2. Current Status of Domestic IP Telephony Market
Enterprise-use Market Brisk,
Emerging as New Growth Engine
--Cisco, Avaya, Nortel Lead Early Biz Domestic Cos. Busy Securing Foothold
"The fast emergence of IP telephony triggered fierce competition in new product development among domestic and foreign telecommunications device firms."
As high-speed Internet services, which have led the domestic telecommunications device market, entered into the stagnant phase of its growth cycle, the telecommunications device industry and multinational network companies face acute adversity. After the high-speed Internet service boom, when they had a competitive edge against global rivals based on high technological competitiveness, an increasing number of telecommunications device firms suffered tough times due to the lack of a growth engine. However, IP telephony is fast emerging to pick up the slack and is gaining rapidly in the businessuse market.
More companies which used to support intra-company telecommunications services by TDM-based private exchanges are now switching to IP telephony-based systems. The IP telephony boom, starting with large insurers and retail and wholesale firms in 2003, is fast extending to other large companies and SMBs (small and mediumsized businesses). Last year, Samsung Life Insurance Co., Kyobo Life Insurance Co., Hyundai Fire and Marine Insurance, Seoul Auto Gallery and some retailers and wholesalers converted to IP telephonybased IP call centers. And Shinhan Financing Group, some credit card firms, banks and large firms joined the market this year.
The fast emergence of IP telephony triggered fierce competition in new product development among domestic and foreign telecommunications device firms. A number of business-use Internet phone solutions were launched in the market. Cisco Systems, Avaya and Nortel Networks are already in head-to-head competition in the IP PBX sector targeting the IP telephony market in the long term. Latecomers such as Alcatel, Siemens and 3Com are busy developing strategic models.
Not to be outdone, Samsung Electronics Inc., which dominated the PBX and telephone market for companies based on its superior TDX technology, recently launched a businessuse IP PBX model, Office Serve, and a SOHOuse (small office, home office) Samsung SOHO WLAN Solution (model name: SIT 200EM, SIT200Ei). LG Electronics and an intelligent telecommunications solution company, Xener Systems, offered a businessuse IP PBX model targeting educational institutes and public organizations.
Some of the NI (network integration) and SI (system integration) specialists such as Samsung Networks, Seoul Communications Technology and LG CNS also formed exclusive departments for the IP call center and telephony businesses, and are working hard to enhance marketing.
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Foreign Cos. Lead Market Initially
Cisco's aggressive marketing push early last year sparked interest in the IP telephony market. The initial interest led to huge sales to Samsung Life Insurance and Kyobo Life Insurance, with about 1,000 seats each last year, injecting excitement into the market.
The domestic IP telephony market is currently at the mercy of foreign specialists such as Cisco, Avaya, Nortel, Alcatel and 3Com. Among them Cisco, Avaya and Nortel are waging cutthroat competition to take the lion's share of the Korean IP telephony market. These firms offered next-generation IP convergence products and plan to offer diverse discount programs so that they could take the upper hand in the fast emerging market.
In pursuit, the three companies picked IP telephony and IP call centers as strategic divisions for this year, and are eager to induce their existing customers to convert to IP telephony and to attract new customers. Telecommunications device industry experts said that with high-speed Internet market growth slowing down, most network firms are staking the future of their company on IP telephony. The IP telephony boom is expanding to entire industries, and as interest in Internet telephone service grows, expectations for market expansion have increased.
Cisco Systems Korea plans to launch strategic products such as IP video phone (a video-conferencing system) and mobile phones applying IP telephony technology during the first half of this year. The new developments are next-generation IP devices which have upgraded the Internet service concept from the existing wired network-based VoIP (Voice of Internet protocol) telephony to moving picture and mobile services.
To back up their new product sales, Cisco utilizes a variety of marketing tactics including a customer compensation program, "Cisco Great Exchange". Under the "Cisco Great Exchange", existing customers can return their telephone systems and PBXs to the company and replace them with IP telephony solutions.
Various compensation and discount advantages will be granted to such customers.
One of Avaya's high-ranking officials in charge of IP telephony recently visited Korea to present its next-generation telecommunications protocol SIP-based (Session Initiation Protocol) IP convergence devices and systems to the Korean market. Based on its strategic partnership with a PBX leader, LG Electronics, Avaya Korea plans to encourage more of LG's large number of PBX customers to adopt its IP telephony solutions and IP call centers after the second quarter.
Avaya and LG Electronics plan to offer various discount and compensation packages when existing customers switch to IP telephony.
Nortel Networks Korea set an all IPbased PBX model, 'Succession', as its flagship model last year and plans to launch a "BCM" solution during the second quarter, with which small and medium-sized customers can support an integrated voice and data environment as well as VoIP telephony. With the new product, Nortel plans to exploit the market for public organizations and small and medium-sized firms, and will give discounts when its existing PBX customers transform to IP telephony this year.
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Cisco, Avaya in Fierce Competition
Cisco and Avaya are the two leaders in the domestic IP telephony market and will compete fiercely this year to secure more IP telephony contracts. Cisco and Avaya attracted the two largest IP telephony customers, Samsung Life and Kyobo Life, respectively. The two rivals were very different in their product lines, as Cisco offered an all-IP telephony system and Avaya a hybrid-type IP telephony product. Naturally, each proclaims the superiority of their offerings.
Their rivalry will continue this year. Avaya, under a partnership with LG Electronics, plans to boldly address the public and private business sectors, expecting another round of competition with Cisco, which has a number of local business partners.
Cisco Korea, the traditional IP networking leader, judges that the emergence of NGN (Next Generation Networks) gives it the best chance to push their IP telephony offering. To this end, it plans to expand its IP phone business by offering wireless and color IP telephones, lower-priced models for SMBs, video IP phones and by supporting hangeulization this year.
The IP-based Cisco total conferencing solution, 'Cisco Meeting Place' enables companies to hold audio and video conferences, all participants to share the data on the Web, and companies to provide employee education. And through Cisco's collaborative solutions, customers can achieve major cost-savings by using IP phones and instant messages linked with groupware.
Last year Cisco Systems Korea signed on numerous customers including Samsung Life, the Damyang-gun provincial office, NCsoft, IBM Korea, Insung Information and Samsung Networks, and aspires to expand its market in cooperation with domestic IP telephony partners. The company will focus on maximizing the merits of its IP-based call center solutions to efficiently expand its market.
Avaya Korea plans to focus all of its management power on the IP telephony business this year. The company was determined to secured a solid foothold last year in the domestic market and aspires to to top spot this year by strengthening marketing, sales and partnerships and expanding its product portfolio. To this end, it plans to expand its customer base to telecommunications carriers. Avaya Korea recently forged a strategic alliance with LG Electronics in order to efficiently enter the domestic PBX market for companies as well as its stronghold, call center market.
This year Avaya is staunchly expanding all its IP-based IP telephony product lines, and will try to offer custom-tailored IP telephony systems. Also the company will offer lower-priced IP phones targeting SMBs in an effort to extend its customer base. Meanwhile, Avaya Korea supplied its IP telephony systems to Kyobo Life Insurance, Merit Securities and the Seoul Auto Gallery last year.
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Late-comers Go All-out for Market Share
Nortel Korea showed off its high technological sophistication last year when it supplied NGN solutions to DACOM. In the wake of this, it plans to apply such specialty telecommunications technology to the enterprise market. Nortel launched "Succession 1000M" at the end of last year, and plans to put router, fire-walls and voice/data in an integrated one-box PBX solution called 'BCM', for SMBs, thereby expanding its product line.
Succession 1000M provides IP telephony's functions and the security of an exchange to up to 1,000 IP subscribers simultaneously. It helps customers using Meridian exchanges build All IP telephony environment with little infrastructure alteration at the lowest possible cost. Nortel plans to expand its BCM marketing channels by adding two more partners to its existing partner, ECS Telecom.
Nortel Korea's market expansion strategy is to focus on its devices' security features, product diversity and superiority in quality. On the other hand, Korea Alcatel, which failed to secure large contracts last year, will try harder this year. Korea Alcatel supplied its "Omni PCX Enterprise" in small quantities last year to Korea Arrow and one more firm. And it drew up an ambitious marketing blueprint for IP exchange and data infrastructure systems with the aim of getting at least one customer in each vertical market. Its channel partners, including SNet Systems and Inphony, are aiding this effort.
3Com Korea is marketing its standard open technologybased IP telephony systems, available for both SMBs and large companies, and plans to provide total solutions to the enterprise networking market, including switch, router and wireless LAN and other networking devices. The company has signed a strategic business alliance contract to cooperate in the VoIP sector with EDS Korea, and will offer 'NBX' network telephony solutions and 'VDX (Voice Core eXchange) V7000'.
The domestic company Vodacom, which supplied "HiPATH" series IP exchanges to several insurance companies last year, is eagerly seeking nextgeneration IP telephony sales through Siemens' "2g (second generation) IP." Putting top priority on the SMB market, which is growing at a faster pace than the large enterprise market, the company is differentiating itself from rival companies by supplying modular products with diverse capabilities and customeroriented solutions especially for SMBs. Vodacom plans to launch various new lower-priced IP phone models and to offer new modular applications throughout the year.
Xener Systems, which is preparing to launch its businessuse IP PBX in May, a delay from its original plan of late last year, is focusing on the public sector to cash in on its advantageous status as a domestic vendor. Polypix is confident of IP telephony sales expansion this year at home and abroad through its six-year experience in the field and due to the brand-new product offerings of its global business partner, Zultys.
Last, but not least, Syswill is also pushing ahead with IP telephony by marketing the IP PBX "Top-CPX" and "Communication Management" series systems of its business partner, Avaya.
