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Selling the CIO on telecom business services

The networking of enterprise IT is creating new revenue-enhancing opportunities for telecom service providers that better use RFPs to position their services and focus on speaking the CIO's language.

Traditionally, anything beyond connectivity has been a hard sell to large enterprises that are well known for running...

their own networks to keep control within the corporate limits. But with increasing network complexity, networked applications, the need for remote backup sites and tight corporate budgets, telecom service providers have a chance to play a larger role than connectivity provider to the large enterprise.

The networked aspects of enterprise applications are changing at the same time unified communications has become a reality, and business continuity and disaster recovery plans are more essential than ever. Telecom service providers are already expert at providing many of these services for themselves, and extending that expertise to businesses isn't much of a leap. But enterprise sales opportunities often mean learning how to sell the CIO, as networking and IT become more integrated with overall corporate goals.'s new e-Guide, Selling the CIO on business services will help you improve your RFP responses and increase business services revenue, no matter what the size of the business.

Top 3 value propositions for winning an RFP response by Robbie Harrell 

Crafting a winning request for proposal (RFP) response is critical in the highly competitive service provider market, as traditional services are common, offered by multiple carriers and are most often commodity purchases that were historically compared on price. This is especially true in the service provider space as it relates to data and voice transport, hosted services and product resell.

The secret to winning a customer's business usually comes down to the "extras" that your organization can bring to the table as a trusted partner and one-stop shop. These extras are the differentiators between your commodity-priced services and those of your competitors, in that there is a value proposition that can be made even if the customer has requested commodity type services. 

�There is a value proposition that can be made even if the customer has requested commodity type services.
Robbie HarrellNational Practice Lead, AT&T

This Telecom Essentials tip highlights three key areas I have personally seen differentiate the decision process outside of the cost factors. If you are consistently getting beat on a cost basis for the RFPs you are responding to, and your organization has driven the cost as low as possible, you really only have two choices. You can reduce costs to a level that can severely impact your business model, or offer additional value propositions that will encourage the customer to look at your services as more than a commodity-based service compared on cost alone.

Winning business beyond commodity pricing

I have worked as a consultant in the service provider and enterprise space for 15 years and below are three areas that definitely make a difference:

  1. Highlight the infrastructure backbone availability/survivability and scalability used to transport the services you offer.
  2. Highlight service level agreement (SLA) offerings (even if not asked) and emphasize your ability to provide uninterrupted service.
  3. Bundle in architecture/design and integration expertise.

Each of these provides the customer with insight into how you as a provider are much more than just a commodity-based store that competes on price. Each of these is discussed below in further detail.

  • Highlight survivability. This is key in that you want the customer to know that you have engineered the best backbone infrastructure and that you can guarantee your network can scale to meet both current and future bandwidth needs. This approach highlights the fact that you have invested the time and capital into building a world-class network that can handle all of your customers needs. This can soften the blow of percentage points higher in transport costs because it provides the customer peace of mind. If you don't highlight and emphasize this in the response, the customer will lean toward the lowest-cost provider, regardless of whether or not they can actually deliver around failure and growth.
  • Highlight SLAs. If you don't have them, you need them. If potential customers don't ask for them in the RFP, tell them anyway. Most RFPs are tactical in nature and don't necessarily consider a three-to-five year window of requirements. Expanding the response in anticipation of the customer requiring SLAs in the future shows that you are a strategic partner, not just a supplier competing on cost.
  • Bundle in expertise. Whether this expertise is on front-end planning and design work or on back-end integration, most customers do not have the in-house expertise or resource pool to handle migrations to technologies requested in RFPs. The ability to provide this expertise and the ability for a customer to get these resources from one place is a strategic value proposition. It also means the customer will have fewer vendor contracts to manage. Touting your expertise as a mechanism for reducing deployment costs and minimizing migration risks can be a very powerful incentive for the customer.

These three areas represent value propositions that can differentiate one provider from another in the commodity service space. If you don't have the ability to respond in this fashion, you could still win on cost. But more and more, enterprises are looking for their carriers to bring more to the table and aligning your responses to these facts can help you win more than your fair share.

Selling CIOs on business continuity backup by Gary Audin

Where should a CIO construct a backup site? In a major disaster, backup sites can go down, too, so where to go? A USA Today feature, "Is There Anywhere Safe to Live?" (April 20, 2006), focused on the location of natural disasters for all 50 states, plus American Samoa, Guam, Puerto Rico and the Virgin Islands. But for a CIO, a better headline would be: "Is there anywhere that's best for a backup site?"

Disasters cost money, interrupt business operations and may cause the enterprise or government agency to cease operation, which makes planning a business issue, not just an IT issue. Disasters can interfere with or even terminate IT and communications services. It doesn't matter whether the disaster affects the enterprise, government or service provider. Floods, fire, volcanoes, earthquakes and other events can destroy a primary and backup site if they are too close together.

Telecom service providers can offer expert advice on where to locate a backup facility and should position themselves with CIOs to offer both consulting and services. After all, they have experience planning for their own primary and backup facilities, as well.

A CIO's selection of the backup site location will always have risks and liabilities attached to the decision. Adequate and reliable communications to the backup site and communications between the primary and backup sites are what most service providers can successfully offer to the CIO.

In choosing a backup site, CIO's must first determine how big a disaster plan for and budget for it. The level of disaster planning increases as you goes down the following list:

  1. Building closed/evacuated
  2. Loss of power
  3. Loss of communications
  4. Facility damaged/destroyed
  5. Community disaster (10-to-30 mile range)
  6. Regional disaster (30-to100 mile range)

Where service providers can help

Service providers can be beneficial in helping with disaster planning in categories three through six and has different services to sell:

  1. High speed communications between the primary and backup so the two sites can have synchronized, duplicate data. This is required for good customer support but may also be required to meet compliance regulations and security requirements.
  2. Communications access for all users with a rapidly implemented and seamless connection to the backup site including: Multiple media access such as WiFi, Metro Ethernet, fiber optic services, DSL, ISDN, etc.
  3. Wireless WAN
  4. Laptop connectivity for mobile users
  5. VPN services
  6. Access to the service provider's site as a substitute for the enterprises backup site. This can include:
    • Hosting services
    • Provider-managed storage service
    • Replication and data mirroring
  7. Redundant geographically diversified communications routing for site access and synchronizing communications between the primary and backup sites
  8. Contact/call center call rerouting, network queuing and contact center services
  9. Conferencing and collaboration services.

The service provider's credibility is of utmost importance in planning and providing disaster/recovery services. To win enterprise business, a proactive service provider should meet with the CIO about the following issues:

  • The service provider's own plans for its internal disaster/recovery (DR).
  • How the internal DR plans help the enterprise in its DR planning.
  • How conferencing and collaboration services can be beneficial tools during disaster and the subsequent recovery.
  • Security, compliance issues and regulations that will influence DR plans for the enterprise or government agency.
  • Participating in the enterprise's disaster/recovery drills. Unfortunately, few enterprises actually try out their disaster/recovery scenarios before they're necessary.
  • Help the enterprise determine the real costs if the DR planning is not well designed so that the budget for the DR can be compared to the financial liabilities for poor DR planning. This will help justify the DR plan implementation.
  • Help the enterprise determine if good DR planning will reduce other costs such as insurance premiums.

Ranking disasters and where they occur

The following 14 natural disasters are a possibility in some places:

  1. Blizzards and lake-effect snow
  2. Earthquakes
  3. Flash floods and monsoons
  4. Tornadoes
  5. Heat waves
  6. Hurricanes and typhoons
  7. Ice storms
  8. Lightning
  9. Nor'easters
  10. River valley flooding
  11. Thunderstorms
  12. Tsunamis
  13. Volcanic eruptions
  14. Wildfires and firestorms

Looking at where natural disasters occur is one factor in selecting primary and backup locations for IT and communications centers. Unfortunately they aren't considered enough in site selection.

Service providers can advise the following common site-locations considerations:

  1. As the distance from the primary site increases, staff will be less likely to be able to move rapidly to the backup site.
  2. Access to power, fuel and adequate communications facilities.
  3. Cost of the physical site, hardware and software required at the backup site.
  4. How long the backup site can operate.
  5. How well the primary and backup sites can be synchronized.

Where is the least bad location?

The USA Today article shows a map of the states that are most vulnerable to each disaster. The state's vulnerabilities varied from one to eight disaster possibilities. Nevada had the lowest number of possible disasters, that is, it was rated for one disaster type, wildfires and firestorms. Montana, Idaho, West Virginia, Alabama and Louisiana had only two disaster possibilities – hurricanes and thunderstorms – but these two can be much more catastrophic than other types.

Which states have the greatest number of possible natural disasters? Colorado, South Dakota, Minnesota, Kansas, Missouri, Illinois and Michigan, each of which has seven possible natural disaster situations. Texas is the only state with eight. Many of the disasters are transient, so they do not have long lasting effects. Others, like volcanoes, earthquakes, tsunamis, tornadoes and hurricanes, can prevent a site from recovering for weeks to months. Site restoration time after a disaster should be considered when selecting a location.

The CIO must come to a balanced decision for the backup site. The Disaster Resource Guide is a good source for service providers to help communicate with CIOs on disaster backup planning.

Selling the CIO on the service provider as business continuity partner by Gary Audin

A service provider can make a difference for enterprise IT organizations by supporting and enhancing the company's business continuity plans to keep important functions operating acceptably when the primary IT infrastructure fails. 

Service provider communications and hosting services can play a vital role for IT and its disaster/recovery initiatives. This requires redundant systems, most likely in two or more locations. IT's economic goal is to keep the costs low, but redundancy requires extra IT and communications facilities.

According to the Strategic Research Corp., a market and business development consultancy, the primary failures encountered in IT are:

  1. Hardware (44%)
  2. Human error (32%)
  3. Software and firmware errors (14%)
  4. Security breaches and viruses (7%)
  5. Natural disasters (3%)

Determining the reason for the failure is important, but recovery is the real objective. The IT organization has to consider the time it takes to recover and how much information needs to be recovered. Non-critical applications can be deferred until repair has been accomplished, while critical applications should have as little interruption as possible. This is exactly the point where service providers can help mitigate problems and offer cost-effective solutions.

�The service provider can eliminate the cost of running a second data center in a decentralized enterprise data center model.
Gary AudinPresident, Delphi Corp.

Where service providers come in

In Forrester Research's report, IT Consolidation Drives Active-Active Data Center Configurations, one of the survey questions asked enterprises whether their internal data centers acted as recovery sites for each other. Seventy-four percent of respondents said they have an internal backup site; 24% use a service provider's disaster recovery service, and 4% have no recovery site.

Service providers can increase that 24% through customer education into the value of sharing disaster/recovery facilities at a service provider site rather than going it alone within the enterprise.

Data centers and server farms are centralized resources of computing and storage, as well as expensive real estate. Expanding the data center and server farm to accommodate new applications and IT communications adds stress to the operations and can be costly. Enterprise data center and server farm managers are always reluctant to keep adding servers or add new remote sites or another data center.

A service provider can reduce this stress by hosting new or moving non-critical applications to the hosting site on a permanent basis.

How to weigh the location of operations

The economic drivers that influence IT cover a wide range of factors. There are obviously hardware and software costs, and IT can do nothing without staff. New applications and constant changes add to the cost of IT operations.

Like the swing of a pendulum, most CIOs have been through variations of centralized, decentralized, distributed, hierarchical and peer-to-peer configurations. IP technology and related applications can be located in one or many locations and configurations. The cost to support and operate one or more sites will depend on several factors.

One location may be more vulnerable to an outage. A centralized location is easier to manage and staff. Remotely located staff diffuses the organization's expertise and limits the ability to respond the unanticipated situations and problems. Sometimes, decentralized IT sites will be required to meet regulations imposed by local or national jurisdictions.

The service provider can eliminate the cost of running a second data center in a decentralized enterprise data center model by hosting the remote site for the enterprise. This will allow the IT organization to avoid the disadvantages of decentralized operations (below).

Decentralized IT operations


  • Shared load
  • Less vulnerable to total failure
  • Meet national regulations


  • More staff
  • Multiple locations
  • Increased air conditioning
  • Complex inter-site synchronization

Centralized IT operations


  • Smaller staff requirements
  • Efficient use of floor space
  • More efficient air conditioning
  • Less complex interconnections


  • Site failure = total failure
  • Inability to meet some foreign or domestic regulations

The idea of a backup location is now common for IT operations. Many were originally designed to take over the full traffic load and stayed in standby mode called an active-passive configuration. As the economics of IT became a bigger issue, the utilization of the backup site for live traffic has grown, according to the Forrester report.

The Forrester report stated, "Historically, alternate data centers have been an expensive insurance policy; the duplicate resources in this data center (DC) stood idle so that in case a disaster or some other calamity disrupted the production data center, IT operations could failover production workloads to this site to minimize downtime and keep the business running. But now, the pursuit of IT consolidation and greater financial and operational benefits is driving US enterprises toward more active-active data centers — data centers that run production workloads but also serve as recovery sites."

What this means is that all active sites must have equal communications capacity and connections. A majority of the time each site will support half the load and will be underutilized. Further, the active sites must be interconnected with sufficient bandwidth so the multiple sites can be synchronized within milliseconds of each other. The inter-site communications must have high bandwidth with low utilization, less than 5%.

So instead of the enterprise supporting two active-active sites, service providers can position themselves as the other active site for the enterprise.

Selling the unified communications convergence story by Gary Audin

Many enterprises are still working on their migration to VoIP and IP Telephony. Now telephony, data and software vendors are pushing  unified messaging (UM) and unified communications (UC), and IT departments are looking forward to  Service Oriented Architecture (SOA). To understand where the service provider can participate in the convergence arena, let's review the definitions to make sure service providers and enterprises are on the same page:

  • VoIP: Voice over Internet Protocol (VoIP) was the original term, but enterprises use the term IP Telephony. VoIP is more often used to describe telephone service over a provider's IP network.
  • IP Telephony: A phone system based on standard IP transport over Ethernet that usually includes a server-based system for call control and voice applications (voicemail, etc.) and TDM gateways for PSTN and traditional PBX integration.
  • Convergence: The aggregation of voice, video and data onto a single IP-based network supporting advanced networking features.
  • Unified Messaging: A messaging system that includes single storage for voice, video, e-mail and fax messages. (Some vendors include instant messaging).
  • Unified Communications: A communications system that includes three or more of the following elements: voice, unified messaging, video, mobility, web/data collaboration, conferencing and  presence.
  • Presence: A system for collecting and managing an individual's status, ability to communicate, and their preferences for the mode of communication.
  • Service Oriented Architecture: SOA is software architecture, not a product, that includes the use of loosely coupled software services to support the requirements of business processes. Information and application resources on a network in an SOA environment are made available as independent services.

Now that we've defined our terms, it's important to note that each vendor has a different view of UM and UC. Some offer a wide range of capabilities; others only offer UM. Some only provide middleware for integrating multiple products together. Yet all of these services have one thing in common -- they depend on and require accessible, reliable and secure communications networks.

A real-world UC definition

Unified Communications is really the convergence of six communications product areas. Some have existed for years, while others are recent entries. UC is really part of the evolution of IT and telecom into one common set of features and functions, not a brand new, emerging, concept. Therefore, UC includes:

  • The evolution of the legacy PBX into the IP Telephony system
  • The development of the softphone as part of IP-based PBX offerings
  • Integrating voicemail and e-mail
  • The change in e-mail functions to a desktop management tool
  • Multiple forms of conferencing, including web, voice and video
  • Instant messaging services and capabilities.

How to sell convergence to the enterprise

When selling the convergence and unified communications story to a customer, that customer will obviously consider the technical capabilities of the provider. There are several additional points, however, that the provider can present to sell the case for using its network and services. Beyond your technical capabilities, here's a list of must-mentions:

  • Financial strength. Demonstrate the financial strength of the provider so stability doesn't become an issue, since the move to convergence and UC will be strategic for the customer. Some competitors will be start ups and will be working on investment capital, not profit. Customer will not want to change providers once the commitment has been made, so they need numbers and assurances.
  • Network capacity. Discuss how your backbone and local access bandwidth capacity can support increased traffic especially for voice, data, web and video conferencing.
  • Delivery in the North American market. Be sure to address your network's geographic reach in the U.S. and Canada.
  • Delivery outside North America. If the enterprise needs UC services in locations outside North America, address how you can support all of the enterprise's locations in other countries.
  • Is the solution from a combination of vendors? Be clear about whether your UC solution made up of more than one vendor's products. If it is "best of breed," address how the service provider acts as the prime solution vendor.
  • Where does UC fit in your overall service strategies? Talk to customers about whether UC is the primary product, an addition to an IP Telephony solution, or whether it is a small part of the provider's portfolio.
  •  Service provider reorganizations and mergers Reorganizations and mergers can mean some discontinuity in service development and support, as well as delaying service enhancements. If you have one or the other going on, discuss how the company is dealing with it so potential customers are assured you have a plan.
  • Is the solution possible due to recent acquisitions? Be ready to demonstrate that recently acquired UC components will interoperate well.
  • Is the product delivery direct or indirect? Potential customers will need to know if your UC services will be provided by a third party rather than directly from you. This could be perceived as a weakness if you can't address why this is a good thing rather than a bad one. The provider that doesn't use third parties can use that as a selling advantage.
  • Is a VAR/system integrator necessary to integrate the UC services? If the answer is yes, the enterprise will also need to evaluate the VAR/integrator since successful deployment will depend on that company's deployment capabilities. Be prepared to bring the VAR in to talk to the customer.
  • Is the solution mostly unified messaging? The variations in the UC definitions seem to all include Unified Messaging (UM) as the minimal set of features. Be careful that UM is not the only real function supported if you're selling your solution as UC. At a minimum, presence should be offers in addition to UM.
  • Is the solution network or applications centric? Since most vendors are applications centric, be clear about whether your UC solutions allow only one vendor's equipment or platform to be used, such as a Cisco, Avaya or Nortel IP telephony platforms.
  • Is your focus on all UC elements? The focus of your UC capabilities should be on the entire enterprise, not just IT or telecom. Be clear in your descriptions and/or limitations.
  • Does you have an established record with the UC elements? Experience counts for a lot in terms of confidence in the service. New services will almost always have some initial deployment problems, but explain your track record with potential customers in terms of addressing hiccoughs.
  • Do you have IT as well as telecom and contact center experience? In the customer's view, the broader your experience, the more likely you will be to deliver the range of UC functions successfully.
  • Are your services brand new? Think of all the patches and fixes that occur in the early life of a software product. The newer the product, the less stability the product generally delivers. Demonstrate how you deal with the software change issues.
  • Can your UC services scale to large installations? Function without scalability is not attractive may be useless. Scalability doesn't relate to a single location. Be sure to address how your services can be scaled and distributed over multiple locations.

Some of these considerations may not be important to every enterprise. Enterprises will make their own value judgments on each point, so presenting your solutions thoroughly will give you the best chance of addressing unique customer needs.

How to serve the SMB converged services market by Sanjeev Aggarwal

Small and medium-size businesses (SMBs), or companies with up to 999 employees, in the U.S. are looking at adopting converged communications services at a faster pace than in previous years, according to the latest AMI Partners' communications study. SMBs in the U.S. have been slow to adopt converged communications, but this trend is changing.

To serve the SMB market effectively, telecom service providers need to look at SMBs' needs, as well as what drives SMBs to move to traditional and converged communications solutions. Here's why:

lT shortage. Most SMBs either have no IT staff or a small IT staff that is already busy addressing IT basic break-fix issues. Small and medium-sized businesses are looking to outsource non-core IT and communications services. Yet the total U.S. IP communications and managed services opportunity is estimated at more than $30 billion this year and will grow at a compound average growth rate (CAGR) of 15.6% until 2010. Service providers should consider adding managed security, managed backup/business continuity, network management, hosted e-mail services, web hosting, applications and database hosting, and IT infrastructure management. No single service provider is providing all of these services to the SMB market. Today, SMBs are buying some of these services piece-meal from several companies, which creates management and problem resolution problems.

No dominant provider. No single service provider is currently dominating IP communications for a broad range of IP services, including hosted/managed VoIP, so the field is wide open for regional and large traditional telecom and cable service providers, VARs, and IT services companies like IBM Global. With 6.2 million SMBs (not including home-based businesses) in the U.S., national and regional providers can compete for a large number of customers.

Security and backup needs. More than 10% of U.S. SMBs now use a managed firewall service and more than 15% are using managed VPNs. The opportunity for online/off-site data storage and backup is also increasing, driven by business continuity and disaster recovery needs and has risen to 11% among small businesses and 15% among midsize businesses.

Understanding the SMB market. Service providers need to develop a deep understanding of the SMB demographics, buying behavior, decision marking criteria and current/planned adoption of hosted and on-premises solutions. Scaled-down versions of enterprise solutions are not appropriate for SMBs. This in-depth information can be gained by looking at information and market research sources that focus on the SMB companies.

Differentiating your services. To be successful in selling converged services, service providers need to:

  • Have channel partners develop C-level and IT management relationships with SMBs to become trusted advisors to SMBs
  • Develop a bundled services approach
  • Focus on proactive customer support
  • Develop local relationships to provide on-site support (if needed)
  • Make it easy for SMBs to find your services
  • Give them some idea of pricing models

How to differentiate hosted VoIP services for SMBs by Sanjeev Aggarwal

The adoption of hosted Voice over IP (VoIP) services in the small and midsize business (SMB) market is growing on a fast trajectory, according to AMI Partners' 2007 survey of SMBs looking at converging their voice and data services. In the U.S., we expect hosted VoIP spending to increase from $236 million in 2006 to $1.4 billion in 2010, representing a compound annual growth rate (CAGR) of 57%. Most of this growth is expected to come from the small business segment of companies with 1 to 99 employees.

This growth will continue to dramatically shake up the telecommunications industry and open a fresh era of competition where companies will offer new and innovative products, services and approaches to SMB companies. Even today, VoIP providers have wasted no time coming up with a vast array of products and services that start with voice services and expand to other services relevant to the market. But it's not always an easy sale.

Once a hosted VoIP service is in place, service providers can offer add-ons like unified messaging and conferencing. These are valuable services to businesses and provide additional revenue to service providers to increase their average revenue per user (ARPU).

Education is a large component of making a hosted VoIP sale and speeding its adoption. Many SMBs are confused about all of the different types of solutions available, and service providers need to be prepared to discuss the options, as well as their positive and negative qualities. They should also explain the difference in quality between Skype or Vonage and business-class VoIP solutions and benefits, since many people still associate VoIP quality issues with those two services.

Service providers can market hosted VoIP to SMBs by emphasizing the following positive aspects: local, long-distance and international call toll savings; no additional hardware or software to manage (the SMBs' IT staffs do not have voice expertise and are already busy patching servers, desktops and maybe doing backups); lower total cost of ownership (TCO); reduced upfront capital expenditure; predictable monthly operational expenses based on the number of lines and features; access to the latest technology and features; remote management by the service provider's SLAs of 99.99%; and fast problem resolution due to service provider staff experience.

Service providers should be prepared to address any SMB issues about hosted VoIP, particularly customer support and responsiveness, concern about being dependent on the service provider for service and support, not having direct control of features and applications, limited flexibility on implementing an extended unified communications strategy, and possible service degradation as the number of lines increase or data traffic on the network increases.

Tailoring VoIP offerings

The first thing service providers need to understand about VoIP solutions is that one size doesn't fit all, so the small and mid-sized business markets should be offered different solutions that suit their needs. Any service provider offering VoIP services should complete a detailed market segmentation analysis before developing and packaging their service offerings. The SMB market is very fragmented, and vendors who appreciate the importance of tailoring their strategies to each tier are better positioned to succeed in this segment.

The type of SMB that might adopt a hosted VoIP solution varies, but some baseline possibilities include:

  • Startups: Lack of upfront capital resources and growth plans makes them an ideal target for hosted VoIP services with leased IP phones.
  • Wholesale firms: These companies have high communications needs and can't miss phone calls, as their highly mobile and remote workforce spends a large percent of time at client locations. Their biggest requirements are mobile phone integration using Find-me/Follow-me service and having voice mail messages delivered to their Outlook accounts.
  • Retail businesses: This includes retail stores, restaurants, etc. These companies don't have sophisticated telephony needs, but they do need an auto-attendant feature when they are busy, giving them an aura of a larger, more professional vendor. These small retailers are incorporating VoIP features like click-to-call into their e-commerce presence.
  • Professional service businesses: They have no real business front other than their website and business cards. A hosted solution could make them appear more professional and help them operate the same way as their larger competitors. Also, like wholesale firms, these businesses have a highly mobile workforce, so integration with mobile phones using the Find-me/Follow-me service is very useful. Highly mobile and customer focused verticals such as real estate, legal, accounting, travel, doctors' offices, and hospitality are prime candidates.
  • Companies with multiple branch locations: Mid-sized companies with multiple branch locations do not have the IT staff or networking/voice expertise to provide 24X7, on-premises voice communications solutions. A hosted VoIP service that provides proactive management and support regardless of the branch office location is the preferred solution for companies that need proactive redundancy support, round-the-clock monitoring and a backup support plan in place with a "one-click-to–enact" plan – a level of support not available from any of the national service providers.

Needs of a maturing market

As the hosted VoIP market matures, the differentiation factors for hosted VoIP service providers will be:

  • Types of hosted VoIP solutions offered. Some service providers offer pure hosted VoIP solutions, while others offer only IP trunking solutions (these IP trunking solutions are being marketed by some service providers as hosted VoIP, although they are only trunking services for premises-based IP-PBXs or traditional TDM-PBX solutions). Not all functions and features of a pure hosted VoIP solution are available using IP trunking solutions.
  • The value-added solution a vendor can deliver could have a meaningful impact on the key business drivers for small and mid-sized businesses.
  • Avoiding feature proliferation that leads to complexity and increased costs and instead delivering focused solutions with simple customer implementations to help achieve business breakthroughs.
  • The level, responsiveness and quality of customer services could be one of the most important differentiators, as voice communications are mission critical and downtime has material impact on the business.
  • Capability to provide on-site support – if needed.
  • Solutions for business continuity and active service management.

Three types of hosted VoIP providers

Hosted business VoIP providers that service the vast small and mid-sized business markets can be categorized into three segments based on the services and business value they provide to customers:

1. Mass-market providers compete based on the high-volume and low-touch approach with low-priced, basic hosted VoIP services that include some unified messaging and conferencing services. This segment experiences high churn because customers are always looking for the lowest prices.

2. Full-service vendors compete on a value and service approach. They aren't the lowest price vendors, but they offer a cost-effective bundle of services. These companies provide a range of services that enable clients to sell, service, and staff better based on proactive management and 24X7 monitoring, detailed analytical capabilities and solutions to provide enhanced employee productivity and retention. A few function almost as outsourced marketing departments for SMB companies—providing value-added services that are much more cost effective compared to in-house staff or a marketing agency.

3. Partial services companies are hybrids -- hosted VoIP companies partnering with services companies. Others are hosted VoIP companies that recognize the value of being a voice services company and work with other vendors to provide some of the value-added services.

SMB network assessment

Service providers and VARs can help SMBs assess their network connections and list the steps necessary to implement an effective VoIP solution. Most businesses need help in assessing their VoIP-readiness – an analysis of their existing internal networks and external broadband connections. Service providers or VARs can identify whether the current network configuration has any problems in terms of routers, switches and other hardware. They can analyze whether the company firewall will block voice data transmissions and test the Internet connection to see how many VoIP phone lines the company can support.

Service providers also need to address companies' security concerns and decide whether they can be addressed through network encryption.

VoIP service pricing

The business model that offers the application on a per-seat basis works well for hosted VoIP. With this model, businesses buy or lease IP phones, then pay per user on a monthly basis. This helps them predictably forecast their monthly voice communications expenses. This pricing typically includes unlimited local and long-distance minutes, with some basic fees for unified messaging and a web-based management interface. Additional features like audio and web conferencing are priced separately.

SMBs can also start small and increase the number of seats as their requirements grow. In the future, if they need to look at other alternatives if the service isn't delivering the right performance or scalability; the hosted VoIP solution provides them flexibility as they have not invested much in capital equipment that they're stuck with a solution that doesn't fit their needs.

About the authors:  Sanjeev Aggarwal is the vice president of SMB IT infrastructure solutions at AMI Partners (New York). For more information, please go to AMI-Partners specializes in IT/Internet/Communications solutions, actionable market intelligence, and venture capital services with a strong focus on Global SMBs (Small-Medium Business Enterprises with 1-999 employees), as well as extended coverage of larger corporate enterprises (1,000 or more employees) and Home-Based Businesses—providing an integrated go-to-market perspective across enterprise market sectors.

Gary Audin, president of Delphi, Inc., has more than 40 years of computer, communications and security experience. He has planned, designed, specified, implemented and operated data, LAN and telephone networks.

 Robbie Harrell (CCIE#3873) is the National Practice Lead for Advanced Infrastructure Solutions for AT&T. He has more than 10 years of experience providing strategic, business and technical consulting services. Robbie lives in Atlanta and is a graduate of Clemson University. His background includes positions as a principal architect at International Network Services, Lucent, Frontway and Callisma. 

This was last published in March 2008

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