 9%

*Note that this question was addressed only to those members who said their company currently has a stand-alone VoIP Long Distance Provider.

Satisfaction With VoIP Long Distance ProvidersRises. Eighty-five percent (85%) of companies that currently have a VoIP long distance provider are either “very” or “somewhat” satisfied with their service. This is a significant increase from the 77% “satisfied” in our February 2004 survey. Only 7% are unsatisfied, a 6-percentage point decline from the previous survey.

III. ChangeWave Research Methodology

This report contains the findings from the latest ChangeWave Alliance survey on Corporate VoIP Trends. The survey was for Alliance members involved in or knowledgeable about decisions regarding Voice Over Internet Protocol (VoIP) services for their company. The survey was conducted the week of October14 -19, 2004, and a total of 406Alliance members participated.

The Alliance’s proprietary research and business intelligence gathering system is based upon the systematic gathering of valuable business and investment information directly over the Internet from accredited members.

ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, interprets and reconciles the information in a cohesive manner and converts the information into valuable quantitative and qualitative reports.

The Alliance has assembled its membership team from senior technology and business executives in leading companies of select industries. Nearly 3 out of every 5 members (58%) have advanced degrees (e.g., Master’s or Ph.D.) and 94% have at least a four-year bachelor’s degree.

The business and investment intelligence provided by the Alliance provides a real-time view of companies, technologies and business trends in key market sectors, along with an in-depth perspective of the macro economy – well in advance of other available sources.

IV. About ChangeWave Research

ChangeWave Research, a subsidiary of Phillips Investment Resources, LLC, identifies and quantifies "change" in industries and companies through surveying a network of thousands of business executives and professionals working in more than 20 industries.

ChangeWave has a very unique asset in its 4,900-member Alliance. We have assembled our membership team from a broad cross section of more than 20 vertical markets such as telecom, semiconductors, data storage, and biotechnology, along with a wide range of professional disciplines including CIOs, IT managers and programmers, executive management, scientists, engineers and sales personnel.

The ChangeWave Alliance is composed of senior technology and business executives in leading companies - credentialed professionals who spend their everyday lives working on the frontline of technological change.

This proprietary research and business intelligence gathering system provides a real-time view of companies, technologies and business trends in key market sectors along with an in-depth perspective of the macro economy - well in advance of other available sources. ChangeWave surveys its 4,900 Alliance members on a wide range of investment research topics and converts the findings into valuable investment and business intelligence reports. ChangeWave delivers its products and services on the Web at

ChangeWave Research does not make any warranties, express or implied, as to results to be obtained from using the information in this report. Investors should obtain individual financial advice based on their own particular circumstances before making any investment decisions based upon information in this report.

For More Information:

ChangeWave ResearchTelephone: 301-279-4200

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Helping You Profit From A Rapidly Changing World ™