The Cloudy Race to Zero

Peter : On Rad's Radar?
Peter
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

The Cloudy Race to Zero

There has been an discussion about the Transactional Agent - and his demise. I beg to differ. I think The Cloud will end up being transactional as well.

A couple of months ago, Microsoft lowered its pricing on Office 365 in March to compete with Google Apps at $50 per year per user.

At first, I thought only MIcrosoft and select partners would be offering Office 365, but with Sprint's announcement today, it looks like anyone can get in the game.

I was sitting in a CLEC training when the subject of Hosted Exchange came up. The CLEC would offer special pricing to not lose a deal. So again "We will lower our pants to get 1000 seats." Price war.

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How do folks choose CRM? I'm guessing for some, it is solely on price. Agents could certainly have a collection of 3 - Salesforce, Dynamics, Zoho - to offer to clients. See? Transactional.

Hosted PBX - how many Broadsoft players are there? Over 400. Plus add in Metaswitch offerings from EarthLink and others. It can definitely be sold on price.

Avaya's Live Connect at $19 per user is certainly a shot across the bow (towards a price war).

In an interview, one Tampa cloud provider said, "You can save a bunch of money by going to the cloud." That's when I knew it was going to be another race to zero.

ASIDE:

Managed IT had this problem a couple of years ago. Everyone and their uncle was selling managed IT via remote apps. Once it got to sub-$10 per machine, the pros had to leave the market, because you just can't provide decent service at that price point. I see this happening with other services like email, office, Hosted VoIP. Mainly because people sell it as a line item that can be comparison shopped.

It will be Bundling that changes this.

When there are only a select few offering a service, margin is high and knowledge is clustered. As more enter the marketplace, the knowledge spreads thin (not a good thing), value dips and price erodes. For example, a boutique IT shop selling integration of a software suite can sell on value and target highly qualified prospects who will need this service and be willing to pay for it. When it moves into the mainstream, not so much. More people selling similar services - or at least outwardly similar to the market. Less sales people that truly understand the value of the service; that can prospect accurately; and can sell on value. Price war. Red Ocean. See that ship? That's where it is heading to the Red Ocean.



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