Why VoIP For SMBs Is Hot

It might be that their CEOs have heard the buzz about Skype and Vonage. Or it may be because it's time to upgrade the 6-year-old PBX systems they bought in the wake of Y2K. Whatever the reasons, businesses of all sizes have become extremely interested in Voice-over-IP.

"Within the past 18 months, we've been getting lots of inquiries," says Philip Stone, president of Boardwalk Communications, a solution provider in Victoria, British Columbia. "Before that, we'd get an interested call a month, and now we get a very interested call a week."

"We're seeing it big-time," says David Blau, chief security officer and founding partner of Consolidated Technologies, a Port Chester, N.Y.-based VAR. "We're selling twice as many implementations on a weekly basis than we were a year ago."

Stone and Blau are not alone in their assessments. According to the latest VARBusiness State of the Technology survey on networking, service providers are supporting VoIP at a furious pace. While IP telephony is offered by fewer than half of the current networking VARs, it tops the list of additions small VARs will make to their offerings next year. More than 28 percent of the small VARs say they'll put VoIP on the menu next year. IP Telephony is also on the wish lists of 18 percent of midsize and 17 percent of large VARs, the survey found.

But, clearly, the most excitement around the technology is among solution providers making their first foray into networking. More than 70 percent of VARs will debut in networking with VoIP as compared to 43 percent with wireless, 29 percent for network infrastructure and 21 percent in network management, according to the State of the Technology report.

The numbers reflect the hot market for VoIP across most businesses. Even so, VARs can't rest on the laurels of VoIP hype if they want to win interested customers. As is the case with many new technologies, SMB customers need to understand the benefits of the service before they buy it.

"On the enterprise side, they understand what Voice over IP is, and on the consumer side, they don't want to know what it is--they just know that it's cheap," Stone says. "But with this group in the middle, they want to know what it is and what it does."

"Within these small and medium businesses, Voice over IP is something that's catching on, but in terms of what it means, it's still not absolutely clear to them," says Joe Scotto, director of product solutions and marketing for the small and medium business group at Avaya in Basking Ridge, N.J. "They know that it's a technology that does something good, but they're not clear on what it does for their business."

If there's one thing potential customers know about VoIP, it's that the technology can provide cut-rate long-distance phone calls. And now the voice quality of VoIP calls rivals that of landline calls.

"In the past, the detriment was that you had this great feature, but the quality was degraded," says Rich Tear, vice president of managed services for Iomega in San Diego. "That has changed."

For small and midsize businesses that need to watch every dollar, however, a cheap phone call is not enough of a selling point anymore.

"Initially, the whole idea was that you'd save on long distance, but long distance is so cheap now that there's really no cost savings there," Stone says. "So you have to look beyond that."

"Your average small-business users, when they hear 'VoIP,' they hear 'cheap long distance,' but that's really one of the least compelling parts of the story," Blau says. "What we can offer is a suite of applications that enables our customers to do more with less, to engage part-time staff to work remotely, to allow the road-warrior sales team a single number with follow-me features."

"Anybody today who is looking at a phone system is almost crazy not to go with Voice over IP," says Brian Sims, vice president of Advanced Technical Solutions in Scott Depot, W.V.

When it comes to pitching VoIP services, it's best to know the top three reasons the technology makes sense, especially for SMBs.

NEXT: Reason #1

Reason No. 1: Unifying Voice And Data Applications

For businesses ranging from five to 500 employees, one of the most compelling aspects of VoIP is its ability to integrate voice and data applications, which isn't an option with circuit-based phone systems.

"One of the key things we're seeing is the whole unified communication thing," says Sanjay Kalra, director of product management at Juniper Networks in Sunnyvale, Calif. "The key reason for upgrading to Voice over IP used to be voice, but now the cost of making any phone call is almost zero. So now it's more about advanced and unified applications."

Such applications include the ability to forward voicemails as .wav files in an e-mail; the ability to scroll through voicemail messages, which lets the customer hear the messages in the preferred order; a "follow-me" feature in which a call is automatically forwarded to a user's cellphone or second desk phone; and a "click-to-call" capability, which integrates phone functions with a variety of office applications.

"Connectivity to Salesforce.com--which lets you just click on somebody's information within the application and dial out--was an innovation that we brought out for our small-business customers first," says Richard McCloud, director of unified communications solutions for the worldwide channels group at Cisco Systems in San Jose, Calif., which offers myriad applications for its CallManager unified-communication products. In November, Cisco launched a new program aimed at educating VARs about its unified communications offerings and how best to sell them. "Master Specialization, Master Unified Communications" is only the second of Cisco's highly advanced education programs for VARs. The first, introduced in March, focused on security.

"The real end-user value is around productivity," says Mike Segura, executive director of SMB and data programs at Nortel Networks in Brampton, Ontario. "We definitely see customers harvesting the value of not just unified messaging and voicemail, but leveraging a partnership we have with Microsoft to allow users to make phone calls from their desktops and laptops, as well as their mobile phones."

Integrating VoIP with video services also is a common customer request.

"I'm seeing more and more questions about that and also more development come out of Cisco," Advanced Technical Solutions' Sims says. "Everyone wants to see each other when they talk to each other."

"There's an awful lot of small and midsize businesses out there that have two or sometimes three locations," Cisco's McCloud says. "With desktop systems that connect into the voice systems, every call is literally a video call, and being here is equivalent to being there."

NEXT: Reason #2

Reason No. 2: VoIP Is A One-Box Solution

VARs report that small and midsize business adoption of VoIP is largely due to recent vendor focus on those markets--often in the form of a single box that integrates VoIP with several other network functions.

Combining several functions into one box means that customers can buy a system that supports VoIP even if they don't intend to deploy it right away.

"Seventy to eighty percent of our [SMB] customers want boxes that are voice-capable, but it's only 20 percent who actually turn voice on right away; they just don't want a dead-end platform," says Juniper's Kalra, whose company partners with Avaya, adding security features to VoIP systems for SMB customers.

"We're seeing a trend for integration of multiple services into one box," Kalra says. "The cost of an integrated box is a lot lower than multiple systems."

Avaya has seen much success with its IP Office product, a scalable box that can act as either a voice-only PBX using circuit-switched lines, or as an IP-telephony server using high-speed ISDN/PRI dial-up access and/or direct leased-line connectivity. It also includes Wi-Fi connectivity, voicemail and broadband access. IP Office supports up to 360 extensions. The company has shipped some 85,000 units since the first version was introduced in 2002. "Over the years, we've worked a lot in making it channel-friendly," Scotto says.

In September, Avaya introduced a "mobile twinning" capability that enables IP calls to be forwarded to employees' cellphones, as well as Web-conferencing features. Avaya plans to unveil a new version of IP Office in the beginning of 2007. For larger installations of up to 500 customers, Avaya offers the MultiVantage Express, a server that marries Avaya's Communication Manager software with a media server; it comes preintegrated with several applications, including the ability to send VoIP calls to cellular extensions.

Some VARS say that the all-in-one box trend has actually spearheaded customer demand for VoIP.

"Cisco has been in the [VoIP] space for eight years, but the reality is that they were really focused on the enterprise for a long time," Boardwalk's Stone says. But customer interest in VoIP more than doubled, Stone says, after the 2004 introduction of Cisco's Integrated Services Router (ISR) for SMB customers, a single box that supports up to 250 T1/E1 connections for voice, data, video and wireless--with a range of built-in security features.

Most recently, Cisco added presence capabilities to the ISR--the ability to tell who is on the voice and data network at any given time. "It has become a platform for small businesses to really build on," Cisco's McCloud says, and VARs play an integral role in helping the customers to add new applications.

Meanwhile, Nortel offers similar functionality with its Business Communications Manager boxes, which support as few as three and as many as 200 users.

NEXT: Reason 3

Reason No. 3: The Potential For Managed Services

Several PBX and handset makers have launched initiatives to fuel managed and hosted services for VoIP customers, especially for small businesses with fewer than 50 employees.

"Managed services are among the key trends we're seeing from service providers," Nortel's Segura says. "In 2007, we're augmenting our bundles to include a managed service that allows for the throttling of different kinds of traffic." This will mean the ability to prioritize voice packets over video packets, he says.

Telecom carriers may seem like the most obvious providers of managed services for VoIP because they are, first and foremost, providers of voice services. But VARs are getting into the game too.

"The carriers have been driving this, but that doesn't necessarily mean it has to be a [traditional] service provider offering it," says Jeanne Bayerl, director of marketing and business development for small and medium businesses at Plano, Texas-based Alcatel.

In fact, while most of them work closely with carriers on VoIP packages for their customers, many VARs believe that they have more to offer in terms of managed VoIP services than carriers do. And VoIP deployments are often easier to manage than circuit-switched deployments because they can be managed remotely.

"Before if we wanted to sell a PBX in Boston and something went wrong, we'd need to get to Boston to fix it," Boardwalk's Stone says. "Whereas now, even if it's a hardware issue, Cisco has the SMARTnet Maintenance program so we can prepare the unit remotely."

"Most of the carriers are in the business of getting lines and getting circuits and those kinds of things," ATS' Sims says. "They're not always set up to go past the demarcation point and deal with the everyday problems of the customers."

CTI's Blau agrees. "VARs like mine are typically similar in size and scale to our customers," he says. "Most small businesses are nimble and quick and expect the same level of attention that they give to their customers, and carriers can't execute on that."

To that end, CTI in January plans to roll out a hosted VoIP service, using equipment from Avaya and BroadSoft. The only customer-premise equipment will be the IP phones.

"It's not for everyone, but in the instances where a hosted solution is right, people will know that they have an opportunity to work with a company that knows the market," Blau says.

NEXT: State of Networking Technology database