On Rad's Radar? - unified communications Archives

What is the Value Prop of VoIP?

2012-04-16T20:51:05Z

"It is happening and no one seems interested in stopping it - that hosted voice services are rapidly becoming a commodity service," Dave Michels

"According to the Telecommunications Industry Association, wireless has become the preferred voice-services option. Wireless revenue in 2012 is forecast at $335 billion, while all other forms of fixed network voice revenue will only total $176 billion ($132 billion for wireline, $38 billion for broadband access and $6 billion in cable/television revenue)," blogs David Byrd of Broadvox.

Those are interesting numbers. And there is more interesting numbers when you look at VoIP.

"Zeus Kerravala estimates penetration [of SIP Trunking] is right around 5% in the United States," reports Razorsight. Just 5%! The blog continues with: "In some cases, it is argued, SIP trunks do not save money." This statement flies in the face of an imperative in our industry. If a SIP Trunk isn't saving money, why not sell and install a TDM PRI that has known stability and quality? This would certainly be the reverse of where the Industry is heading: all IP. But if we are heading all IP in a move to save money - more for the carriers than the customers, I think - and SIP Trunks are not a big cost savings, where does that leave the sales proposition?

According to Insight Research, Hosted PBX is about $500M now. That's not a lot. I figure with 1000 service providers running around yelling "I'll save you money" while cutting pricing to close any deal, that figure would have to be greater than $1B.

Revenue is dipping in everything - GigE ports in a data center, T1's, MPLS, DIA, broadband. The only rates going up are cellular and TV.

Scary stat: "In 2010, operators made on average only $13.21 per user per year from mobile VoIP services."

There are reasons that the Hosted PBX revenue is small: VoIP is sold as cheaper than TDM, so on the conversion from TDM to VoIP the bill declines. Also, there is no way to accurately report the Hosted PBX industry with its 1000+ providers out there with everything from an Asterisk box to a Broadsoft suite. Also, switched voice traffic is migrating to other avenues like chat, IM, SMS, and cellular. That's why Unified Messaging and Hosted UC should be huge - but sadly are not.

One reason is that the sales pitch has been so loud for so long on I Will Save You Money that we have trained the marketplace to buy it that way. Sure, you can blame the Agents and the Direct Sales folks, but at the end of the day -- going back to the pin drop in 1986, we have been working on giving away margin and revenue. Oh and neglecting Value.

"The cable industry, without a doubt, is the main purveyor of VoIP in the United States. An industry strategy is to bundle video, VoIP voice and data. The approach is to offer a good deal on the three services....The bundling strategy has served cable operators well and has been embraced by telephone companies," reports Carl Weinschenk. This bundling has even resulted in a Price War. Again no Value, just commodity price shopping.

The thing about VoIP that most companies don't get is that it is just an app - Google Talk or any chat app that adds voice; gaming consoles that let you chat with your peers; Skype; MagicJack; mobile apps on your cellphone; audio conferencing; and now Hosted PBX. The Value of VoIP is that it can be attached to other apps like email or a computer we call a PBX or on another computer we call an IP Phone. The Value isn't in the dial-tone. The Value is in how it is applied and used.

Hosted PBX (and its complicated cousin, Hosted UC) take VoIP to a different level. Therein lies the problem though. Now it's tougher to sell!

The value of VoIP is in a click-to-call button or a Speak Live app on your website that converts prospects into customers.

The value in VoIP is allowing the medical office scheduling to be completed by the computer and not a human to save time, be efficient and let the office manager do other tasks.

With debt piling up and revenue waning, it's time for the carriers to change the way they sell. It's time to sell on Value. It's also time to realize that Layer 7 of the OSI model - Apps - is where they break-away from the ILEC's.

I've written before about what EarthLink should do, about niche marketing and about bundling. No is listening yet. But I will keep trying to drive this point home.

Another way to look at it:

People would pay more for Voice if we would sell it in a non-traditional way. Stop selling it like a POTS line.

Look at what Jon Arnold writes, "Building off that base, [ShoreTel] understands the voice 2.0 value proposition - it's all about the applications and the experience - not just cheaper, reliable connectivity. With VoIP, dial tone quickly becomes a commodity, and their view is that high value applications are the best way to differentiate against low priced competitors. One example was their Live Answer demo - a simple cloud-based diagnostic tool that shows what percentage of calls is being answered live. This basic piece of information has inherent value not just in the contact center, but for any business where phone inquiries can lead to sales."

I Can Do It Myself

2012-03-06T14:37:09Z

I hear this all the time: "I can do it myself!" Backup solution? No, I'll build one myself. Outsource your email? No, I can run my own email server. White-label VoIP? Nope. I'm going to spin up an Asterisk box and use that.

You think I am kidding, but I'm not.

Yesterday it was: We needed to re-do our Broadsoft portal. After shopping around, we decided to build it ourselves.

It makes me wonder about a couple of things:

Are you a hobby or a business? A hobby is when you like to tinker with technology. A business is something else.

Do you know what your time and effort is worth? It takes a lot of time and effort to build a solution, maintain that hardware and software, and support it. Add in licensing, backup, redundancy and security to that budget number. Factor in that while spending your time and effort on Building Your Own, you could have been doing something else -- some other priority, some other revenue generating activity, or personal time.

There is always a debate about buy versus build. There are many reasons to buy: faster to market, outsourced skill and support, no CAPEX, knowledge base, etc. Yet there are reasons to build: you want more control, special features, proprietary, etc.

In today's world, where most service providers don't market very well or brand themselves (or their servcies), buying is the way to go. Why? It isn't about you or what you want. It's about your customers and what they want. It's a speed to market. It's about capturing wallet. And you can't do all that by yourselves. You just can't.

When I examine VDI, VoIP/Hosted PBX, UC, backup and conferencing, there isn't any special sauce being pitched. To the marketplace, it's one big nosie box about the tech and its features. That's why it doesn't sell fast and that's why you don't have to spend the effort building your own (in my opinion).

Can you put a competitive service together that your customers will be happy with in the most efficient manner?

Don't look at the cost (unless you factor in your time saved), look at results.

A Brief View of Integra Telecom

2012-02-21T18:51:16Z

I interviewed Integra in Austin last year. Like quite a few interviews I do, I just can't find the time to write up the blog. It may seem like I do this blogging thing full time, but my bills still get paid doing consulting to ISP-CLEC-VOIP-MSO companies and being a telecom agent. It makes for a lot of juggling and long hours.

Integra Telecom is a CLEC in 11 Western states, including: Arizona, California, Colorado, Idaho, Minnesota, Montana, Nevada, North Dakota, Oregon, Utah and Washington - bringing in about $700M in revenue, in part due to the acquisition of Electric Lightwave and Escheleon Telecom. The parts I like are the 5,000-mile long-haul fiber network and the 3,000-mile metro network that feeds about 1,900 buildings. Now with Kevin O'Hara as CEO, Integra is re-branding itself as a "fiber-based, business-grade networking, communications and cloud solutions provider." That's right: from CLEC to Cloud provider.

Integra Telecom is going the UC&C route by "providing network-wide availability of hosted Microsoft Communication Services, which includes Microsoft Exchange, Microsoft Outlook 2010, Microsoft Lync, Microsoft SharePoint, enhanced encryption and other valuable features," according to the pr.

At ITEXPO West in 2011, they "introduced a cloud security services suite of managed, networked-based security products for companies that rely on the Internet for their business and need to protect their network from unauthorized and malicious access and content. The first available product is Cloud Firewall Service, a network-based unified threat prevention service that provides secure inbound and outbound Internet access without the need for on-premise equipment or additional staff," according to the pr. That service keeps them in the hunt with Netwolves, EarthLink and others who have rolled out a managed firewall service. Security is supposed to be the buzz word this year. We'll see.

To me, it's all about On-Net. Whether I am talking about EarthLink or Integra or WIND or XO or TWT or L3, it is all about LIT Buildings! Why? You already spent the capital to put fiber there, so get deep into that building. Then layer on services. Big pipes will need security since everyone is getting hacked.

Did I mention that Integra Telecom is channel friendly? (Though they haven't joined TCA yet.

What Twitter Told Me This Week

2012-02-10T16:11:39Z

I get a lot of articles off twitter. Too many to write about all of them so I am just going to drop some on you here.

Please be advised that the FUSF rate for Q1 of 2012 has increased from 15.3% to 17.9%. For further information regarding FUSF Fees and rates please see the FCC website.

RebTel is #2 behind Skype with 15M users doing 2 billion minutes of international calling. [venturebeat]

Both Florida state and federal lawmakers are trying to overturn the NFL blackout rules. Main argument is those stadiums were paid for with public tax dollars. [tbo]

Besides the M5-ShoreTel deal, I saw 2 other acquisitions occur. [radinfo]

Your open wi-fi access point leaves you open to lawsuits. Awesome! [radinfo]

FCC Eyes Google Voice’s Rural Call Blocking - just a part of the whole FCC Rural call completion review and the inter-carrier compensation issue. BTW, it's AT&T that keeps poking Google in the eye at the FCC about this.

It's Halftime America!

EarthLink is still utilizing the AX platform from New Edge Networks (now named EarthLink Business). XCast just set up an NNI (an inter-connection) with that platform for better performance. The AX platform allows cloud providers to connect to EarthLink's nationwide MPLS network for better quality to the users.

TELX is building another data center in NYC, land of not much commercial space for sale.

MITEL has achieved CLEC status in all 50 states. Maybe that's to help it deliver Hosted MITEL UC service to its customers.

Why Did ShoreTel Buy M5?

2012-02-10T15:48:57Z

Recently, M5 Communications was acquired for about $160 million by ShoreTel. The premise PBX vendor had a bad quarter and caved to the pressure of Hosted PBX. Avaya, Interactive Intelligence and MITEL have hosted offerings. At some point, ShoreTel had to jump on that bandwagon - due to the big opportunity (ask any analyst) and the threat that cloud comm places on premise only sellers.

I think some of that money - now $162 M based on the stock - was for Dan and his team to stay on and continue to run the machine. There are a couple of million in accelerators in the LOI (letter of intent), also. Plus what does Shoretel know about running a service or the proprietary softswitch that M5 switched to in 2010? The M5 team had to stay (for a while).

ShoreTel's C-level exes probably saw that the hole in their strategy by not having a CaaS strategy. After that, the decision comes down to build-or-buy. The advantage to buying is that - if done properly - you get revenue, a market proven service offering, and a sales channel. Building from scratch has a big learning curve, capital investment and little revenue.

By scooping up M5, ShoreTel gets a proven business model. At $48 million in revenue, M5 was one of the giants in the Hosted PBX space with a proven sales record that had grown 30% in the last year. Their indirect and direct sales teams were effectively selling the service. Not many VoIP providers are organically growing revenue. In 2010, M5 was doing about $32M in revenue when it acquired Gekkotech, a Chicago based VoIP provider that was utilizing M5's softswitch platform and bringing in about $8M.

M5 left the Broadsoft platform in 2010. This move increased the profit margin by eliminating the licensing fees to Broadsoft. This might have been another factor that made M5 attractive - margin. For the second quarter of fiscal year 2012, ShoreTel revenue was $58.0 million with a net loss of $1 million. Hardware alone is a difficult business to be in, ask Amazon or Dell.

Under the terms of the deal, M5 shareholders will receive approximately $84 million in cash and 9.5 million shares of ShoreTel stock, for a total of about $146 million on stock value at close of sale. Moreover, M5 shareholders have incentives that could realize up to $13.7 million, according to the company's press release.

M5 will be run as a separate division with CEO Dan Hoffman still managing things. This is a smart strategy; the same one that TelePacific took when it acquired Telekenex. The culture of CaaS is different than hardware / premise PBX. There is some rivalry there. Why break either corporate culture?

This transaction is just another example of how the legacy telecom world will have to jump into the new cloud world - mostly through buying since it will be cheaper and faster that building it from scratch.

Why can't the rest of the cloud comm space get this deal? One reason is that investors don't look at companies with less than $10M in revenue. You don't have a proven model at $4-5M. It's a different deal at that size. At over $20M, investors know that you can sell and you can scale. It's proven. Another reason was the average revenue per customer at almost $2000. As Q-Advisors told the crowd at Cloud Comm Expo in Austin in 2011, that number has to be north of a thousand to be attractive. Those are pretty good reasons for the 3x revenue number.

The Trouble with UC Sales

2012-01-23T22:01:45Z

In a recent study, titled IDC MarketScape: Worldwide Unified Communications Voice Infrastructure 2011-2012 Vendor Analysis, IDC analyst Rich Costell wrote that "Customers still struggle to justify the deployment of UC and calculate its overall ROI." The conclusion: "educating potential customers is critical" to UC sales.

"If you can't explain it simply, you don't understand it well enough." - Albert Einstein.

The transition to selling UC will need to be done with first educating the sales channels. I still hear cost savings as the first reason to sell VoIP.

Also, no two UC packages are similar. In fact, the whole term Unified Communications is garbage can term for everything. In the call center space, it seems to be better defined.

Unified Communications, for the most part, begins with a VoIP service and goes on to include text, SMS, chat, email, video, and conferencing. Then we add social media and collaboration. In some cases, we had integration with CRM and other software applications. This is a huge can of varying stuff - in a marketplace that barely has unified messaging, a single inbox for email and voicemail.

This kind of varying component mixture is more like stew and adds to the confusion to both the customers and the sales teams.

"Since there is no 'one size fits all' solution for UC adoption, customers have not only the advantage of having a variety of platforms to source their functionality but also the challenge of figuring out which solution is most appropriate for them," according to Rich Costello, senior research analyst, Unified Communications/Enterprise Communications Infrastructure.

When the product contains a large array of services selling it is daunting.

Where do you begin?
Where do you stop?
What will deployment look like?
Will the employees actually be able to utilize the benefits?
Who's going to manage this?
Will it integrate with Program X?
How will the integration work?
What policies will we need in place to structure all that communication across so many architectures (social, etc.)?
How much is IT involved?
Is there a business case for this move?

It goes without saying that the sales process for this is very different from selling telecom services. Education and training of the prospects and the sales teams will be vital for success.

Next week at ITEXPO, I will be moderator for a panel that will touch on this: Educating the Channel with Industry Standard Certifications on Wed., Feb. 1, 2012 at 2:30 PM.

Lying Will Kill the Sale

2011-12-22T17:38:46Z

One of my coaching clients asked me how to dig deep into a service providers knowledge base to insure that they can actually deliver on what they say. I had to chuckle.

In most cases, only a few people at any service provider really know what is under the hood in any detail. Two examples for you follow.

I ordered a PRI from a CLEC. I asked numerous times if it was TDM PRI or not. The Channel Manager reassured me that it was a PRI. Finally, when I received the FOC date, I asked once more: Was this a true TDM PRI or was this PRI signaling at the CPE. It turns out that it was PRI signaling from the CPE and a SIP Trunk back to the CLEC. BAM! Cancel the order. Start over.

In the another case, the Agent is trying to determine if the Cisco 7900 phones can be used when the customer migrates to another Hosted PBX provider. A couple of ITSP's have said YES; a couple have said NO. It made the Agent insecure in proposing a solution since he couldn't get a straight answer. [Cisco 7900 were running MGCP, while most ITSP's run SIP.]

The problem is that everyone is only looking at Quota and getting the contract signed. Our industry is sliding away from the Customer Matters.
What good is it to get the contract signed only to not be able to deliver on service?

That's a lot of wasted manpower plus hard costs for anything ordered from the ILEC. Not to mention, you burn the Agent and the Customer.

Not many CLEC's worry about branding, but most of the Branding occurs closest to the customer, where WOM (word-of-mouth) and relationships occur. If you give incorrect information, if you lie, if you don't care if the information is accurate, you are ruining 3 brands: the CLEC, the Agent and YOUR OWN.

One way to avoid this is to limit the number of carriers you deal with. It's a challenge to know anything in-depth about 20 carriers, let allow 40 or 100. And in the ITSP sector, I think you need to take a regional approach. You want to be selling someone as close to the customer as possible for QOS and other reasons.

At the end of the day, you may make mistakes due to bad information. All you can do is give your customer the best choices you can and be as transparent as possible. When the mistake happens, apologize, work to fix it fast and give the customer Plan B.

It's Monday So Lots Happened

2011-10-17T17:21:24Z

Polycom bought Vivu, a video collaboration company, to help Polycom push it's Presence gear. Video, video, video. Yet I never have video calls or video call requests. To me, I wish you would work on the phone part. Give me a great looking phone that is easy to use and where the voice quality is awesome. Can you do that? Not really.

All the companies in this space are running to the Video. Why? Deployment and usage are challenging enough without trying to hook up video and make myself presentable. Fax over IP and HD Voice are still just a promise - and video conferencing off platform doesn't work.

It's kind of like talking about Cloud or UC, you are hoping for a stock bump or a PR bump.

Folks are at the Broadsoft show today being introduced by a 3D presentation. Then they will be peppered with alcohol to dull their senses so they can listen to BSFT talk about Video Conferencing (iLinc acquisition) through BroadWorks (Don't get your own; Buy more licenses from us!). Then I'm sure it will be about Mobility and Integration from the vendors that ponied up big $$$ to pitch their wares.

The one thing that gets lost in all this: there are too many VoIP Providers in the marketplace (over 1100 in the US alone). All of them are still trying to figure out how to sell more seats! Sure, they can sell SIP trunks but that is low margin commodity business. Hosted PBX is a higher margin (if sold correctly) business that is about to heat up as the cable giants - Comcast and Cox - roll it out nationwide and give away access in the sale. How does a Hosted PBX provider who doesn't own a network compete then?

And selling UC&C (unified comm and collab) mixed with video is a specialized sale. First, you need a base of Hosted PBX clients and a set procedure for deployment and on-boarding customers. Then you can have a process to upsell or chase a specialized market.

Meanwhile, we are all waiting for the FCC to make some decision on both USF Reform and Inter-Carrier Compensation. ICC will actually change the VoIP market a little. Not that anyone noticed, but the TRA is now a requirement for Inter-Connected VoIP Providers. Why not utilize the video and collaboration components to solve TRA and Communications for Disabilities? Then at least you would have a hot button.

I was going to rant about USF Reform -- like how we should kill the whole program -- like that would ever happen -- because spending tax money to outfit rural areas with broadband is kind of crazy, in my opinion. And its only 15 million Americans. How many will actually buy broadband? Maybe 67%? So 10 million? At a cost of 15% of the bill every month? That's crazy.

Anyway, on to M2M. Sprint is big in Machine-to-Machine wireless solutions and "has targeted four high-growth segments as the umbrella focus of its M2M development activities and offerings: Connected Transportation; Connected Meters, Sensors & Alarms; Connected Machines, Screens & Things; and Connected Personal Devices." [pr] Meanwhile, Sprint is hoping the iPhone bouys up their subscribers.

VZ is getting into home energy monitoring and testing 3G/4G networks nationwide. I'm sure that it will be an unbiased study of the 3G/4G world (MetroPCS, AT&T, T-Mobile, Cricket, Sprint and VZW).

And in another blow to privacy, VZW "has made a change in its privacy policy that clears the nation's largest wireless carrier to track its subscribers' Web browsing, location and app usage habits," according to the LA Times.

Did you know there is such a thing as Hardware-as-a-Service? Chartec and Outreach offer it in a partnership.

NTS/XFONE grabbed 1800 cable customers in West Texas from Reach Broadband.

ABRY Partners bought data center company XAND, who is either a hosting company or a data center infrastructure company. To tell you the truth, the way these press releases describe the companies involved, I know two things: (1) the PR firm has no clue what they are talking about; (2) the marketing department or firm has no clue what they are talking about either. Keep It Simple!

Metaswitch is Blowing Up

2011-10-06T22:51:18Z

I know that the M Forum was last week, but the news is tumbling out of Metaswitch faster than I can read it. It started at CPExpo when EarthLink Business confirmed that it was going Meta despite buying STS which was a Sylantro shop. Deltacom and ONE Comm had a lot of Metaswitches lying around (mostly unused :).

Optimum Lightpath (Cablevision) rolled out Next-Gen Hosted PBX for the mid-market and enterprise. It will be utilizing Metaswitch's MetaSphere multimedia application server for HD Voice, mobility, UM, visual voicemail, collaboration and conferencing.

One of the cool announcements was that Metaswitch inter-operates with the CloudTC Glass 1000, the industry's smartest IP phone. The CloudTC Glass 1000 includes a visual voicemail application that is fully compatible with the Metaswitch VoIP solution. The desk phone is an Android based device that is cool looking and one of the few desk phoens that actually utilize apps. (Not that others can't but this was designed to). Apps is where it is at. Thinking Different.

"Panasonic System Networks Company of America announced certification for interoperability of the KX-UT series of SIP telephones with Metaswitch Networks' platform, a recognition that signals admission into Metaswitch Networks' Mosaic Partner Program." More info about the phones at TechZone360. Panasonic is chasing the SMB market with these phones. They work with Asterisk too.

"Blue Mountain announced that its newly released hospitality middleware M-Suites enables hotel guestrooms to have carrier-grade VoIP services." Chasing verticals is the key to margin.

Finally, Lyrix introduced Mobiso, a new Cloud Based Speech Assistant to Metaswitch customers as a SAAS app. It's speech enabled auto attendant (SEAA).

The Latest in VoIP Updates

2011-09-19T22:00:37Z

There is just so many press releases. I'd say news but much of it is not new (that is to say innovative) or really news worthy other than as tidbits of info to keep up on the sector.

Metaswitch got into the SBC market, because their clients didn't want to buy the market leader, Acme Packet. Level3 jumped into the SBC market with a new service: Managed SBC.

Skype bought Groupme for a rumored $80M. Groupme was a contestant at the second Startup Camp, that also had the makers of the Android desktop phone, Glass.

Interesting thought: Inter-op is about user experience, so is device choice. Think about deployment from the user's experience.

Telesphere partnered with CosmoCom to add cloud-based contact center solutions. That's one more customer that won't be using BroadCloud. Oops! BSFT bought web conferencing company, iLinc, for just $2.4M. The hope is that clients will use BroadCloud instead of third party companies (like Citrix, MegaMeeting or CosmoCom) to fill in the UC components needed for the complete UC experience.

Sangoma acquired all the key assets of Vegastream.

InterCall announced that it will extend its Smoothstone VoiceMaxx IP-PBX services with the addition of VoiceMaxx CE, a suite of service packages based on the Cisco Hosted Collaboration Solution. Both Smoothstone and Intercall are owned by West Corp.

Here's something startling: a company debuted at ITEXPO with "a 100 percent turnkey white label product that will not only include provisioning, support, billing and telco services, but will also incorporate all of RealLinx products (VoiceLinx, SecurityLinx and BroadbandLinx)."

RingCentral got $10M more in funding. Aren't they self-sufficient yet?

8×8 recently acquired cloud-based call center provider Contactual Hosting.

"NetSapiens' SNAPsolution is utilized by One Source Networks to power a hybrid of cloud-based and premise-based solutions, integrating all of the necessary service delivery components critical to the OSN VoIP infrastructure, such as accounting, provisioning, and call switching to enable OSN's end-user applications such as unified communications, virtual PBX, conferencing, and enhanced call center solutions."

"Virtual PBX Complete with VoIP Anywhere allows customers to use their smart phones and computers as VoIP handsets with complete business phone system capabilities."

CounterPath added SMS, chat and presence to its Bria mobile app. Counterpath also launched the Client Configuration Server (CCS), a carrier grade server platform specifically designed to allow enterprises and service providers the ability to efficiently and consistently deploy, configure, update and upgrade softphone and UC Client end-points.

Zendesk adds some VoIP functionality via Twilio. Zendesk Voice is a cloud-based call center that integrates with the startup's popular help-desk platform.

Vocal IP Networx now offers a unified communications (UC) platform, dubbed Vocal UC, utilizing Microsoft Lync software.

The Banker Speaks

2011-09-16T15:56:21Z

At Cloud Communications Summit at ITEXPO this week in Austin, Q Advisors a luncheon keynote. Q Advisors has been involved in quite a few M&A transactions this year with Cloud Comm companies. Micheal Quinn was the speaker. He said a lot of stuff that I have been saying (so I naturally liked the guy, even though he is a banker.)

Key factor for bankers: Size Matters! So does ARPU (average revenue per customer.)

Wireline consolidation is coming because there is no organic growth in our industry. The CLEC's haven't had organic growth in a while. Most buckets are flat or declining for wireline, so it's buy stuff to move the needle.

Best quote I agree with: "Paetec got tired." Back when Paetec bought Allworx, I made a comment that Paetec being public was going to be really tough - too challenging perhaps.

The multiples being paid out are 4-6x. CLEC's trade at 7x, but fiber trades at 9x. Paetec bought for 1.1x. One Comm for 0.6x

Who's buying? CLEC's and ILEC's since "Acquisitions are just about features right now." But Dell and HP might buy a UC shop."

Quinn said that UC matters. International is untouched - Asia and LATAM specifically.

"No shop in the UC game is at $100M"

Most UC sales are still under 25 users." at 33% of all UC sales. 25-50 seats is at 29% of sales.

Quinn said, "Under 25 will lose to cable." I say, Definitely. They own the network. They can give away the bandwidth. Deeper pockets. Brand recognition. "CLEC's are in trouble by cable giving away bandwidth," especially since this was the sweet spot for many CLEC's - 10-25 employees.

Also, under 25 can be bought online via packet8, Speakeasy, FreedomVoice, RingCentral. Makes a CFO wonder if a sales force is needed. (A sales force IS needed - an effective one, bringing in big ARPU).

The UC sale should be about "cutting staff", according to Quinn. (Typical banker.)

"Cbeyond has not moved the needle with cloud.... Packet8 has more market cap." Those are interesting statements.

"Other CLEC's have no strategy for cloud!"

"Organic growth is non existent!"

Valuation Drivers:

ARPU under $1000 is nothing.
M5 is all one year contracts, but buyers want multi-year contracts to lessen churn.
Size of customers. Multi-location. CAPEX. Churn. ARPU. Customer Acquisition costs.
Service offerings. Customized?
CPE? How sold and booked.
Back office and Management.
Sales channel
Ability to offer network.
Integration options

Most interesting factor: Ink to bill cycle, which relates to pre-install churn.

A very fact filled talk. You can poo-poo it if you want, but bankers have a different view. If you don't need money and don't want to sell (or buy), you can ignore this. If you want financing or want to sell, these ducks need to be in order.

A Couple of M&A Items

2011-09-09T15:48:25Z

It seems that Apple put in a bid for Dropbox for $800M (for $100M in revenue). But Dropbox decided to get another round of funds and think IPO instead. [BusinessInsider]

Cablevision will resell Sprint wireless service through its Optimum Business unit. Quad play for SMB.

WAN optimization is buzzing. That will be the next "big thing" companies will be begging the Channel to sell.

Ntelos spun off its wireline business, including the Fibertech asset it bought, into a new company called Lumos Networks. This is the same thing that Alltel and Sprint did. For sale?

Broadsoft decided to shore up its BroadCloud service by buying iLinc in an all-cash deal. (No figures found yet.) This deal means that the web conferencing and collaboration piece of BroadCloud will be an in-house offering instead of a third-party resale or add-on. This is an attempt by Broadsoft to get beyond just trunking and seat licensing. Add-on sales is where the gravy is. Otherwise Broadsoft customers would be incorporating other options like Microsoft, Citrix or Cisco (Linc, GoToMeeting, Webex).

And one last plug for the CMO SUmmit next Tuesday at ITEXPO with this link: CMO's To Increase Spending On Social Media But Integration Still Lacking

Blockbuster Still Chasing Netflix

2011-09-06T14:25:30Z

There's a lesson to be learned from Blockbuster. Blockbuster was the last standing national chain of video rental shops. It was purchased by DISH Network out of bankruptcy. Blockbuster was an example of a company that couldn't keep up with changes in its sector - and let rivals dictate the playing field.

Blockbuster started doing the mail order DVD on a monthly basis when Netflix started gaining ground. One thing that Netflix had was an efficient distribution system for both physical DVD's and for streaming (using AWS) -- something that Blockbuster did NOT have. It's sunk costs of doing business were huge. Brick-and-mortar usually is. Ask Borders.

Now Blockbuster is launching a streaming service, according to Bloomberg. This time not just chasing Netflix but Hulu as well. The key may be that Netflix lost Starz and Blockbuster may have it. We'll see next month.

The only novel thing that Blockbuster has done isn't even novel. Setting up Blockbuster Express kiosks was their way of chasing Redbox.

We see this a lot in telecom. Chasing the competition. It's so me-too that most people can't tell you why CLEC A over CLEC B over the ILEC, except on price. (This contributes to an industry consolidating and mounting massive debt.)

How come no one chases a vertical? Inphonex CMO Matt Bramson and I have spoken about this in the past. As voice is just an application (software), why aren't the VoIP Providers working with vertical software companies to integrate their bundle?

For example, dental practice management software with scheduling app plus VoIP and email. A real bundle would include private networking to the data center for the PMS plus access to payroll and credit card processing. This is a solution. And with over 300K dentists out there, even 10% is a great business. (Many VoIP providers don't even offer email?!)

There are of course other verticals.

You can't be chasing the competition.

The landscape in VoIP is evolving. The network operators are coming to market with Cloud Communications - XO, Comcast, Cox, Windstream and CentruyLink. This means that either you shift your game or end up a commodity provider (where the scale and network of your competitors will eventually kill you).

The State of VoIP

2011-05-24T21:06:16Z

Seems passe to be writing about VoIP, but that's the overarching theme of this post. What is happening in the VoIP world?

Microsoft bought Skype and announced today that Skype for Asterisk will be shuttered. Yep, looks like Skype will be for LINC, maybe a few select partners, and maybe a reborn Response Point program.

Web Hosting companies are in the game of VoIP now. Intermedia is now offering Hosted PBX as a stand alone product. Parallels, which is a web hosting platform company, has developed an automation and provisioning system that includes voice apps from the likes of Alteva and 4SPA.

MegaPath has put some Hosted PBX features into its Integrated Voice-Data solution, including Find-me/Follow-me. MegaPath leaves you with a great sales question: "What Hosted Voice features would be most advantageous for your employees?" It would be a good question to ask customers and prospects and a good one to ask during product development.

Momentum was already a Broadsoft shop doing white label for Tier 2 cablecos before it acquired the assets of CommPartners Hosted business. We'll see where that goes, because that might have been a Money Pit that Momentum got.

TelePacific just acquired a Hosted PBX shop that will become part of TelePacific's Managed Services subsidiary.

XO is knee deep in Broadsoft Cloud Communications fun. So much so, I wonder why they haven't joined the Cloud Communications Alliance yet. Who did join the CCA? GLOBALINX

Here's a letter from the Smoothstone President to clients and partners about the acquisition of Smoothstone by West Corp.

TouchTone rolled out an Unlimited Calling SIP Trunking service called BusinessFlex, which provides unlimited local and long distance calling anywhere in the Continental U.S., Puerto Rico, Canada, and the U.S. Virgin Islands. No contract term is required; and standard features include BTN with E-911 and Caller ID/Name, one DID per SIP trunk, and many other enterprise features.

Junction Networks launched a free VoIP Service named GetOnSIP. GetOnSIP is built upon the same SIP and XMPP foundation as Junction Networks' existing OnSIP hosted PBX service. However, GetOnSIP is a stripped down offering with a SIP URI. Once your SIP phone or soft phone is registered you can start making and receiving calls to any other SIP URIs.

In Rich Calling, Ringio partnered with InPhonex to create Televate.

Cbeyond's Virtual Receptionist was recognized for Outstanding Innovation.

SYNNEX rolled out CLOUDSolv UC as their hosted unified communications platform that works with both VoIP and desktop voice services. It's a private-label service sold through SYNNEX resellers that works with Microsoft and Broadsoft technology.

M5 Networks launched a cloud based call recording solution for SMB.

Packet8 decided to jump into the SOHO and solopreneur sector with a UC solution for even offices of One. Details of that offering are here. 8×8, which owns Packet8, "added 3,009 gross new business customers in the fiscal fourth quarter of 2011 and ended the period with 24,385 business customers in service," according to its press release. It did $18M for the quarter and $70M for year with churn at 2.3%.

Telcentris joined the white-label turn-key crowd with its "managed wholesale VoIP enablement solution [that] is ideal for interconnects, service providers, carriers, and entrepreneurs looking to offer Internet telephony services within weeks with minimal upfront investment."

I think that covers most of the "news". Now here's a sales link: Determining Whether Hosted VoIP is Right for Your Small Business.

TDCloud Joins the Fray

2011-05-19T19:37:48Z

We have seen the hardware distributors moving into the cloud space. We saw that SYNNEX launched Cloud SolvUC as a unified communications play. According to the PR, the first nationwide cloud UC product. Umm, just from that marketing spin alone, I would suspect that SYNNEX did not have its finger on the pulse of this space.

Like voice agents moving to IP and hardware VAR's struggling to become MSP's, distributors moving to cloud services is heavy on hype and thin on details.

Ingram Micro has gone cloud and today Tech Data announced TDCloud. The interesting thing about the TDCloud is how closely it resembles IBM's cloud strategy. Could be because they are a partner.

Ingram, TD and SYNNEX are used to managing gear and licenses. Now they have to take on monthly billing, which will include lots of accounts receivable and probably billing issues.

Also, how does a warehouse and logistics company deliver on cloud computing services, especially something like UC? There is probably a third-party behind the curtain, much the way Broadsoft's BroadCloud services are mainly resells of a video conferencing service and the like. (By the way, how do you profit in this scenario? UC-company+Distributor+VAR-or-ITSP-or-MSP+customer? Seems like a lot of middle men.)

For VAR's or Agents to start selling Cloud, we need more transparency. We need to know what's under the hood. We also need a Value Proposition, because without a Brand in the marketplace (like Amazon, Rackspace or Google), how do you get the customer's trust on an unknown brand and service? UC is convoluted and no two companies define it the same way. The on-boarding of a UC customer is a challenge. If the UC Provider goes up in smoke -- and some will because there are just too many of them -- what happens to the VAR/MSP/Agent's customer? And his business reputation?

We need details to feel comfortable selling it. Time and again I have discussed the UC components that can be used to provide that solution - email, collab, VoIP, chat, presence, video, conferencing, text and now social media elements. You will need a provider who understands that and let's you configure and sell it the way each customer wants to buy it or needs it configured. XO distribute through TD, offers the UC components and wasn't even mentioned. Ah, pay-for-play models.

Let's look at one more element. Most VAR's stop at the Router. Most Agents stop at the router - just from opposite sides. Cloud services requires LAN, WAN, IT and telephony to all be on the same page. It requires Internet Access to get to the various apps in the cloud.

It will be interesting to see how this shakes out, but remember that Cisco didn't set any sales records for Webex and that's the perfect analogy: how does a hardware company and its Channel suddenly sell services? We aren't all IBM and they took years to get to the services business.