Is the PBX dead?

I'm thinking of buying a company that installs and maintains PBX systems and also pulls cable (cat 5/6). Customers are small to medium sized. I realize VOIP is the future but ...

1) Will PBX customers hire a company to convert them to VOIP or is it just too easy for their IT folks to do it for them ?

2) Are IP phones as simple as plug in to your category 5 cable and go ? Obviously need a router module but that's also quite simple.

3) My gut tells me that the old telecomm companies are dying and this guy is selling out before he goes bankrupt ?

Ideas ? Thanks

Reply from dean on Feb 08, 2008 - 03:39 PM

Welcome to VoIP User teakman.

Quote:

1) Will PBX customers hire a company to convert them to VOIP or is it just too easy for their IT folks to do it for them ?

They'll continue to hire a company to do it for them. No self-respecting CEO or MD is going to take the risk that not using experts entails. Some very small tech-aware companies will probably DIY, but it's a big market out there. The distinction between Computer IT and Telecoms IT is getting more and more blurred. I anticipate there'll be less support work around for traditional PBX companies over the next few years as the IT staff get educated.

Quote:

2) Are IP phones as simple as plug in to your category 5 cable and go ? Obviously need a router module but that's also quite simple.

What about configuring the PBX? Least cost routing? Getting all of the benefits of switching to IP in the first place?

Quote:

3) My gut tells me that the old telecomm companies are dying

They're shifting focus. The people that those companies have are still very relevant, as is any pre-existing brand.

Lastly...

Quote:

I'm thinking of buying a company

That is of course a business decision that only you can make on your own. Don't take my word for anything - seek 100 different bits of information and collate it all. I think you're doing the right thing in doing some market research, but with the questions you're asking you may need to decide whether you know enough about this business to get into it?

Reply from teakman on Feb 08, 2008 - 04:00 PM

Thanks Dean ... so refocusing is the key if I buy it. So I'd need to train the phone tech's on IP telephony which could be tough, some are older guys near retirement.

I'm sure maintenance work on old systems will be on the decline -- big time -- over the next few years though, would you agree ?

Does anyone buy a traditional PBX system anymore, or is it all IP phones if you are buying a new system ? Maybe a 75/25 split favoring IP phones ?

Reply from dean on Feb 09, 2008 - 09:19 AM

Quote:

Does anyone buy a traditional PBX system anymore

Yes. But many of them are hybrid in design now anyway.

There's no question that non-IP PBX's are on the decline but the length of that curve/graph is anyone's guess.

Quote:

some are older guys near retirement.

Don't underestimate the value of people that understand how office staff use telephones. They're gold dust.

Also, from a sales team point of view, most customers don't really care about the technology that drives it, they're interested in feature set and what they can do with it. It's only the technology that's changing, not the underlying fact that it's still basically a telehone system.

Quote:

I'm sure maintenance work on old systems will be on the decline -- big time -- over the next few years though, would you agree ?

I'm not sure. My old firm still has a 10 year old PBX system which does everything they need, and they still have a support contract on it. The support company will be the first port of call when it comes to upgrade (in fact, they'll probably trigger it by being unable to get spares anymore). So I would suggest that having a stack of legacy support contracts puts any IP PBX installation/supply company in a pretty solid position?

Reply from ianplain on Feb 09, 2008 - 12:10 PM

Hi I will answer these in order, for a starter

1) Will PBX customers hire a company to convert them to VOIP or is it just too easy for their IT folks to do it for them ?

This depends on the company, But as a rule of thumb a telecoms installer now need networking skills as well as telecoms skills.

2) Are IP phones as simple as plug in to your category 5 cable and go ? Obviously need a router module but that's also quite simple.

If you use a off the shelf system then the answer is pretty much yes. But faulting problems is harder.

3) My gut tells me that the old telecomm companies are dying and this guy is selling out before he goes bankrupt ?

Could be, It proberly he sees the costs of upskilling his staff to be to high and hes just not interested in doing so. and mabe he has been trying to migrate customers and they are not budging. You need to look hard and deep at the accounts.

Ian

Reply from rgower on Feb 09, 2008 - 05:57 PM

Most small firms, and not a few medium sized ones, do not have an IT Man to do the work. Most make do with a spotty herbert who can plug a PC in and knows how to set the photocopier. So serious IT work will always need a chap with a van.

With the same thought in mind, the firms that do have an IT man will happily do away with him if they can, because he is expensive to run, even if he isn't looking for an easy life himself. And that, perhaps, ought to be the target?

Specialising in installing PBXs and stringing cable has a difficult, if not limited, future. There are a lot of people trying to do just that, some are a lot bigger than any local firm and most PBX's are going to be used for at least 10 years. So what you are buying is a happy list of customers. The skills base and support contracts you inherit offers a springboard on which to consolidate and keep what you have.

As Ian observed, many PBX installers now include networking in their prospectus, which makes sense; There isn't a whole lot of difference between nailing a network cable to a wall and a bit of telephone wire. I think that is not enough either. Where you need to be looking, for long term success, is nearer 'floor to ceiling' support; not just the telephones and cabling, but the rest of the hardware and quite possibly software too. In a world of ever increasing competition over fewer customers, it allows you to remain profitable on a smaller client base and expand

How that squares with what you are starting from, or how much extra you want to spend over the small change of buying the company in the first place, is your problem, but, I submit, it is where you need to set your long term sights on?

Reply from jerniman on Feb 09, 2008 - 11:08 PM

Gentlemen,
I work for a small consulting/do everything and anything in the tech world company. We have been pulling conventional PBX systems out of clients sites and replacing them with Asterisk systems and most of our clients dont have in house IT staff so thats where we come in. I dont like the "geek squad" outfits because I have found them to be substandard and they dont care.

I agree with rgower in that limiting your self to a couple of cable jockies and swinging PBX systems your gonna lose to more multi-services outfits that do PC, servers, networking and so on.

Reply from Tambo27 on Feb 12, 2008 - 02:23 PM

Hello

Here are a few reasons why the PBX isn't dead yet:

Price - kitting out a business with decent SIP phones and an Asterisk server isn't cheap. And how do you get VOIP to a factory floor or a remote gatehouse? Probably using a Digium ATA card. A 24-channel fxs card costs around US$1600.

Reliability - Most PBXs are (nearly) fit-and-forget items. Passive wiring, ie no hubs or switches to fail, loop-start lines that work over kilometers of wire. Multifunction digital phones are available if you do need the bells and whistles, which are often mentioned but hardly ever used.
And constant geek intervention (billed by the hour) isn't needed.

Features - Most PBXs have entryphone and doorlock support built in. Discrete (and expensive) systems are needed to interface to Asterisk boxes. SMDR call records for cheap and simple call management is standard.

Location - E1/T1 ccts are not universally available. So why use VOIP if your system terminates on POTS lines?

In the end its horses for courses, but don't write off the PBX just yet!

Reply from TelephoneGuru on Feb 16, 2008 - 03:41 PM

It is predicted that by 2010 90% of phone systems will have IP capability. I still hear from clients that they either do or do NOT want VOIP.

Straight VOIP solutions have not met market standards yet for a majority of the SMB market, and solutions like Cisco have been too expensive to deploy.

What you get with buying a PBX company is a customer base for which to provide new system opportunities down the road, some MAC work, and references. Service revenue is declining based upon the ability of system owners to do things themselves, so you CANNOT use his OLD numbers to project business value. Come up with your own numbers.

The reason companies buy new phones instead of keeping old ones is because it makes financial sense. You will need to be network capable, but there will be plenty of work, as there is no good plug and play telephony options out there that you can slap in and have work. Everything is too specialized still.

Cabling will continue to provide a solid stream of income for years. The promise of Wifi and wireless is not realized yet, and it will be sometime before that is accepted over traditional infrastructure cabling.

Good luck to you! Be sure not to overpay. I do see several old timers not wanting to move with the market change. Margins are thinner than they used to be on new systems, and service revenue has dropped dramatically. You CANNOT buy the business based upon past value. The market has changed a ton in less than 2 years.

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