1. UNDERSTANDING THE US MARKET A revolution in slow motion.

2.  1876 First Master Patent granted to Bell for the telephone  1880-1910: The first cloud: The orginal phone system is established as a fully managed service. The phone company develops as a regulated monopoly: the phone service provider own all equipment, charges fee for service.  1930-1939: the Great Depression accelerates commercial adoption of the phone as a marketing tool: businesses begin replacing travelling salesforce with telemarketing: making long distance calls are cheaper than travel  1980s: several rounds of deregulation in all developed countries:  Businesses adopt ownership model vs. rent model for telephony

3.  1999: IP-PBX- Cisco enters market, predicts that IP-PBX will exceed TDM sales by 1995  2006, eleven years later. IP-PBX sales exceed TDM sales  Early 2000s: “Hosted” PBX services are sold through agents. Service is aimed at cash poor or credit limited companies that cannot do not want to invest capital  2008: iPhone  2010: iPad  BYOD adoption pushes more commercial communication into the cloud: enterprises consider shift back to fee for service model and a way from premises based provisioning in some cases, such as remotes sites. In other cases, private cloud is developed. Snom: First SIP Phone The Tablet Age

4.  The cloud is a new term for an old concept: basically the linking of thousands or millions of users to a managed network, where the users pay a fee for service and where the service provides the hardware and the actual service.  Advantages-  Extremely inexpensive adoption for users as they simply pay a small fee  Adoption becomes widespread, so users are connected to many other users- service approaches universal level  Users do not need any technical skills as all the maintenance and updates are done at the network level Two revolutions in the cloud. The first act of the Russian Revolution was to seize the telephone exchange. A century later The Egyptian Revolution depended on Twitter and on authorities ignoring Twitter, In both cases control and use of a cloud based form of communication was viewed as more critical than control of the police or army. The cloud revolution: An old idea is new again

5. IN SLOW MOTION  Commercial enterprises purchase new products, replacement products or replacement services for approximately 6 million lines per year, or approximately 3% of the installed base  The UC&C market grows with GDP. As the economy adds employees, the market grows in proportion. For every 10 net new hires, between 5 to 7 net new services and end points are provided  This means in the course of a decade approximately 70% of the landscape is either operating something new or something replaced, vs., ten years ago  Commercial replacement of fixed line equipment is very slow compared to replacement of consumer owned mobility: A consumer may change mobile devices once every 24 months. Many businesses retain incumbent phone equipment, for eight or more years

6. INSTALLED BASE VS. CURRENT SALES  Installed Base = What is actually in use by commercial enterprises, in this case everything above SOHO  Current Sales = What is being sold now  The vendors and the users live is very different universes. For the vendor, his world is what he is selling. He is therefore bound to conflate current sales with what’s installed. In a fast turnover business such as mobility, this makes no difference because the lag is measured in months. In the very, very slow turnover rate of business telephony, the turn is measured in years  Companies don’t migrate until the lease is complete, and then they often hold paid for equipment for some years after that.

7. PRODUCT CYCLE: THE INSTALLED BASE TURNS OVER SLOWLY 24 months 96 to 144 months

8. Flat Growth Shrinking Growing Very Slowly Fast Growth THE INSTALLED BASE