Gartner Says IP Centrex Emerging into Mainstream U.S. Telecom Industry; Reports Analyze New Carrier Services and Impending Business Impact.

Business Editors/High-Tech Writers

STAMFORD, Conn.--(BUSINESS WIRE)--Dec. 11, 2003

Internet Protocol (IP) Centrex is emerging into the carrier mainstream in the United States, with major carriers introducing and preparing to introduce new services to a market projected to grow by more than five times over the next two years, according to Gartner, Inc.

"In the coming year, more services will become established and grow rapidly," said Steve Koppman, principal analyst for Gartner's Network Services research group.

According to Gartner, the business impacts of this will be seen on the bottom line.

"IP Centrex has the promise of cutting overall company costs because it can combine data and voice on the same lines, and thus reduces ongoing costs of managing multiple networks," Koppman said. "It makes it possible to outsource telecom management. IP Centrex, though, is likely to be primarily adopted by firms small enough that they can do without a robust internal telecom staff."

These services, pioneered mainly by small regional carriers and MCI, offer the prospect of new and enhanced features such as unified messaging, Outlook integration and instant conferencing, along with the ability to combine voice on data lines while outsourcing responsibility to a carrier rather than investing up-front capital in new customer premises equipment.

By the end of 2004, a majority of IP Centrex-like lines will be provided by major carriers rather than the small niche regional players that do so today. "Major carriers will gain an increasing share of the market, partly from acquisitions," said Koppman.

The IP Centrex concept is a network-based service providing private branch exchange (PBX) functionality without the equipment, with phone calls carried as data, routed over the local area network (LAN) to a company's IP phones (though customers often start out keeping their legacy phones), promising to expand on the functionality of legacy Centrex.

"Carriers will need to offer a compelling value proposition for new network-based voice over IP (VoIP) services, including new features demonstrable at the time of sale," Koppman said. "End users are not in a buying mood to convert for vaguely defined reasons or potential features available at a later date. Basic economies made possible by the combination of voice on customers' same data infrastructure need to be made clear to large and small buyers."

Gartner analysts said VoIP is likely to shift the nexus of customer choice in the network-based direction in the longer run as carriers' IP Centrex-like services provide greater functional equality with PBXs, allowing improvements in customer control over legacy Centrex. At the same time, they will maintain cost advantages vis-a-vis PBX solutions.

The Gartner Dataquest Perspective "IP Centrex: Into the U.S. Mainstream" provides in-depth analysis and a market projection through 2005. The report is available on Gartner's Web site at http://www3.gartner.com/DisplayDocument?id=412387&ref=g_search. The Gartner Dataquest Perspective "IP Centrex: Where North America's 'Big Boys' Stand Today" includes a detailed status report on the offerings of major carriers. This report is available at http://www3.gartner.com/DisplayDocument?id=412385&ref=g_search.

This analysis is provided by Gartner's worldwide Telecommunications and Networking group. This group provides analysis for the full spectrum of telecom and networking issues. To keep up to date on the latest telecommunications issues, please visit Gartner's Public Network Infrastructure Equipment Focus Area at http://www3.gartner.com/research/focus_areas/asset_48266.jsp. To purchase a report or subscribe to Gartner programs, call 408-468-8000 or go to www.gartner.com.

Gartner, Inc. (NYSE: IT and ITB) is a research and advisory firm that helps more than 10,000 clients leverage technology to achieve business success. Gartner's businesses are Research, Consulting, Measurement, Events and Executive Programs. Founded in 1979, Gartner is headquartered in Stamford, Conn., and has more than 3,800 associates, including approximately 1,000 research analysts and consultants, in more than 75 locations worldwide. Revenue for calendar year 2002 totaled $888 million. For more information, visit www.gartner.com.