VoIP Makes Its Way To The SMB Market

After attending Cisco's Partner Summit, Catalyst Telecom's Convergence Symposium, Ingram Micro's VTN Event, VON, and Internet Telephony Expo, I can say with absolute assurance there is an across-the-board interest in VoIP solutions. Each of these events emphasized VoIP vendors selling products geared toward SMBs. Even though the SMB market is generally defined as companies with 1,000 or fewer employees, most VoIP vendors focus on SMBs with 50 to 250 employees. How big is the opportunity in this market, you wonder? According to a study conducted by Analysys Consulting called VoIP In The U.S. Market, small business VoIP adoption (i.e. companies with around 50 employees) is predicted to grow from 100,000 in 2004 to 800,000 VoIP subscriptions by 2008. Also, a recent report by analyst group InfoTech predicted that by 2008, SMBs will spend $5 billion worldwide on VoIP, compared with just $41 million in 2003. To help you get started selling VoIP solutions to SMBs, I spoke with four industry experts and asked them what you need to know before getting started.

Why Do SMBs Want VoIP?
There are a myriad of reasons companies adopt VoIP. SMBs, however, tend to choose VoIP for one of three reasons. According to Rex Stover, VP of sales, North America, at hosted VoIP vendor PCCW Global, "Cost saving is the top reason SMB companies choose VoIP, and features are reason no. 2." Cost savings are realized in a couple of ways. First, sending calls over an IP connection allows companies to bypass the traditional phone carrier (i.e. toll) networks. Second, if SMBs choose to converge their networks (i.e run voice, data, video, and wireless over one network), they can save money by reducing their overall network management fees.

Some of the VoIP features SMBs want include three-digit dialing between remote facilities, a single voice mail platform, three-way calling, presence detection, find-me-follow-me functionality, simultaneous ringing, voice mail to e-mail conversion, Microsoft Outlook integration, and integration of the phone system with business applications such as CRM (customer relationship management). "The third reason SMBs choose VoIP is to provide their remote offices and/or employees who work from home with the same phone service as those who work at the main office," says Stover. Business owners don't want to leave separate voice mail messages for each remote worker. In a VoIP environment, they can leave one message on the company voice mail system and select an option to send to all users. Also, clients calling in to the SMB's remote workers will have the same experience as those calling in to the main office.

Smaller Businesses Have Complex Needs, Too
One of the misconceptions about SMBs is they are much easier to work with than their enterprise counterparts. This is rarely the case, however, because SMBs often have multiple facilities, disparate IT applications and platforms, mobile workers, and network security challenges just like the big guys. "SMBs as a whole have complex needs, and just about each one has different needs from the next," says Prakash Nagpal, director of product strategy at hosted VoIP vendor Covad Communications. "One of the biggest mistakes VARs can make is to present the same VoIP solution for every SMB."

The only way to offer a tailored solution for each customer is to spend time understanding your SMB customer's business needs. Even though this may add two to three weeks to the sales cycle, consulting is a billable activity, and it's worth the end result of having a satisfied customer. Also, providing a customized VoIP solution rather than a one-size-fits-all solution avoids the commodity trap, which occurs when customer B finds out what customer A paid for a product and wants it for less.

VARs do need to be mindful that in their quest to be total solutions providers they don't spread their expertise too thin. "VARs should find vendors, distributors, or other VARs with products and skill sets that are complementary to their own and form partnerships," advises Nagpal. "However, it's equally important to avoid going to the other extreme and partnering with everyone who is willing to sign them up." Most VARs have either data networking experience or voice networking experience — not both. The good news is that you're probably already at least halfway to becoming a VoIP solution provider. The downside is that to get all the way there you're either going to have to pay to train and VoIP-certify your technicians, hire additional salespeople and technicians with complementary VoIP skills, or find partners that have the qualifications you need. If you've already found a VoIP vendor, talk to the vendor about putting you in touch with potential VAR partners.

If you haven't decided which IP PBX (public branch exchange) vendor you're going to use, I recommend contacting a value-added distributor (VAD) such as Catalyst Telecom, Ingram Micro, Interwork, Tech Data, Paracon, Voda One, or Westcon. These VADs have large VAR resources available, and they've already developed programs and online tools to help you find and partner with other VARs.

VoIP Solutions Need To Be Easy To Use, Manage
VARs need to keep in mind their SMB customers usually have limited IT resources. Many vendors have developed simplified solutions that include several VoIP components (e.g. IP PBX, firewall, quality of service software, router, and switch) in a single chassis. "These all-in-one units are fully integrated and feature a single interface, which enables human resources people, rather than an IT administrator, to set up new users," says Iain Milnes, president of VoIP solutions provider Zultys Technologies. "Most SMBs prefer to do the basics themselves, including moves, adds, and changes, and setting up voice mail, dial directories, and automated attendant routing." However, this doesn't mean there aren't opportunities for VARs to provide more than just hardware and software installations. An SMB customer will still need VAR support for adding new features as the company grows and adding service such as remote monitoring and automatic failover in the event the SMB's T1 goes down.

Find Workarounds To SMB Budget Constraints
One of the primary challenges VARs should expect with SMB customers is a limited budget. Some of the suggestions mentioned earlier, such as all-in-one VoIP solutions, can help bring the overall costs down, but it may not be enough. If that's the case, there are two other options VARs should consider before moving on to the next prospect. "VARs can help SMB customers get into VoIP and also preserve their legacy telephony infrastructure by offering hybrid solutions," says Steve Timmerman, VP of marketing at VoIP solution provider ShoreTel. "This is possible with IP-enabled PBXs that allow simultaneous connections to the PSTN [public switched telephone network] and the IP network." Using a hybrid solution, an SMB can allow one department, such as its sales department, to try VoIP while everyone else in the company continues to use the traditional phone system. Then, as the traditional PBX equipment reaches the end of its life cycle, the VAR can help the customer make the switch to a pure VoIP environment.

Another option VARs should consider for customers with tight budgets is hosted VoIP solutions. "Hosted solutions allow companies to experience all the desired functionality of VoIP by signing up for a subscription rather than buying the necessary equipment," says Timmerman. The VoIP equipment typically exists at the VoIP provider's NOC (network operations center), and the VAR earns a monthly or one-time commission from selling the service contract.

All of the experts I spoke with agreed there is one mistake VARs often make when selling VoIP to SMBs, which is a problem whether the VAR sells an on-premise VoIP solution, an IP-enabled PBX, or a hosted solution: they don't consider the customer's network. "We've seen more instances than we can count where VARs cut corners on LAN infrastructure upgrades, such as increasing bandwidth, in the name of cost saving," says Stover. Even though some customers will put a lot of pressure on you to skip steps in order to cut costs, you can't afford to skip over the network assessment — before and after implementing VoIP. Prior to installing a VoIP solution, network monitoring equipment should be attached to the customer's network to capture several days' worth of data traffic patterns. This is the only way to get an accurate assessment of the customer's bandwidth usage. You may discover, for example, that most of the time the customer uses only 80% of its available bandwidth, but there may be a few minutes each day that bandwidth usage peaks at 95%. How will the new phone system work after voice packets are added to the network? VARs have to know the answer to this question before the go-live date.

SMBs are interested in VoIP, and there are several studies that predict billions of dollars of VoIP sales in this market within the next few years. By taking the advice of the industry experts and matching SMBs' telephony needs with their budget requirements, VARs can capitalize on this opportunity.