Customer churn indicates VoIP static
Published: 17 Sep 2003 17:20 BST
On one hand, Cisco must contend with VoIP upstarts such as Shoreline Communications and Veraz Networks, which sell "pure" Internet-based voice systems that completely bypass the traditional phone network. But the bigger obstacle promises to be the long established enterprise voice players -- Nortel Networks, Avaya and Siemens -- which are responding to the VoIP threat with hybrid systems that incorporate both traditional phone and IP elements. That's something Cisco also offers, but only reluctantly.
"Companies want a control knob in order to switch gradually, not suddenly," said corporate networking analyst Nick Lippis, president of Lippis Consulting. "It's hard for them to do that if they have a pure IP phone company that doesn't have any links or ties into the traditional phone world."
Customer churn
To be sure, Cisco doesn't appear to be in any serious trouble on the VoIP front yet: it is currently selling about one out every two VoIP handsets and 71 percent of all the equipment needed to use the Internet to make voice calls.
Cisco marketing director Hank Lambert downplayed evidence of churn as an indication of the company's waning strength in the enterprise VoIP market. Even Cisco can't win them all, he said. And a few examples of customer turnover is not enough to conclude that Cisco is in danger of losing its top slot now or anytime in the future.
"Some companies install a trial system from two different vendors, it's part of their decision making process," Lambert said. "We win a lot of those. We don't win every opportunity."
Cisco won't say how many VoIP customers it has lost, but anecdotal evidence of churn isn't hard to find.
An informal survey by CNET News.com turned up about a dozen examples, including Merrill Lynch, Muzak and IP wholesaler Transcom. Cisco has also come out recently on the losing end in some new VoIP installation bids. For example, Alcatel recently won out against the networking giant in a $4.4m upgrade at the brokerage firm Brown Brothers Harriman.
"It's a bad time for Cisco to be losing customers," said Martin Schneider, a product sales director at VoIP rival Siemens. "The market segment above 5,000 phones a site is where really the big decisions are being made right now."
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