1992 Centrex resurgence is still unpredicted and not under- stood by many; it caught vendors and industry experts by surprise.
Pricing for Centrex is competitive with pricing for PBXs.
Centrex cannot compete with advanced PBX features, but most users don’t need these.
Only Nortel DMS-100 has ACD features.
1994 More ACD features, such as queuing and alt-routing, migrate into Centrex.
1996 Centrex changes are slow to market because service providers don’t upgrade to new software quickly.
Over the last 20 years, Centrex became more competitive with PBXs in terms of cost and feature set. This cost evaluation is complex, though, and quantifiable only in a fuzzy sense given the nature of the costs involved.
What is the value of having equipment on site? Sometimes, to the techni- cally advanced and to companies with a business model that depends on cutting-edge advanced voice services, control is very valuable. To other businesses that need less cutting-edge voice applications, this value of con- trol may be negative; the space to house the equipment might be more valuable than the benefit of having control over it. Another hard-to- quantify attribute is the reliability of Centrex over PBXs, which may depend on geography. Some users in California find that Centrex has more protection against earthquakes (and now power outages) than the organi- zation could afford for its own equipment [52]. A comparison of Centrex to PBX pricing in the early 90s shows the competitive nature of Centrex and the complexity of the comparison [38][53]. Centrex is competitive to PBX ownership or leasing, but the analysis is complex and subjective.
besides AT&T started building equipment. Users could now pick between Centrex and PBXs from several vendors. In the late 70s, technology altered the landscape of the PBX industry, as PBXs became programmable. This was believed to be the deathblow to Centrex; users had become enamored with the fast-growing feature set of PBXs. It was impossible for Centrex to keep up with the innovative new features that programmable PBXs allowed. Industry experts believed Centrex would never become competi- tive with computer-controlled PBXs; however, this proved wrong as users did start to migrate back to the centralized architecture of Centrex in the mid 1980s. This shift, along with some important historical events from the preceding timeline, is illustrated in Figure 9.3. These events illustrate sev- eral shifts from distributed to centralized and from centralized to distrib- uted management structure.
At first, voice services shifted from a distributed to a centralized model.
The first telephone call fits the definition of end-2-end applications spelled out in Chapter 3: two smart devices (phones) connected by a dumb net- work (the wire). The end-2-end architecture of the first telephone system does not scale because you can’t connect every telephone to every other telephone — that would require too many wires. Telephone services fast became centrally managed; telephones were connected to a central switch, and the switch figured out what connections to make. This fits my defini- tion of centralized management in Chapters 2 and 4 well — a telephone that was smarter than the wire in the end-2-end structure becomes the dumb end point in a more intelligent network (the switchboard). In the early days, this switchboard consisted of one person, the signaling being the caller telling the switchboard operator to whom they wanted to talk.
The same telephone that seemed smart compared to a wire looks dumb compared to a smart switchboard operator; this highlights the point that the architecture of voice services shifted from distributed to centralized.
In the early 1900s, business users shifted to a more distributed manage- ment structure with voice services. The growth of businesses, coupled with the communication habits of business users within a large organization, created the need for the PBX. People within a single organization had extensive contact with others in the same company. The economics of cen- tral management did not work well with this pattern of internal company communications. Remember, switches were not computerized, and tele- phone lines were expensive. Large companies wanted many telephones:
Yet, at any given time few of these telephones were connected to tele- phones located at a different location. The distributed PBX solved this problem nicely. The introduction of PBXs signaled a shift to a more distrib- uted style of management for voice services.
154 Chapter 9
Figure 9.3 Centrex usage and history.
In the late 1950s, the next shift in management structure occurred — it was from a distributed to a more centralized type of architecture. The PBX turned out to be expensive in densely populated business districts, causing AT&T to build Central Office telephone switches that allowed PBX-type services for business users. This new Centrex service signaled a shift from a distributed to a more centralized style of management.
The seeds for the next shift in management structure began in the late 1960s, as regulation allowed vendors to compete with AT&T in providing
1991
• Users overall satisfied
1987
• Lags exist between features on switch Vs installed
• Centrex more competitive, options such as customer control
• Centrex gets 15-20% of systems with < 100 stations
1992
• Centrex resurgence unpredicted
• Competitive pricing
1988
• Digital Centrex
• Distributed Centrex
• Growth in Centrex 6% Vs PBX 3%
1989
• Voice mail fastest growing feature
• Centrex ACD lags behind PBX ACDs
• Services previous available in digital PBXs
• Price becoming competitive
• Can't compete with advanced PBX features
1985
• Centrex Still more Expensive
1984
• Expanded Features 1982
• Flashy PBXs blow Centrex away
• Centrex has more PBX Features
• Centrex re-birth unpredicted
• Only Notel DMS-100 has ACD features
1996
• Centrex changes slower to market because of difficulty changing CO switches
1994
• ACD features such as queuing and alt- routing migrate into Centrex
80 85 90 95
Basic Voice Services 155
equipment to users that connected to the PSTN. The relaxed regulations allowed competition, and technology advanced when PBXs became computer-controlled, giving vendors both the incentive and the ability to innovate. By the late 1970s, this new computerized PBX architecture, com- bined with the relaxed regulatory environment, promised advantages to users, and they started shifting to the distributed management structure of the PBX. Most believed that the combination of relaxed regulation and advancing technology made PBXs unbeatable.
This case focuses on the next shift in management structure from a dis- tributed model, based on PBXs located at the customer site, to Centrex. It started in 1983, when the number of new Centrex lines bottomed out [14], as Figure 9.4(a) shows. This indicates that Centrex started to meet more needs of users. The increased success of Centrex as compared to PBXs is highlighted in Figure 9.4(b), showing the percentage growth per year.
Users again found Centrex competitive to PBXs in terms of desired features and showed this preference by starting to buy more lines in 1983 and con- tinuing to do so. At first, the shift was slow and subtle; it was not until 1985 that the total number of Centrex lines installed started to increase [14]. This shift back to Centrex was completely unpredicted because it was counter to the current belief that distributed solutions located at the customer site and managed by the user provided better service [7][14][34]. The shift contin- ued into the mid 90s, with more advanced features such as ACD and VM migrating into Centrex service. The evidence that follows shows with cer- tainty that a shift in management structure started in the early 80s and con- tinued for more than 10 years.
As Centrex growth continued, the total number of Centrex lines installed started to increase in 1985, as Figure 9.5(a) illustrates. Figure 9.5(b) high- lights this change by showing the slope of the graphs in Figure 9.5(a). This figure shows the installed base of Centrex lines compared to PBX ship- ments. The data for the two sets of PBX shipment numbers comes from BCR [14] and Verizon4.
156 Chapter 9
4A spreadsheet from Shelley Frazier from Verizon.
Figure 9.4 Shift to Centrex (lines shipped).
The data illustrates that the trend started in 1983 and continued well into the 90s, highlighting the strength of this shift in management structure from distributed (PBXs) to centralized (Centrex).
Centrex PBX
Centrex PBX 10
# of Centrex Lines Shipmates (New & Add-on)
Centrex compared to PBX growth rate
# of Lines T/M
Year (a)
(b) 9 8 7 6
Percent growth per year
5 4 3 2 1
60
40
20
0
-20
-40 0 1982
1982 1984 1986 1988 1990
1984 1986 1988
Year
1990 1992
Basic Voice Services 157
Figure 9.5 Shift to Centrex (lines installed).