FRAMINGHAM, Mass. -- Although the demand for hosted IP voice has been growing over the past two years, it is not ready to challenge PBX any time soon for supremacy in the enterprise communications market. Although IDC believes that hosted IP voice will eventually develop into a compelling service option, a great deal of work still needs to be done to improve the service. IDC expects the market for hosted IP voice services among U.S. businesses to reach nearly $456 million by the end of 2008.

Although the market for hosted voice services will continue to grow at a strong pace, this growth masks several challenges that the industry will continue to face over the next few years. Foremost is the issue of quality, including presale design and implementation, as well as service quality. Service providers must also develop a solid value proposition beyond selling a low-cost commodity service.

"Some of the early implementations were flawed, leading to customer cancellations and botched deployments," says Rebecca Swensen, research analyst, Voice over IP Services. "Although there are plenty of examples of smooth implementations and satisfied customers, the stain of poor service hangs over hosted IP voice like a dark cloud."

IDC