Five Implications that make Hosted VoIP Good for your Business

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1 White Paper Five Implications that make Hosted VoIP Good for your Business Contents Executive Summary....2 Five Business Implications for Hosted VoIP...3 Implication #1 - Size Doesn t Matter Anyone Can Do It....3 Implication #2 - You ll Get Closer to Your Customer...4 Implication #3 - You ll Get More Leverage as a Customer for Telephony....5 Implication #4 - Cloud Is a Better Business Model for VoIP....6 Implication #5 - Growth-friendly for Your Business....8 Conclusion....9 About Ziff Davis B2B Ziff Davis B2B is a leading provider of research to technology buyers and high-quality leads to IT vendors. As part of the Ziff Davis family, Ziff Davis B2B has access to over 50 million in-market technology buyers every month and supports the company s core mission of enabling technology buyers to make more informed business decisions. Copyright 2013 Ziff Davis B2B. All rights reserved. Contact Ziff Davis B2B 100 California Street, Suite 650 San Francisco, CA Tel: Fax: marty_fettig@ziffdavis.com

2 Executive Summary When considering VoIP for your business, there are basically two choices premise-based or cloud-based. Most businesses choose the former, since it is the same deployment model as the legacy phone system that s about to be replaced. Many SMBs, however, find the new technology a bit daunting, and with limited IT expertise, will elect to defer this move and stay with their legacy system for as long as possible. For these situations, hosted VoIP is the natural choice, since it takes that obstacle away, making it easy for any business to adopt VoIP, regardless of how much or how little IT expertise they have. The challenge for SMBs, however, has been the historical lack of hosted options available to them, especially for smaller scale operations. That has changed considerably in recent times, especially with the rapid rise of the cloud as a bona fide solution for almost any IT requirement. Today, SMBs have a great variety of hosted VoIP options to choose from, and there has never been a better time to finally move on from legacy telephony. While most businesses are attracted to VoIP solely for the cost savings, there is actually a broad set of benefits to consider. The decision to adopt hosted VoIP will trigger a series of implications that will be good for your business and should change the way you think about the strategic value of communications technologies. Saving money is important, but our view is that the five implications addressed in this guide will have a greater long-term impact on the success of your business. After reading this guide, we hope and expect that you will agree. ziffdavis.com 2 of 9

3 Five Business Implications for Hosted VoIP To understand the value of this guide, our research has focused on five ways that hosted VoIP has business-level implications. In other words, your decision to go hosted needs to be viewed as a direction that will deliver more than just cost savings for the business. In other words, hosted VoIP should be seen as an enabler for business-level benefits that impact bigger things, such as how you manage employees, engage with customers or plan for growth. These factors would not be part of a discussion around legacy telephony, and our intention here is to show why they should be front and center with hosted VoIP. Implication #1 - Size Doesn t Matter Anyone Can Do It In many regards, size does matter in business big time. Bigger doesn t always mean better, but generally that translates into market power and competitive advantage. SMBs, of course, are at the other end of the spectrum, so they have to find other ways to stay in the game. Every adversary has a weakness, and when you find it, you exploit it as best you can. For SMBs, your natural competitive advantage is agility, and being able to jump on opportunities or trends faster than enterprises can. Larger competitors cannot respond as quickly, and that should be your first line of attack. You don t always have to exploit weaknesses, however, to stay competitive. In some cases, all you really need to do or can do is to match your competitors. Beating your competitors often requires investments in time, money and resources luxuries SMBs don t always have. Not only that, but there s no guarantee that these actions will in fact, succeed. Even if they come up a little short, you generally only get one shot. To win, you have to give it your all in that first volley, but if it just bounces harmlessly off their armor, you re in trouble. At that point, you ve shown your hand, and now the competitor knows you cannot exploit that weakness. Not only have you been exposed, but the competitor now knows your vulnerability, and can turn the tables far more forcefully. This is the moment when you have to decide whether to fold your hand, concede defeat and be acquired if they so choose, or retrench and find another battle to fight that you have a better chance of winning. Clearly, this is a high risk strategy, and a far safer bet is to pursue options that put you on equal ground with larger competitors. In many areas, this is certainly attainable, and since this outcome poses little immediate threat to them, they ll hardly notice. Hosted VoIP is one of those opportunities, and the good news is that any size of business can deploy it. This point is not lightly made, simply because until recently, hosted VoIP wasn t such a versatile option for SMBs. For a variety of reasons, these offerings weren t practical to extend to the lower end of the SMB space. These customers were just too small and offered little upside either in terms of adding new services or subscribers. Technology evolution has a lot to do with what s different now, especially in terms of the cloud being so ziffdavis.com 3 of 9

4 widely adopted. Delving into the specifics of these changes is beyond the scope of this guide, and the important implication is that for a change, size doesn t matter when it comes to hosted VoIP. This is important to note because in the absence of hosted options, many SMBs have held off shifting to VoIP because of the perceived complexities. SMBs tend to have limited IT capabilities and are either not willing or able to take on a new technology such as VoIP. For businesses that are very comfortable with TDM, there can be a natural hesitation when considering VoIP s difficult history. If you re not aware of how much VoIP has evolved, this is totally understandable, albeit misplaced. More relevant is the hesitancy around adapting your network to VoIP and implementing a phone system based on new technology. A premise-based phone system is rather straightforward, but going with a premise-based VoIP phone system will be too much of a change for some SMBs. Hosted VoIP is designed specifically for IT-challenged businesses - among other things but if those options aren t there, it s easy to see why you would choose to stay with your legacy phone system for as long as possible. Today, there is a diverse range of hosted VoIP offerings for SMBs of all sizes, even SOHO operations. We would need another guide just to explore those options, and the main message here is that the size of your business is no longer an obstacle for adopting VoIP. Implication #2 - You ll Get Closer to Your Customer With legacy telephony, decisions to buy, maintain or expand the system were usually utilitarian. The focus was usually around extending dial tone to employees at their desks and maybe adding some new features. Since these phone systems were self-contained, running over a dedicated voice network, there wasn t any need to consider the value of telephony in the broader context of your overall communications needs. Furthermore, the focus was on internal needs so employees could communicate with each other. Once you have VoIP, that equation changes and expands considerably, and that s where the business implications come into play. Instead of one employee calling another employee on their desk phones, one or both ends of that call could take place on a PC or a mobile device. Instead of making/taking all your calls at your desk, you could be anywhere there s access to a broadband connection. The scope can be extended further when those VoIP calls can be woven into a broader fabric of communications in real time. Even employees with modest degrees of being tech-savvy can manage multichannel sessions, either with the same person or using multiple modes with multiple parties. Judgment will not be passed here as to whether multi-tasking helps or hurts productivity, but at minimum, VoIP opens up the ways we can communicate. ziffdavis.com 4 of 9

5 Now let s add another layer by considering external communications, specifically with your customers. Everything cited above applies here too, which means more ways that employees can engage with customers. Aside from the fact that VoIP generally means these are free calls, it also makes it easier for customers to get in touch with you. Our research tells us that customers are often ahead of businesses in terms of technology adoption. This means they have heightened expectations about communicating with you, and legacy telephony won t get the job done any more. This is important in that today s business environment has never been so competitive. While globalization has helped businesses lower costs, it also means more competitors chasing a finite set of customers. Whatever the product, consumers have lots of choice and can easily go elsewhere. Loyalty is becoming a thing of the past, and customers can leave you for seemingly trivial reasons. The best way to mitigate against this is to be as customer-centric as possible. In many sectors, the products are becoming commodities, and the best way to differentiate sometimes the only way is through customer service. Whether or not you have a contact center, VoIP opens up many avenues to create dialog with customers. A good starting point for this is to use the tools that they use and reach them where they are. Increasingly, this means engaging when they re on their mobile devices or PCs. In those environments, VoIP can become the basis of a richer communications experience, especially when you can mix in modes like chat or video. This is well beyond what legacy telephony can do, and adds another layer of business value to your buying decision. To be fair, you can do many of these things with premise-based VoIP, but only if you have the IT expertise to manage all of these modes. A key benefit of the cloud is that your hosted provider can do all of this for you, plus add more sophisticated tools that provide business intelligence about your customers. This takes us into the emerging field of Big Data and predictive analytics, but that assessment needs to be considered in a separate guide. Implication #3 - You ll Get More Leverage as a Customer for Telephony Buying hosted VoIP is quite different from legacy telephony. In general, VoIP is more about buying a service than a product, especially when it s cloud-based. Legacy phone systems have long been dominated by a few telecom vendors, with even less choice for SMBs. Barriers to entry for hosted VoIP are low, which means more offerings to choose from. This field is populated mainly by CLECs Competitive Local Exchange Carriers who are in business solely for this purpose, and came into being largely as a result of telecom deregulation. Joining them are hosted providers from outside the telephony space, with cable operators being the most prominent. Some have been very successful catering to ziffdavis.com 5 of 9

6 SMBs, due largely to the distinct advantage of running their own networks. Another layer comes in the form of providers that are entirely Web-based with VoIP offerings that don t even require a phone system. These providers tend to be small, highly virtual and heavily focused on the low end of the SMB market. All of these factors point to a positive implication for your business. Before VoIP, SMBs had little market power with telcos and their needs were largely an afterthought. With no alternatives to incumbents, SMBs had to live with being overcharged, underserved and largely ignored. Not surprisingly, once options became available, these customers were the first to move on, and we all have VoIP to thank for that. Now that hosted VoIP has matured to the point of being SMB-friendly, you now have a wide variety of suitors to choose from. Many of these providers especially those who are Web-based know that you re anxious to move on from your incumbent, and are hungry for your business. Whereas incumbents saw SMBs as a collection of small customers that didn t make them much money, hosted VoIP providers see this as a large market with a common set of needs that aren t being met by big telcos. This means that for a change, you have the leverage as a buyer, and can choose a provider that truly meets your needs and is competitive on price. In this case, having choice is a good thing, and as a buyer of telephony services, this is probably new for you. In that context, hosted VoIP allows you to make decisions from a position of strength instead of weakness. Not only will you get more for your money, but you ll likely be receptive to exploring the more advanced capabilities of hosted VoIP that can add even more value to your business. You should also consider that this newfound leverage goes beyond buying VoIP service. When buying a premise-based VoIP system, the process is the same as when you bought your legacy system. The phone system was bought from a telephony vendor, and the service was bought from your incumbent carrier. With many hosted VoIP providers, the phone system is actually secondary to the service. Since most of the intelligence with VoIP resides in the network (the cloud) instead of the phone system, there s less need to invest in a costly phone system. As such, the hosted provider can provide a complete VoIP solution the phones and the service all covered in a single monthly cost for each subscriber. You don t have to follow this path, but if you do, there s additional leverage to be realized from buying both pieces from the same provider. Implication #4 - Cloud Is a Better Business Model for VoIP In addition to looking at the business benefits of the service, along with how it could improve customer relations, there is a broader positive implication in terms of the underlying business model. Legacy telephony has always been a Capex decision, whereby the phone system was capitalized. Since this form of telephony was hardware- ziffdavis.com 6 of 9

7 based, it was viewed as a valuable physical asset, to be amortized over a long period of time, usually 10+ years. This scenario may be more familiar for enterprises, but it certainly holds for many SMBs. The Capex model was appropriate for telephony, not just because the hardware required a major investment, but also because telephony itself was highly valued by the business. Before VoIP, business communication was telecom-centric, and as such, the high cost wasn t questioned. Just to clarify, this is also before mobility became part of the business landscape, so nothing really could rival the phone system as a tool for getting things done. If this is the world you know, then hosted VoIP has a lot to offer. VoIP in general is less capital-intensive than TDM, but hosted in particular is entirely Opex-based. As such, not only will hosted VoIP be attractive for its lower usage cost, but also for its budgetfriendly acquisition cost. The Opex model means that VoIP is another line item in the budget, and relative to other operating costs, it should be pretty minor and easier to justify for approval. Not only that, but hosted VoIP delivers cost certainty. Hosted providers price the service on a monthly fee per subscriber, which is fixed other than for international toll calls that fall outside most service packages. All of this adds up to lower telephony costs, but there s more to consider in terms of this being a better business model. VoIP is still a developing technology, and there is a lot more innovation to come. This is a major contrast with TDM, which has hardly evolved for over 30 years and has limited flexibility to keep pace with the times. VoIP is both software and Internet-based, making it highly adaptable for integrating with new technologies. All of this points to the advantages for tying up as little capital as possible, which is a key virtue of the Opex-based model. Another related benefit of the cloud is service continuity, even under adverse circumstances. Wherever you live, you have likely been touched recently by extreme weather, and these occurrences are becoming part of our everyday reality. While legacy telephony functions under almost any condition, premise-based VoIP is more vulnerable to power outages, which are becoming more frequent these days. Hosted VoIP, on the other hand, is operated from data centers, usually with redundant locations for always-on reliability. Premise-based VoIP cannot match this, and if you view business models in terms of what s best for ensuring operational continuity, cloud is simply a better way to go. No matter what conditions are keeping employees from getting to work, hosted VoIP ensures your business won t miss a beat, as least so long as they have broadband access. Finally, cloud economics is another factor that favors hosted VoIP. Over time, one can certainly argue that renting is more expensive than buying. Hosted VoIP hasn t been ziffdavis.com 7 of 9

8 around long enough to support that thinking, but at some point, it will be a reasonable position. However, that assumes current prices will stay static or even increase. Our position is that as the cloud gains more critical mass, the cost of services like hosted VoIP will in fact decline, especially relative to maintaining a premise-based solution. If so, the business case for hosted VoIP will be even further validated. Implication #5 - Growth-friendly for Your Business This may the most difficult implication to envision, but perhaps the most important one for your long-term plans. When your legacy phone system was bought, it wasn t viewed as an investment to help drive business growth. Rather, it was a capitalized asset that quietly went about its business, but not looked at for much more. Presuming your business is planning to grow over time, hosted VoIP offers some distinct advantages over premise-based alternatives. First is the idea that the cloud can generally scale well enough for any SMB. You may start with VoIP on a limited basis for pilot testing, and if it goes well, the next step is likely a company-wide deployment. If so, there will come a point where the service needs to make a major jump in scale, and given VoIP s real-time nature, this could be a real challenge. Early on, valid concerns were raised about the cloud s ability to scale, but for most SMBs, that should no longer be problematic. Building on that, businesses want to grow as cost-effectively as possible. In many cases, this means decentralizing the workforce and making greater use of home-based employees. Not everyone can work effectively that way, but for those who can, hosted VoIP ensures full-featured service with virtually no down time. In other cases, the business may choose or need to grow by adding branch offices. This will be especially important when entering new markets or lines of business, and physical presence is absolutely needed. By adding SIP trunking to hosted VoIP, you can extend the full functionality of a phone system out to these locations without adding costly infrastructure. Aside from lowering your expansion costs, hosted VoIP can be deployed much faster than any premise-based phone system. Furthermore, SIP trunks can be deployed with greater flexibility that TDM, providing a further cost saving. Legacy trunks must be purchased in fixed increments, meaning that many businesses especially SMBs pay for more trunking than they need. SIP trunking, on the other hand, can easily be scaled up or down to provide only the needed amount at any point in time. This ensures your new offices are always right-sized in terms of telephony spend, regardless of whether you grow quickly or slowly. Another key aspect of being growth-friendly is the idea that VoIP is ever-evolving. Unlike TDM s static nature, IP-based telephony will keep adding new features and capabilities. By extension, this will increase its value, especially as more people use VoIP. Whatever your vision of VoIP is today, the service will be far more interactive ziffdavis.com 8 of 9

9 five years from now, and to benefit from this, you must be agile enough to adapt what s coming into everyday workflows. Hosted VoIP is the best way to ensure that all the latest innovations will work seamlessly on your network and filter down to your employees. You can achieve the same results with a premise-based solution, but only if you have adequate IT resources. Conclusion When considering hosted VoIP, you really need to look beyond the dollars and cents issues. Once you ve decided to move from legacy telephony to VoIP, it s understood that you ll be saving money. After that, the main choice is whether to remain premise-based or adopt an entirely new deployment model with hosted VoIP. A strong case can be made either way, but our view is that most SMBs are better served with a hosted solution. The cloud seems to be everywhere today, but that alone is not sufficient for adopting a hosted model. After all, if everyone does this, how will you achieve competitive advantage? VoIP providers can certainly make early gains with aggressive pricing, but that s generally not sustainable. As a buyer, SMBs need to be wary that the lowest price is not the ultimate arbiter of value. To get beyond this, our guide has examined five business-level implications for hosted VoIP. Cost savings is a given, but there are other factors that drive good decision-making for SMBs. By incorporating these implications into your thinking, we are certain you ll make decisions that are based on more than the obvious. Most of your competitors won t get past the obvious, so we hope you view this as an opportunity to be proactive with hosted VoIP and use it in ways that help differentiate your business from those that stick with legacy phone systems or only move on to premise-based VoIP. ziffdavis.com 9 of 9