SMBs Call out to Hosted Service Providers for VoIP

Carl Weinschenk

A newly released study from Access Market International (AMI) pretty much settles the question of how much small businesses want to be involved in the provisioning of VoIP and related services: as little as possible.


The study shows that the SMB VoIP hosted services market will reach $416 million this year. That may not seem like so much, but it dwarfs the $165 million the category generated in 2005. The cumulative growth rate will be 56.9 percent between 2005 and 2010, with companies with fewer than 100 employees enjoying a growth rate of 69 percent during that period.


The numbers are impressive, but certainly easy to understand. Indeed, this is the second recent survey -- In-Stat published the other -- that suggests small businesses will be a key for hosted services. The bottom line is pretty obvious: Not many small operations have the knowledge or desire to monkey around with Internet telephone services. Even the cable industry is getting into the act. Earlier this year, the biggest Canadian cable operator has partnered with Mitel on a hosted product aimed at SMBs.


We usually don't throw too many numbers around, but these are worth looking at: Spending by SMBs on hosted services will increase from $164.9 million in 2005 to $1.56 billion by 2010. SMB seats served by hosted VoIP will rise from 393,967 last year to about 3 million by 2010, which represents an increase from 2 percent to more than 7 percent of the market.


It's unclear if the AMI estimates factored in the move by Microsoft to integrate VoIP and Office applications in the new Office Communications server. This CRN story makes the point that this is good news for value-added resellers (VARs), who now will have a voice application to push. It can be assumed, however, that it figures to drive hosted services in general.


As Microsoft and other companies move toward complex unified communications offerings, it seems that the expertise offered by hosted service providers will increasingly be in demand.

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May 2, 2007 8:34 AM Clark Atwood Clark Atwood  says:
It continues to bother me that there is no distinction by the press, trade organizations and even hosted communication providers about the delivery of communications over a public network (Internet) versus a private network with prioritization (like MPLS).For this sector to grow exponentially, the services must be stable. It is not the 98% of the time that an Internet connection will work that will propel this market, it is the 2% of the time that VoIP on a public network will take a companies business communications down that will hamper the growth.Why do managed VoIP providers continue to push communications on the Internet form a stable and reliable TDM solution rather than offer a private IP solution that solves the issues? Thats easy. Price. In order to converge all of these services into a private IP environment you must provision a private circuit or MPLS enabled circuit to the customer. This costs money. So does packet prioritization, power over Ethernet (POE) switches and installation. They are taking the easy path to quick money by having customers use their existing (not ready for VoIP) network and a public transport to the PSTN that they have no quality controls to manage.Businesses are more picky than residential customers. Businesses use the phone as their life blood. Putting their mission critical voice communications on a public network is like playing Russian Roulette. Why would any business in their right mind take their communications from a secure, stable and reliable TDM network and put it on the Internet? Ignorance in the face of perceived cost savings.We have been selling managed VoIP solutions for four years now and have over 100 active locations with a managed VoIP provider. This works because they use a private network with packet prioritization. The voice quality is solid. The customer gains all of the benefits of convergence of local, long distance, Internet access and wide-area-network (WAN) without the security concerns and reliability issues of putting all of this through the Internet.SMBs will want VoIP in great quantities when someone steps to the plate, becomes a national managed VoIP provider, can prioritize voice, video and data and presents it at a reasonable cost. Don't forget, TDM pricing has fallen as VoIP has become more popular. Bundled TDM services we used to sell five years ago for $1,300 /month are now less than $500 / month.The benefits of VoIP remain single operator for multiple locations, mobility login, 4 digit dial, tool bar extensions to the desktop, application integration like CRM, convergence of network services, disaster recovery, home-based user integration, call center IVR / ACD applications and more. Most of these benefit multi-location customers. The single location customer benefits a lot less from VoIP applications. Pitching unlimited domestic long distance for VoIP can be easily matched by current TDM solutions. The battle lines are quickly being drawn. Managed VoIP needs to grow up and match TDM in price, security, reliability and add more features for the same price to convince the majority of SMBs to switch. Reply
May 2, 2007 9:41 AM Rhett Smith Rhett Smith  says:
I'm pleased to know the market is growing--it means people are finally catching on to a good idea. Speakeasy VOIP is a fantastic hosted solution. Since Speakeasy is an ISP they can control the pipe on both ends of the T1 making QoS much easier. We've been using the service for over a year now and couldn't be happier. For a small business one of the primary challenges is provisioning trunk lines without paying for lines that remain mostly dark to accomodate the occasional peak call times. Hosted VOIP is an ideal solution for SMBs--providers just need to open up their APIs so that VARs/System integrators can provide custom/vertical solutions. Reply
May 2, 2007 6:59 PM Jonathan Travers Jonathan Travers  says:
I couldn't agree more! My business recently reviewed switching to a Hosted solution and is most likely going with Fusion Telecommunications here in NY.They're an up and coming organization with a very comprehensive suite of products. In addition, the solutions look to be both cost effective and able to increase the features and day-to-day functionaliy that will help my business grow.Great article-- I never realized the size of the market was that large!WOW Reply
May 4, 2007 2:23 PM Kannan Kannan  says:
Article brings about the perspectives,market,challenges & expectations from communities such as users,SMB,Business needs & the techies.The Challenges are more in the third world countries with technology,cost,regulatory,security awareness to be fused with convergence .VOIP on VPN, MPLS seem to provide higher comfort with the QOS & COS offerings from providersManaged services & hosted services are getting popular too.Bandwidth on demand burstible mode (I mean Dynamic allocation) rather than dedicated bandwidth should bring in further exploitation of technology to drive the operating costs lower. Reply
Jul 30, 2008 3:05 PM VoIP VoIP  says:
VoIP makes easy to call and talk to anyone.provides facilities to make calls over the internet. VoIP offers best call termination services,Internet VoIP phone service, reseller programs, VoIP PBX and Business VoIP Solutions.Through the VoIP we can make easily. Reply

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