Starting my career with AT&T, I’ve closely followed the evolution of unified communications (UC) technology—from the early days of digital PBXs to today’s IP-based systems. As a product marketing manager, researcher, and analyst, I’ve witnessed enterprise communication systems transform over decades.

Recently, our consulting team at The Eastern Management Group completed its annual five-year UC market forecast. This extensive research, based on insights from 50,000 IT managers, forms the backbone of our latest report: Unified Communications Market Analysis - Strategic Marketing and Distribution Strategies for 2024-2028.

Premises PBX Systems: A Strong and Enduring Presence

Despite the rise of cloud-based UC solutions, premises PBX systems hold a significant share of the market, especially in certain industrial, commercial, and GEM (government, education, medical) verticals. In fact, about half of UC systems installed globally are premises PBXs, and in 2024 alone, 22 million new premises PBX seats will be sold. This equates to 375,000 new systems, representing 40% of all UC system sales.

Key Facts:

• Half of the current UC installed base consists of premises PBXs.
• In 2024, 22 million new premises PBX seats will be deployed, across 375,000 new systems.
• Premises PBXs will make up 40% of all new UC system shipments in 2024.

These numbers highlight the continued relevance of premises PBXs, particularly for industries with unique operational and compliance needs.

Industry Breakdown: Why Premises PBXs Remain Essential

Across a broad range of industries—education, banking, packaged goods, and energy—premises PBXs continue to be indispensable. This trend is particularly noticeable in sectors that prioritize control, stability, and operational flexibility. These sectors often require reliable and secure communication infrastructure that can be customized to meet their specific needs. Schools, for example, benefit from having locally managed systems that are easy to maintain and cost-effective. In industries like banking and government, premises PBXs offer the heightened control and data protection necessary for compliance with stringent security protocols.

For instance, 84% of schools, 72% of banks, and 93% of packaged goods companies still rely on premises-based systems to manage their communications. In the energy and government sectors, 87% and 86% of organizations, respectively, continue to favor premises PBX solutions.The data is clear: premises PBXs remain the go-to choice for organizations seeking reliable and adaptable communications infrastructure.

What Types of Enterprises Need Premises PBXs?

Every industry has some need for premises PBX systems, but certain sectors find them particularly valuable due to their specific operational requirements. Key reasons to choose a PBX include:

• Enhanced Control and Security: Premises systems allow organizations to maintain direct control over their communications infrastructure, reducing exposure to third-party risks and ensuring tighter security.
• Customization for Compliance and Operations: Premises systems can be tailored to meet specific compliance, industry, and operational needs, making them ideal for organizations in sectors where regulation and operational control are critical.
• Data Protection: Sensitive communications data remains within the organization, minimizing the risk of breaches and cyberattacks by limiting reliance on external platforms.
• Hybrid Flexibility: Premises PBXs offer seamless integration with cloud services, providing a balanced solution that leverages both in-house control and the flexibility of the cloud.
• Long-Term ROI and Asset Maximization: With a lifespan averaging seven years or more, premises PBX systems deliver long-term value by extending the life cycle of existing investments and maximizing return on capital expenditures.

Premises PBXs in a Changing Market

While the premises PBX market remains strong, the industry is not without its challenges. Over the next five years, premises PBX market share is projected to decline from 41% to 38%, as cloud-based solutions continue to grow. However, this shift doesn’t spell the end for premises PBXs—it’s simply part of the ongoing evolution of the communications landscape.

Several vendors have exited the premises PBX market for reasons such as:

• Slowing Sales Growth: Premises PBX sales are declining by several hundred thousand seats annually.
• Cross-Elasticity with UCaaS: As UCaaS gains popularity, some businesses see it as a direct substitute for premises systems.
• Lack of Recurring Revenue: Unlike UCaaS, premises PBX systems do not automatically generate monthly recurring revenue (MRR), which is an attractive financial model for vendors.
• Decline in Hardware Sales: The sale of telephone instruments, once a significant source of revenue, has been impacted by softphone alternatives.

Yet, while some providers leave the market, IT managers continue to endorse premises systems for their unique advantages, especially in industries where control, security, and customization are paramount.

IT Managers’ Endorsement: A Reliable Indicator

One of the most reliable indicators of a system’s value is the recommendation rate from users. In The Eastern Management Group’s customer satisfaction (CSAT) surveys, four manufacturers—of the two dozen evaluated—receive “Recommend-To-A-Friend” benchmark scores of 80% or higher from IT managers:

• Avaya
• Mitel
• Cisco
• Sangoma

Avaya and Cisco dominate the large enterprise space, while Mitel and Sangoma are strong in the mid-market and smaller businesses. Many other vendors also score well, but these four brands stand out for their product quality, vendor experience, and customer satisfaction.

Conclusion: A Valuable, Enduring Investment

Premises PBX systems remain the workhorses of enterprise communications. While the broader UC market is evolving toward cloud solutions, these systems continue to deliver significant value, particularly in industries that demand secure, customizable, and reliable communication infrastructures.

With high recommendation rates from IT managers and the resilience of premises PBX systems across key sectors, the data underscores their continued relevance. For enterprises seeking dependable communication systems, premises PBXs remain a solid, long-term investment.

Research for this article is based on The Eastern Management Group report, Unified Communications Market Analysis - Strategic Marketing and Distribution Strategies for 2024-2028. For more information, contact: [email protected] or [email protected].