Natural Convergence on Hosted VoIP Services for Small Business

For several years, carriers have made massive capital investments in advanced broadband infrastructure. Now, they're looking for new services that help to leverage those investments with recurring revenue streams -- starting today.

The small and medium-sized business (SMB) market generates more than $400 billion U.S. in recurring annual service revenue for North American carriers. However, despite the size of this market and its track record of high customer loyalty, until recently, carriers have been unequipped to focus on it due to complexities of a VAR channel and a fragmented market.

According to In-Stat/MDR, telecom services and equipment represent the main area of IT spending for small businesses in 2004, at approximately 32 percent of total IT expenditures. They project this market to continue its growth with spending exceeding $215 billion by 2008.

To win this lucrative market space and reap its valuable revenue streams, carriers need to identify and service the unique needs of small business. A logical starting point is the market's most immediate need and source of pain: voice services. Small businesses rely heavily on voice systems as their main day-to-day business communication tool.

This is a golden opportunity for carriers. With a carrier-hosted solution, customers are no longer burdened by the costs and management issues of in-house equipment. And by removing the VAR between the host and customer, carriers can offer the service more cost-effectively while still earning a higher margin on revenue.

Small businesses typically feel underserved by their communication service providers. Historically, they've been offered downsized versions of large enterprise voice solutions that are expensive to install and manage, difficult to operate and often require additional technical support to maintain and upgrade.

But small business needs are drastically different compared to those of a large enterprise. These customers only purchase that which provides them with an immediate benefit. This means:

No major up front costs.  Small businesses do not want to purchase expensive voice hardware, software and network equipment. They want a solution that eliminates the need to build and manage technology infrastructure.

Controlled costs.  Small businesses need solutions that scale with their company as it grows. This means telephone capabilities for current employees and a simple method of managing system changes such as adding or removing new users when required.

Easy administration.  Small businesses need to focus on their core competencies and on growing their businesses. They don't have time to manage complex voice systems and rarely have in-house IT support. Managing a complex phone system incurs the costs and delays of outside help.

A comprehensive and scalable voice solution with an emphasis on simplicity can put the small business back in control of its communications tools.

A Hosted Approach

Just as network infrastructure evolved from narrowband to broadband, so to are voice services moving from switched to packet-based architecture. As a result, small businesses need to migrate their voice systems from the traditional key system to a packet-based VoIP solution. But unlike a traditional key system that demands on-site installation for the small business, a virtual key system (VKS) lets small businesses hand responsibility for hosting converged packet-based services to trusted communications experts -- their carriers. The carriers can then deliver advanced VoIP benefits to the small businesses remotely.

On the carrier side, a VKS operates over existing infrastructure. Any broadband data connection -- DSL, cable or fiber -- can deliver VoIP services. By only offering standard-based designs, the carrier's solution will accommodate firewalls, support different IP phones and be compatible with voice mail platforms and softswitches.

Another benefit of a hosted approach to VoIP is that carriers can offer customers additional subscription-based services. This pay-as-you-go model generates new recurring revenue for the carrier while allowing small businesses to anticipate their communications costs.

Customer Self-Service -- A Natural fit with Hosted VoIP

With a subscription-based hosted VKS, customers need sign up only for VoIP services with a carrier and the rest is simple. Rather than expensive and difficult capital equipment that is either outgrown or becomes obsolete, small business customers can manage their own voice mail; auto-attendant; as well as moves, adds and changes, as often as required, online via a standard Web browser.

VoIP services can be personalized and administered directly by each business user or by a central delegate -- all they need is Web access. Equipment ordering, delivery and desktop discovery are all accomplished with a few clicks of a mouse. Once activated, service management is entirely self-serve.

A small business user could add a new employee by:
--registering the employee online and selecting the appropriate phone model;
--receiving the phone directly from the manufacturer overnight; and
--plugging the phone into the LAN and powering it on.

Self-service isn't a new concept. It has been successfully implemented in various industries such as auto pay at gas stations and online banking. With this model, carriers replace multiple small business voice, fax and data lines with a single LAN wiring plan.

David Cork is the co-founder of Natural Convergence Inc. With more than 20 years of experience in the telecommunications industry, he was previously the COO for Nortel's eXtremeVoice. He can be reached at david.cork@naturalconvergence.com.

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