Service Providers Risk Losing SMB Customers by Not Selling IP Comm

The benefits of IP communications such as find-me, follow-me are finally finding their way to the SMB market. Moving the market are IP telephony equipment vendors such as Cisco, Avaya, 3Com and Shoreline that are aggressively investing in R&D, sales and marketing, and channel development to seed the market with their solutions.

Playing catch-up are service providers that have unsuccessfully in previous years tried their hands at offering IP communications—usually in test trials—but failed to connect with SMB customers. Undeterred, service providers continue to strategically invest in these services. Good examples are Verizon in partnership with GoBeam (in Chicago), SBC, MCI and AT&T. Smaller players include Vonage, Covad and Cbeyond.

The biggest dilemma for both equipment vendors and service providers continues to be figuring out how to sell SMBs the key benefits of IP communications such as improved employee productivity, better customer service and more satisfied employees—when they’re intangible and difficult to quantify and explain.

The good news is demand for these services is growing quickly.

Survey Findings
In a 2002 report, the Yankee Group explained that trends in mobility, broadband adoption and growing dependence on a mixed communications environment (wireline, wireless, e-mail, IM, etc.) contributed to the SMB market readiness for IP communication services 2 years ago. The interest in IP-based communications heightened; these services now appeal to a broader set of SMBs. Receiving voicemail, e-mail and fax in one box using a single device and fax to PC applications garnered broad interest from all industry firms. Exhibit 1 shows that 50 to 65 percent of SMBs are interested in this application, which compares with 33 to 56 percent in 2002.

Although business size is an important segmentation, other attributes that identify prime candidates for different IP communications are:

• Industry verticals: An SMB’s communications needs depend greatly on the work employees perform. For example, 58 and 43 percent of service workers in the technology and healthcare fields, respectively, find instant messaging beneficial to their business, compared with 38 percent of construction businesses whose contractors are constantly on the go.
• Telephony infrastructure: Communications-intensive SMBs that adopted, or will adopt, PBXs and key systems are familiar with using some call management applications. This segment is the low-hanging fruit for IP communications. Phone equipment vendors are doing a good job marketing IP communications solutions to this group. SMBs with multiline phones have selective interest in applications such as retrieving voicemail, e-mail and fax using one device, fax-to-PC, and accessing contact, calendar and e-mail from a PDA or cellphone. They are less interested in Webconferencing and instant messaging.
• Telephony services: T1 SMB customers are the prime targets for IP communications because they are at least 8 percentage points more interested in these applications. SMBs with analog lines are mainly interested in basic IP communication features such as fax-to-PC, single mailbox and accessing contacts, e-mail and calendar from mobile device versus Webconferencing or instant messaging.

• Telephony equipment vendors prompt the use of IP communications features. Today, cost savings rather than new communications features motivates SMBs to adopt IP telephony. Before the purchase, the productivity benefits of IP communications such as find-me, follow-me services are nice-to-have features and rarely on the list of purchase motivators. However, after purchasing, 66 percent of early adopters cite the need for unified communications solutions as the top reason for adoption, outranking need to reduce cost. Once the vendors seed the SMB with access to these applications, employees find these applications indispensable.
• Service providers face challenges selling IP communications to SMBs. Selling IP communications as a standalone service has proven difficult for most service providers, particularly when SMBs cannot justify paying extra fees for the promise of improved productivity. Service providers must integrate these IP features into the SMBs’ overall communications experience. For example, for a trial period, automatically send voicemail to the SMB’s e-mail box to expose end users to these features quickly.
• Service providers risk losing customers if carriers continue to move slowly on IP communications. With a growing number of SMBs adopting increasingly affordable SMB-targeted IP telephony solutions from vendors such as 3Com, Cisco and Avaya, carriers are losing opportunities to up-sell value-added voice applications to SMBs. To broaden the addressable market, carriers should position hosted voice applications as a supplemental solution to premises-based options. To also prevent churn, carriers—particularly CLECs—need to offer high-value, loyalty-inducing applications such as IP communications applications, particularly if they cannot add wireless voice to their SMB bundle. Wireless is becoming a key differentiator.

• Adopt IP communications to help employees simplify and manage their communications while traveling, at home and at a branch office—which will improve their productivity and morale. IP communications can transform the agility of your firm. Broadband, wireless and VPN technologies have made your firm’s employees more mobile.
• Ask for test trials of IP communications from your service provider. If your service provider offers IP communications, ask to trial it and become familiar with the application before you commit to paying an extra fee.