August 20, 2019
By John Malone, Eastern Management Group
UCaaS prices rose at an annual rate of 4.9% in the first half of 2019. This marks the sixth consecutive year of increasing cloud prices, according to Eastern Management Group economists. The research is incorporated into our report “Worldwide Hosted PBX Market 2019-2025.”
In 2019, Mitel is offering among the lowest UCaaS industry prices. To compute UCaaS prices, the Eastern Management Group uses a market basket index. The market basket – or shopping basket – consists of a fixed set of features. Quarterly, we identify vendor prices for items in the basket.
I see no evidence UCaaS prices will stabilize or decline anytime soon, even in light of a growing number of competitors. Eastern Management Group’s analysis is that prices will continue to rise for the foreseeable future.
We recently compiled a list of 20 top hosted PBX providers offering products and services via channel partners.
Mitel, the 40-year-old PBX manufacturer, with the largest installed base of cloud seats, is leading the hosted PBX market in setting prices. As the biggest provider, I would expect Mitel to be the price leader.
Among major competitors, Mitel prices are lower than RingCentral and 8×8 (pure UCaaS providers); Intrado, formerly West (a reseller); and Comcast (a cable provider), for example.
Promotions Coming of Age
Hosted PBX is a younger field than, say, switching, routing, and security — industries which have long been influenced by companies like Cisco, Juniper, and Hewlett-Packard Enterprise. Our pricing research finds that experienced providers like these use sophisticated promotions to add customers and resellers. For example, switching, routing and security vendors offer reseller and end-user discounts, front-end and back-end rebates, special offers, allowances, deal registration and SPIFFs to drive sales. On average, individual vendors run eight simultaneous promotions, changing offers monthly or quarterly to grow sales. This is the future for hosted PBX.
Effective promotions are new to UCaaS, but less so to Mitel, an experienced premises PBX company, which turned-up some UCaaS promotions in the first half of 2019, leaving competitors to catch up.
Mitel’s new customer UCaaS promotions are meatier and more likely to drive transactions than other competitors. As a case in point, here’s a recent Mitel promotion to generate new hosted PBX sales: one Premier License per user, one 6910 phone per user, 10 MiCloud Connect CC licenses, free SFDC plugin, free Jumpstart, and free On-Demand call recording.
Apart from Mitel, many vendors we examined have no substantial promotions or promotions experience to draw on.
We expect hosted PBX promotions will increase in numbers, sophistication and frequency, particularly as traditional PBX vendors – like Cisco, Alcatel-Lucent Enterprise, and Unify – offer more cloud products like hybrid hosted PBX, server virtualization and UCaaS.
New promotions will take many forms. From Eastern Management Group’s experience developing vendor promotions, we expect to see product rebates, instant rebates, special discounts, trade-up and trade-in allowances, volume incentive rebates, special payment terms, special offers for training, offers on certification training, and more. Promotions like these will certainly drive the market forward.
The research used in this post comes from the following Eastern Management Group sources: “Worldwide Hosted PBX Market 2019-2025.” and “2018 PBX Customer Satisfaction Report.” For more information, please contact our analyst team or John Malone directly at 212-738-9402 Ext. 2201 or [email protected].
John Malone is president and CEO of the Eastern Management Group, a communications industry research company, and the author of three book for young readers. In addition to Eastern Management, he founded two other software and database management companies. He has served on the board of directors of numerous publicly traded and private technology companies. Malone has managed thousands of the company’s research assignments for major technology businesses and service providers worldwide. He is a former executive with AT&T, where he developed the world’s first call center. Follow Malone on @temgworldwide or LinkedIn.
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