SMEs turning to SIP trunks

Published March 22nd, 2010 - 12:41 GMT

“SIP trunks”, the newer way to deliver low-cost voice, looks set to take off as a broadband-based service for businesses in 2010 to 2011. There are still some serious barriers on the way but new research by Point Topic suggests they are being overcome.

SIP trunks are virtual lines that connect a company’s phone system to the internet, running over a broadband or leased line connection to carry the organisation’s voice traffic. They replace trunks using established technology, mostly ISDN lines currently in the UK.

The benefits of using SIP trunks combine reduced costs and increased functionality. From the supplier’s point of view they make it possible to provide a more easily packaged and scalable voice service. For the end-user they offer a way of accessing low-cost “Voice-over-Internet Protocol” (VoIP) services with better quality and more functionality than before. Compared with ISDN they can provide more number flexibility and portability, much quicker and easier scalability and greater resilience.

Point Topic’s research, published in its UK Plus service on the broadband market, shows that the business communications industry is enthusiastic about the prospects for SIP trunks. For example, Tom Fellowes, Sales Director at Spitfire, one of the leading providers, says their SIP trunking business grew substantially through 2009 and he expects that to continue.

Industry estimates by Illume Consulting suggest that the number of SIP trunks in the UK doubled to 100,000 during 2009 and is projected to pass 300,000 by the end of 2010 and half-a-million by end-2011. Some of these are serving large companies and call centres, which may have hundreds of trunks, but thousands are with SMEs which typically have 4 or 5 trunks each.

Most of these SME installations will need a dedicated broadband line. Point Topic estimates that the growth in SIP trunking will create demand for an added 30,000 broadband lines from SMEs during 2010 and at least as much again in 2011.

The market will have to vault over some serious barriers to live up to such expectations. The SIP trunking marketplace has been very fragmented and the offer has been poorly presented, confusing and hard to understand as far as many SMEs are concerned. Many players in business communications would prefer to sell the more lucrative traditional technologies and have not been above spreading some more confusion. To get the full benefits, customers need to understand the increased functionality that that SIP trunks can provide and to have opportunities for using them

Indeed, the full cost benefits of SIP trunking can be gained only when businesses want to install a complete new system or at least a technology upgrade. This is because the initial capital investment can be substantially lower than for the conventional alternative. But in difficult economic times fewer SMEs are likely to need a communications upgrade or bigger offices.

“On the other hand, succeeding in a recession is about doing more for less,” says Tim Johnson, Chief Analyst at Point Topic. “Switching to SIP trunks can be one way of doing that.” Factors which will help to overcome the barriers include increasing confidence and improved quality of service as vendors gain experience in this still new solution, and word of mouth recommendations as more SMEs try it out.

“History shows that when a new product can show technical advantages combined with lower costs then customers beat a path to the door,” remarks Johnson. “It looks as if SIP trunks are starting to pass the test. It’s still not going to be an easy market but it should be one of the growth points in the next few years.”

Point Topic’s Short Report on the SIP trunking market in the UK is available to subscribers to its UK Plus service here.

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