Fonality Takes An Unconventional Approach To Telephony

Chris Lyman, CEO of open source-based PBX provider Fonality, doesn't spend his free time dabbling in typical sports like tennis or jogging. You're more likely to find the entrepreneur driving his race car, jumping out of a helicopter onto an icy mountain slope with his feet strapped onto a snowboard, powering a high-speed snowmobile up a steep incline or diving off a cliff into an underwater cave.

Lyman doesn't believe in taking a traditional approach to business either. With his third start-up, Fonality (he also founded Web-hosting firm Virtualis, and a media-focused systems integrator in Los Angeles), Lyman is looking to take on traditional PBX vendors like Cisco, Avaya and Nortel for a share in the highly coveted SMB market--but with a slightly different approach.

Fonality CEO Chris Lyman is as extreme in business as he is in his personal life (here he is heliboarding).

Fonality sells an IP-PBX phone system, called PBXtra, which is based on the open-source Asterisk project and is designed to serve as a simpler, lower-cost alternative to the traditional PBX for small businesses. Fonality sells mainly to businesses with fewer than 300 seats per site, with the bulk of its end-user customers with 10 to 200 seats per site.

In addition to using open software and hardware, Fonality doesn't charge a per-seat licensing fee, as do more traditional vendors. Instead, it offers one flat site license fee.

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Lyman says the combination allows the company to cut by half the cost of traditional telephony solutions. Ease of use, too, is a key focus for the vendor.

"Telephony solutions are too hard to install, manage and maintain; you need really specialized telephony folks to service the customer," Lyman says. "At the low end, we see a sea change, where the new telephony integrators and installers are really data VARs."

The standards-based SIP solution can be managed remotely from a centralized Web-management interface and requires no new hardware or software.

Fonality started three years ago as a direct sales company, but in the past year the vendor has been aggressively ramping up its channel efforts and now sells a little less than 50 percent through the channel. Also, the company recently raised $7 million in a third round of financing led by Intel Capital, providing it access to Intel's distribution channel.

"One of the primary reasons we went out to raise funding is to get our channel efforts supercharged," Lyman says.

That move follows the appointment late last year of Fonality's new channel chief, Chris Vuillaume, the driving force behind the launch of Alcatel's IP-telephony business in North America. Last October, Vuillaume joined Fonality as vice president of channel development. No stranger to the channel, he built Alcatel's channel program from the ground up as the telco made its move into North America.

Since joining Fonality, Vuillaume has launched a new channel program with three tiers for partners: affiliate, authorized and premium. The initiative includes deal registration, online training and certification.

Also, Fonality's offering doesn't bind VARs to a specific phone brand, as do other PBX offerings, which Vuillaume says is one way its offering will help boost margins.

So far, 2,500 resellers have joined Fonality's channel program, with about 250 active. However, the company is hoping to increase that number, and it plans to sell more than 50 percent through the channel by year's end.

In addition to growing its channel base, Fonality has launched a managed-service practice for VARs. That way, MSPs can offer complete data-and-voice solutions to small businesses.

"The modern data VAR is starting to put in a rack or suite of data services, and we see our system as one more component of those services; it's just one more arrow in the quiver of the data VAR," Lyman says.

Fonality has some work ahead of it to prove its loyalty to the channel, but it's one alternative vendor to keep an eye on in 2007. n