Redefining the IP Ecosystem: ISV Relationships More Critical Than VARs?

The report " IP Channel Strategies ," which examines the resultant shifts in market dynamics and ecosystems and evolving go-to-market plans of the leading IP vendors reveals that players with a more diverse partner mix are more successful than those that focus solely on optimizing their channel strategy. Datamonitor believes that by developing these relationships, the IP telephony market can finally realize its full potential driving it to $2.6bn by 2008 in Western Europe.

"With the increased credibility of Asian vendors, such as Huawei, and the bolstering of more traditional mid-market competition, leading IP vendors like Avaya, Cisco and Nortel have had to rethink the value that they provide to their customers," says Kathleen Klasnic, Lead Analyst of Vertical Market Technology at Datamonitor and author of the study. "As a result, partnership strategies have begun to extend beyond technological software partnerships to look at relationships that enhance the propositions for specific vertical industry sectors."

Strength and diversity of IP vendors' ecosystems and depth of the horizontal and vertical applications they create will be a greater differentiator going forward

Migration to IP-PBX (Internet protocol enabled private branch exchange), is gaining traction in large companies and SMEs, at the expense of traditional PBX (privately owned telephone switching systems for handling multiple telephone lines without having to pay the phone company to lease each line separately).

Deployment of IP-PBX reduces long-term operational costs as both voice and data traffic can be managed on one network. IP-PBX's promote the development of value-added IP services and applications as it can support a much richer set of features and capabilities and can inter-operate with data applications for example, customer relationship management (CRM) software, interactive voice response (IVR), videoconferencing, directory information and unified messaging.

Initially, those vendors that have offered solutions that can "IP enable" a legacy PBX system have been best positioned to take advantage of the evolutionary nature of uptake. However, the strength and diversity of IP vendors' ecosystems and the depth of the horizontal and vertical applications they create will be a greater differentiator going forward.

This broader IP ecosystem includes: service providers (SPs), value-added resellers (VARs), systems integrators (SIs), independent software vendors (ISVs) and data networking vendors. It is these that will help end-users realize IP's true value.

The challenge for IP Vendors

According to Datamonitor, key vertical markets for customization include financial services, public sector, healthcare and manufacturing.

Vendors are pursuing a mix of "must-have" partners, where the majority of IP vendors have close relationships with the firms such as IP recording leader Nice Systems and vertical specialists.

On the vertical side, Datamonitor has identified Misys & NCR in financial services and Intentia & Manugistics in manufacturing among others as being key vertical partners going forward enabling IP vendors the ability to better service 26% of the total market.

Datamonitor's research has shown that while Cisco and Avaya demonstrate the greatest range of ISV partnerships, Siemens has the deepest relationships in specific pockets, notably the healthcare sector.

In Datamonitor's view the challenge for IP vendors going forward is tying into enough ISVs to provide adequate customization and coverage across all targeted verticals without becoming too thinly stretched.

"Leveraging the larger ecosystems of the likes of IBM and Microsoft makes a lot of sense for IP vendors and frontrunners examining ways to deepen these partnerships," says Klasnic. "In addition, while not more critical than VARs, the growing importance of ISVs cannot be ignored. Working with ISVs such as Salesforce.com to create more tailored solutions for the SME market for example is proving a significant differentiator with customers."