Shoretel is acquiring hosted IP telephony provider M5 Networks, allowing Shoretel to offer its potential customers either hosted or premises-based business voice services. The deal will significantly grow Shoretel revenues.

But it might be reasonable to ask what the deal suggests about the volume of revenue hosted IP telephony represents.

A recent report by Gartner shows the IP voice-as-a-service market growing at a 36 percent compound annual growth rate in North America through 2015 to $2.2 billion.

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That is worth putting in perspective. By 2015, total U.S. telecom industry revenue might be $337 billion. If that turns out to br correct, and the Gartner forecast also proves substantially correct, then hosted IP telephony would represent less than six tenths of one percent of U.S. industry revenue, being generous.

Keep in mind that the Gartner forecast is for all of North America, so Canadian revenues would have to be backed out of the $2.2 billion figure. That makes hosted IP telephony an important revenue stream for some providers, but insignificant from an industry-wide perspective. To a large extent, hosted IP telephony is a product of high relevance for firms that sell to small and mid-sized businesses, with some partial-deployment use cases for enterprises.

That doesn’t mean hosted IP telephony is not a key value for some buyers, and a key revenue source for some suppliers. But it isn’t the sort of product that can substantially affect overall revenues for a tier-one service provider. That is one reason why the business is lead by smaller specialist firms.


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