As the VoIP market continues to grow and mature, something interesting is happening.  Below the radar from the large carrier services, the SIP trunking providers, and the Cable triple play - the Small Medium Business (SMB) market for hosted VoIP services is heating up!  In fact, it is growing faster than all other VoIP based services.  The SMB market is opening up an excellent growth opportunity for competitive service providers of all types.

That's right  - small and medium businesses are seeing the benefits of VoIP services.  They want the productivity improvements and find the cost benefits attractive in this uncertain economy.  VoIP based services for businesses are the fastest growing part of the VoIP market with hosted VoIP services growing at a rate of over 28% a year according to Frost and Sullivan.  Not only is this a fast growing market, it consists almost entirely of SMBs.  In 2009 over 90% of hosted deployments were less than 500 seats. 

What makes this good news for competitive service providers?  This is a fragmented market without substantial competition from the large dominant players.  The large carriers and service providers are focused on their profitable large enterprise accounts and the healthy margins they are making on Centrex services.  The established incumbent players poorly serve SMBs because they do not fit into their existing business model, but SMBs can be well served by competitive providers dedicated to this market and its unique needs. 

Also, as the economy recovers, it will recover for SMBs first - they will be the engine of future growth.  These are the companies who best adapt and find new opportunity after a downturn.  This is where we can expect to see both new companies and the early new growth.

What companies are best positioned to take advantage of this opportunity?  Because of the fragmented nature of the market, different companies can approach the opportunity from different angles, but three types of companies seem best positioned to quickly address the market.  The first would be existing service providers that are finding their margins being squeezed in more mature markets such as calling cards or residential services.  Next, would be ISPs and service providers of other hosted services, like e-mail or CRM, who would like to add a high margin service offering to their existing customer base.  And finally, entrepreneurs who are looking to establish a profitable business in a growing market.

Though the opportunity is growing, these customers have greater requirements than a calling card service or even a residential VoIP service.  This is a sophisticated service for demanding businesses whose communications system is a key component of their day-to-day operations.  To take advantage of this market requires service providers to address some critical operational and marketing issues:

1)   Deployment of a rich application platform that is simple to use, providing a streamlined solution designed for competitive providers.  Solutions that require significant development or integration can compromise margins and time to market.

2)   Ability to support a reseller and agent channel.  There are a lot of SMBs, so the ability for a service provider to extend their reach will better position them for success.

3)   Ability to support a high reliability service.  SMBs are accustomed to the reliability of traditional carriers, and though they want the benefits of new VoIP capabilities, these businesses are also dependent upon their communications systems to generate revenue - they are business critical.

Even the equipment providers are reacting to this opportunity as can be seen by the recent announcement of a platform designed specifically to address the SMB market: 'IPsmarx Introduces MarketReady IP-PBX And SIP Trunking To Its All In One Softswitch Solution' http://bit.ly/9JspNV.

For competitive service providers of all types, the best opportunity for success in this economy is focusing on the needs of the SMB market now, and ride their growth as the economy recovers.