SIP Trunking: The New Normal in the Cloud Era

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1 SIP Trunking: The New Normal in the Cloud Era

2 Executive Summary As IP and VoIP technologies continue to mature and the thirst for cloud services escalates, the SIP Trunking market is growing rapidly, driven by increased customer awareness of its benefits. Essentially, the early-adopter, proof-of-concept phase has ended, and the technology is moving into a mainstream, new normal deployment phase across all verticals. And that translates into an unparalleled opportunity for channel partners, vendors and service providers. SIP Trunking, which aggregates IP voice and data (be it IP PBX or cloud-delivered) onto one, scalable IP connection to the outside world, offers several benefits to businesses. For one, it s cost-effective, offering savings of up to 90 percent over legacy solutions in an average installation. And secondly, it s the natural bridge architecture for cloud/hosted services and applications, able to flexibly and natively support any customized applications environment that a company would like to develop. In the cloud era, companies are more likely than not to embrace the next generation of hosted services, becoming comfortable with VoIP access and unified communications as being secure and reliable. As a result, SIP Trunking is enjoying greater adoption across businesses of all sizes, from small retail locations to multi-site conglomerations: in fact, it s expected to reach a penetration rate of 58 percent of businesses within the next two years 1. Vendors, service providers and channel partners thus have critically expanded growth opportunities to leverage SIP Trunking as they develop sustainable cloud communications strategies for their small and medium-sized businesses (SMBs) and enterprise clients. Knowing how and where the offering fits into the conversation will be the linchpin for success; to that end, this white paper discusses SIP Trunking s evolving role in the communications landscape. 1 SIP Trunking and SBC Strategies: North American Enterprise Survey, Infonetics Research, March 2013

3 SIP Trunking: An Evolving Market SIP Trunking is a flexible solution for connecting enterprise IP PBXs to communications networks and aggregating various services over a single IP connection, and has become a high-growth market in flux as businesses seek greater communications flexibility, business continuity and cost savings. Taken together, these drivers have pushed the technology across the early adopter chasm into the mainstream. For channel partners and service providers, the market is reaching a cascading tipping point of opportunity. According to Infonetics Research 2, SIP Trunking market growth jumped 83 percent in 2012 from the previous year. And going forward, the percentage of companies using SIP Trunking is expected to grow from 38 percent in mid-2012 to 58 percent in In comparison, the percentage of companies using previously ubiquitous T1 lines will slip from 71 percent today to just over half (55 percent) in 2015 a marked decline for a two-year period. A Cost-Effective Alternative It s important to highlight that SIP Trunking s cost savings can be significant: compared to a $500 per month T1 line, a SIP trunk can save a customer up to 90% in recurring long-distance costs, according to Net2Phone customer data. SIP trunks also allow a PBX to be connected natively and directly through a standard Ethernet connection, eliminating the need for PSTN gateways or expensive TDM interfaces to be added to the mix these can cost thousands. As businesses migrate to an end-to-end IP-based UC infrastructure internally, VoIP access and SIP Trunking services become a logical choice, because they enable organizations to eliminate legacy telecom interfaces altogether. Further simplifying matters, SIP trunks bundle voice and data together across one Internet connection, which includes local and long-distance. And, because SIP trunks are virtual and provisioned via existing (managed) Internet connections, adding new trunks or sessions is a point-and-click process that eliminates expensive installations and minimizes/eliminates cut-over time. Thus, users can quickly add capacity when needed. It s also naturally redundant: from a business continuity perspective, capacity is not beholden to a physical circuit. 2 Ibid.

4 Unlike legacy options like PRIs and T1s, SIP trunks can scale capacity elastically, even in incremental call session chunks. A PRI on the other hand comes in one size: a bundle of 23 lines. Customers that require fewer lines than that must still purchase the full bundle at a full cost; but with SIP, they simply pay for what they use. Multi-site companies are also becoming a major driver for SIP Trunking installations, because SIP enables streamlined, unified management of enterprise-wide communications across locations. A centralized IP PBX connected by SIP Trunking in one or more locations can be used to deliver VoIP services to networked locations (connected by MPLS, IP VPN or other existing WAN connections), so that voice calling capacity can be dynamically shared across the enterprise. It also allows for real-time load balancing across the network to handle fluctuations in call volume, say for a group of contact centers. This architecture also eliminates the need for each branch to install and maintain its own phone system and dedicated circuits to the PSTN; and, because all calling is on-net within the networked sites, longdistance charges are eradicated. The Cloud Services Effect Cost savings are a big benefit, but SIP Trunking s value proposition is being further driven by a rise in cloud-based services, unified communications, and the consumerization of IT. SIP Trunks offer an end-to-end native IP environment that allows businesses to better support and implement cloud-based voice, data and video applications. That means that resellers and other partners gain the opportunity to partner with application service providers and carriers to bundle and deliver other mission-critical (and high-margin) communications and SaaS services beyond commoditized connectivity. For instance, partners can offer SIP Trunking as part of a hosted VoIP or unified communications (UC) package to improve business continuity and reduce costs. To put the hosted opportunity in perspective, the global VoIP services market, including residential and business VoIP services, totaled $63 billion in 2012, up 9 percent from Due to continued demand for enterprise cloud-based services, hosted VoIP and UC services revenue in contrast grew 17 percent in 2012 from 2011, almost double the growth rate of the broader market and seeing the most expansion of any segment 3. 3 VoIP and UC Services and Subscribers, Infonetics Research, May 2013

5 Solutions Providers also can roll out additional features like mobility extensions, presence and video chat using that same SIP trunk. And many channel partners are also bundling office applications like hosted Exchange and other software-as-a-service (SaaS) offerings with SIP Trunking. The result is a prime opportunity for a channel partner or service provider to engage businesses in a consultative conversation about the end user s specific business requirements, rather than remaining mired in a price-based commodity discussion. It s a bit of a necessity as well: as SIP Trunking volume goes up, pricing comes down, so in terms of overall revenue generation, ecosystem players must be able to find competitive differentiation with creative bundling of data and voice services in ways that make the most sense to the customer. The Net2Phone Difference When it comes to individual solutions, Net2Phone s SIP Trunking is packaged to take advantage of the industry trends that give wings to the market. Net2Phone provides a variety of low-cost, high quality SIP Trunking solutions to suit the needs of any size business, with business VoIP phone service that s certified by Asterisk, Digium, Elastix, Avaya, Cisco and compatible with many other SIP-based IP PBXs. It gives resellers and other channel partners the tools to craft on-demand, customized packages to support not just business voice needs but enhanced collaboration and unified communications applications. The company routes millions of minutes daily over data networks, saving these businesses up to 90% off traditional long distance costs. Net2Phone doesn t charge per port or per concurrent call as many SIP Trunking providers do rather, fully customizable pay-as-you-go or bucket of minutes calling plans are on offer. The company doesn t charge monthly set-up fees, and it also includes one free U.S. DID with every account. With more than 800 carrier interconnects worldwide at its disposal, Net2Phone offers low rates globally and offers customers the ability to have a virtual presence from more than 40 countries and 300 global cities. Considering the bandwidth upgrades that have taken place all over the world, Net2Phone can route calls internationally at less than 50kbps, to support excellent quality for global calling for much less financial outlay than traditional calling. All routes are platinum routes, carried on Tier 1 carrier networks. From a channel perspective, Net2Phone supports agents and also offers a reseller model that gives partners the opportunity to manage and sell SIP Trunking in a white-label environment, on a virtualized basis eliminating the need to invest in hardware or software to support the rollout. Typically, trunking providers need a switch, interconnect agreements and billing infrastructure in place to even begin to get started. Net2Phone offers a virtual wholesale model that allows resellers to create and provision individual SIP trunks as needed on the Net2Phone architecture, with a full management wrapper for pricing and billing, and the support of a 24/7 Network Operations Center (NOC). Partners

6 can sell under their own brand, and Net2Phone also offers an end-user portal that can be white labeled as well. Partners simply log into the online system, which offers a rate deck with wholesale pricing globally that resellers can select and mark up as needed. They can then offer prepaid and calling card applications as well as PBX connectivity. Net2Phone, as a key strategic partner to resellers and solution providers, will also work with the channel to provide customized bundles of minutes around specific key locations. The Channel Partner Opportunity As the world moves inexorably towards ubiquitous mobility and cloud-delivered communications and services, research shows that a majority of organizations are turning to channel partners to help them source an all-in-one solution. As a result, software-as-a-service (SaaS) vendors consider channel partners to be strategically important to growing revenue. A full 66 percent of companies in a survey by Forrester Consulting 4 consider VARs, resellers and other channel partners as having a critical role in growing the market for SaaS and cloud services. More than one-quarter of [end user] firms are centralizing the procurement and management of SaaS cloud applications, Forrester found. Consequently, these firms are changing their sourcing strategy, looking to solution partners who can supply and centrally manage the entire end-to-end SaaS portfolio. That of course means that channel partners can also bundle connectivity solutions like SIP Trunking to create an end-to-end communications solution. The study accordingly forecasts a shift of the revenue mix between direct and indirect channels in the future, with prioritized technology investments on the part of suppliers to support channels and equip them to build long-term relationships with end-customers. The results of the Forrester survey illustrate that channels are more important than ever in today s highly competitive market. As both selling online and cloud-based services have become ubiquitous, reseller channels can drive the trust, context and value-added services that ultimately sustain revenue growth. 4 As SaaS Goes Mainstream, ISVs Invest in Channel Support Tools, Forrester Research, April 2013

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