This year, like the past couple of years, the KTS-PBX market in India appeared to adopt newer technologies and moving away from the legacy systems. But, at the ground level things did not change. While the leading telephone systems manufacturers-sellers kept harping on the benefits and capabilities of IP-enabled or pure IP switches, user organizations remained largely committed to traditional systems. There was a significant change in the composition of the market with many analog system users preferring digital PBX. Another notable trend this year was the emergence of annual maintenance contracts as the cream of the business. While for manufacturers, they helped build customer loyalty, for resellers and dealers they helped improve margins and emerged as an important revenue source.

Market Size

The KTS-PBX market was in the region of 1.1 million lines. Of these, around 30 percent or 3.3 lakh ports would account for the KTS market. In value terms, the PBX market reached up to Rs 370 crore in 2000-01. The size of the KTS market would be Rs 92.4 crore with the average per port price being Rs 2,800.

In value terms the PBX market grew by 19.35 percent over the 1999-2000 Voice&Data estimate of Rs 310 crore. The market had grown by almost the same percentage that year. However, in terms of number of ports, the PBX market grew by only 10 percent over the 1999-2000 figure of seven lakh ports.

While the high-end of the market accounted for 45 percent of the market in terms of value, only 25 percent of the ports installed were in the higher end. There was a sharp decline in the number of KTS units sold largely because a lot of users preferred PBX systems.

Price

The average price per port continued to slide, as they have been doing over the past five years. But this was largely true of the low-end switches available in the grey market. In the more organized sector, the prices remained the same more or less even though telephone systems came packed with more enhanced features. The per port cost of a low-end PBX stood between Rs 1,500 to Rs 2,500. As for the high-end PBX, the per port cost was in the range of Rs 3,500 and Rs 7,500 depending on features. Vendors, especially those who have a manufacturing base in India, improved their margins because of savings from a lower component cost. The PBX components cost less because of lower government duties as well as the usual year-on-year decline in their prices. There was not much cost difference between the digital and analog systems, especially when it came to brands like Panasonic and Nitsuko.

Drivers

The replacement market remained the biggest driver for the segment. A large number of small and medium organizations, which were earlier having analog switches, are believed to have gone digital. Information technology companies and the hospitality industries were the biggest drivers of the industry. Large enterprises also switched over to digital PBXs but only partly. This means that while a digital switch replaced the main analog switch, the user end remained analog. This was because of the fact that digital phones are hugely costly when compared to analog phones. But small companies with less than 200 users were going for pure digital systems.

A new market that was noticed during 2000-01 was that of the up-market residences and farmhouses. But it was small. CEOs, MDs and other affluent people emerged as a potential buyer. This is because of, among other things, the reach of the people who are selling these systems.

Initially growth did come from the call centers, but later the market dried up. The PBX market had great expectations from the call center industry but it was a major setback, especially for lower-end analog PBXs. Lucent, Nortel and Ericsson were the most sought after PBXs in the call center segment.

Growth for players like Usha Informatics came from the private basic operators’ need for last mile connectivity—DID and GPBX largely in Mumbai, Ahmedabad and Bangalore.

Trends

While at the bottom of the market, PBX remained merely an analog voice system; digital PBXs were largely seen as total communications systems and not just a voice telephony system. At the same time while IP-based PBX were talked about a lot and users looked at it as the future of enterprise communication, there weren’t any installations. Pure IP was too expensive and also users were apprehensive of the maturity and reliability of the technology. User queries with regard to flexibility of migration (in their legacy systems or the system they were buying) to IP were common. More and more users were asking for PBX systems that can easily migrate to an IP platform.