SMB Buyer s Guide to Unified Communications A T3i Group White Paper Terry White Senior Program Director T3i Group twhite@t3igroup.com Tel: 973.602.0115 www.t3igroup.com
SMB Buyer s Guide to Unified Communications By Terry White, Senior Program Director T3i Group What is Unified Communications (UC)? There are many different definitions of Unified Communications. T3i Group has adopted the following definition, which we use in our market research studies, reports and whitepapers: Unified Communications is a set of applications which run in conjunction with an IP Telephony system (IP-PBX) for the purpose of improving specific user productivity, reducing costs or streamlining business processes. The following is a list of the most common types of UC applications: Instant messaging Unified messaging (integrating voice mail with e-mail) Conferencing and Collaboration (including audio, video and web) Teleworker (same telephony work environment at home as in office) UC Client (a PC-based application that provides a consistent user interface for accessing the features of IP-PBXs and UC applications) Mobile UC Client with mobile integration (single number for desk and mobile phone, with PBX dialing and feature access) Presence (recognizing user presence and making it available within applications and to other users) T3i Group has been conducting primary market research studies for several years on the demand for IP Telephony (IPT) and UC applications. In these studies we survey both Enterprise and SMB (Small and Medium-sized Businesses) decision-makers. This whitepaper will analyze the buying behavior of the SMB market consisting of companies or institutions with between 5 and 500 employees. There are approximately 2.4 million U.S.-based companies within that employee size range. Market Segmentation Based on SMB Buying Behavior for UC Our market research studies have identified two different SMB segments with respect to their buying behavior for IPT and UC: Basic Communications These SMBs expect their IPT/UC systems to deliver core communications very cost effectively Business Value These SMBs expect their IPT/UC systems to enable them to improve the way they do business 2
We use our market research surveys to measure the size of these segments and to track their adoption rate for UC applications. For example, our surveys for the past several years have posed the following question to SMB decision-makers: Do you agree that UC applications which are enabled by IP Telephony can deliver business value by significantly improving key business processes? The SMBs in the Business Value segment were those that Strongly or Very Strongly Agreed with that statement. At the end of 2007, the Business Value segment represented 57% of U.S. SMBs. This was up from 46% one year earlier. The Business Value Gap However, only 23% of these Business Value SMBs indicated that they had begun to implement UC applications at the end of 2007. So, there is a clear gap between the perception of business value and actual execution. If Business Value SMBs strongly believe that UC apps can deliver business value, why were 77% of that Business Value segment not using any of them? The top four reasons for not implementing UC applications, according to our survey of the Business Value SMBs, were: Haven't started implementing IP Telephony yet Solutions are targeted at bigger companies Vendors lack understanding of our business issues Vendors haven't proposed any This indicates that many of these Business Value SMBs have been delaying the implementation of IP Telephony systems until they figure out how UC applications on those systems can help them improve some business processes. These Business Value SMBs are looking for guidance from their IPT/UC vendors, but are finding that many of these vendors lack the understanding of their business issues or are targeting their UC solutions at the Enterprise market instead of at SMBs. Table 1 shows the product lines that the major IPT vendors are targeting at the Enterprise market and the two different segments of the SMB market. It also indicates which vendors enable the Business Value SMBs to access the same comprehensive set of UC apps that are available for Enterprise customers. This table indicates that Mitel is the only vendor with a flagship product line that can effectively scale from Small Businesses through Large Enterprises. The UC Apps that run on their Mitel 3300 IP Communications Platform product line are also being adapted to run on the Mitel 5000 Communications System which they acquired in the merger with InterTel. In limited cases, some of the other vendors do provide a few UC apps that are common among their different IPT platforms, but Mitel is the only major vendor that provides full UC access for both enterprises and SMBs. 3
Table 1. Telephony/UC Product Positioning Enterprise vs. SMB Vendor Enterprises Business Value SMBs Basic SMBs 3300 ICP 3300 ICP SX-200 ICP Mitel 5000 5000/3000 NEC Nortel Univerge SV8500 UX 5000 DSX Univerge SV7000 Univerge SV8000 UX 5000 CS 1000 BCM BCM SCS 500 Norstar Cisco Unified Communications Manager UC 500 SPA 9000 Unified Communications Manager Express UC 500 Avaya Communications Manager IP Office IP Office Partner Legend: UC Apps are common across the IPT Product Lines for Enterprise and Business Value SMBs Table 1 confirms that most IPT/UC vendors are targeting their flagship set of UC apps at the Enterprise market and do not offer the same depth of applications on their SMB product lines. Mitel is the only exception among major IPT vendors that have extended enterprise UC applications to address the unique needs of small business. Business Value SMBs can access Mitel s full set of UC apps from either the 3300 ICP or 5000 product lines. It is also interesting to note that Mitel was the 2007 market share leader in IP Telephony line shipments to the U.S. SMB market. (See Figure 1.) It would appear that Business Value SMBs were not delaying their implementation of Mitel IPT systems due to the lack of UC Apps that could deliver business value. 4 Figure 1. 2007 Market Share of IP Telephony Line Shipments -- U.S. SMB Market Vendors SMB Mitel 15.5% NEC 14.1% Toshiba 12.9% Nortel 12.5% Cisco 11.9% Avaya 8.2% ShoreTel 7.7% 0% 30%
What Do We Mean by UC Business Value for SMBs? Many industry analysts have divided the business value of Unified Communications into the following two categories: Productivity Benefits UC applications, such as instant messaging, teleworker and collaboration can improve worker productivity Integration Benefits Integrating UC functionality into business operations can significantly improve key business processes However, actual execution to achieve these benefits has been slow. SMBs have discovered that simply making their overall worker population more productive through the use of UC apps does not always translate into actual cost savings. SMBs have also been reluctant to hire consultants and systems integrators to define and implement significant business process improvement projects involving UC solutions. Often these consultants and integrators are focused on enterprises and their solutions are too expensive for SMBs. In some cases, UC can also result in direct cost savings not related to process or productivity (power savings for example). T3i Group has found that productivity improvements can be converted into cost savings by targeting UC solutions at certain types of workers (roles), whose business requirements can be defined and productivity improvement can result in quick ROI. Some IPT/UC vendors, such as Mitel, have achieved initial success in selling the business value of UC to SMBs by using a focus on vertical markets and business roles to demonstrate quantifiable cost savings. The following are actual examples of SMB vertical markets in which Mitel has used this approach to deliver business value: 1. Support Services Type of Business: Outsourcer for network infrastructure and business apps Business Problem: High cost to provide training and technical support UC Solution: UC Client, Mobile Integration, Real- Time Audio/Web Conferencing, Teleworking, Unified Messaging, Automatic Call Distribution (ACD) Target Users: Tech support specialists Business Benefits: Significantly reduced travel costs; improved customer training enabled tech support specialists to serve more customers By using Mitel s Audio and Web conferencing tools to deliver customer training, the company has improved the efficiency of tech support staff by 300 percent, along with a substantial reduction in travel costs. Not only was the company able to recoup its Unified Communications solution investment in just four months, they were able to immediately serve more customers with their existing number of tech support resources. 5
By using Mitel s mobile phone integration, calls are routed to tech support s office phones and twinned to mobile phones ensuring that tech support specialists can respond to customer calls even when they are away from their desks. This improves customer service by ensuring customer calls are answered immediately and lowers mobile phone costs since many technical support calls are taken on desk phones or are moved from mobile phones to desk phones with a single key press keeping calls off the mobile phone network. 2. Consulting Services Type of Business: Education consulting Business Problem: Slow customer service when consultants were out of office UC Solution: Unified Communications Client Target Users: Consultants Business Benefits: Improved employee productivity, enhanced customer responsiveness, reduced travel costs With over half its workforce located in geographically dispersed offices and often in customer offices, the organization was looking to enable closer collaboration between team members. Through the deployment of a Unified Communications client to all employees, everyone in the organization was provided with real-time access to presence information, secure instant messaging, conferencing and collaboration capabilities. Coworkers across the country were able to quickly connect in a secure environment, share applications and collaborate on documents, presentations and files resulting in enhanced productivity and faster resolution of customer issues. The organization halted its original plan of contracting for on-demand audio and web conferencing services. In addition, improving communication and sharing between employees hundreds of miles away from each other significantly reduced business travel between branch offices and headquarters. The result was a cost savings in excess of $10,000.00 per employee annually, along with an unparalleled return on investment. Customer satisfaction has been greatly improved. The resulting increases in productivity enabled consultants to increase the percent of time they are engaged in billable activities. 3. Manufacturing Type of Business: Contract manufacturing Business Problem: Slow customer service when sales reps and engineers were away from their desks, slow decision making UC Solution: Mobile integration, Unified Messaging, Teleworker, Microsoft OCS 2007 Target Users: Sales reps and engineers Business Benefits: Faster response to customer requests; improved sales productivity, faster decision making 6
With Mitel mobile integration and the teleworker solution, customers can dial one number to reach their sales rep whether the rep is in the office, on the road, or working from home leading to enhanced customer service. When calls are missed, messages end up in a single voice mailbox which is then forwarded to email, thus simplifying message retrieval. The solution also included Microsoft OCS 2007 which facilitated the use of instant messaging and collaboration between the sales reps and the company s engineers. This improved collaboration has resulted in faster response to customer requests and much higher sales productivity. This has led to an increase in customer satisfaction, which in turn has driven higher revenue growth. 4. Professional Services Type of Business: Medical Transcription Services Business Problem: High cost to grow the business, difficulty hiring and retaining knowledge workers UC Solution: Teleworker solution, UC Client, Softphone Target Users: Medical Transcriptionists Business Benefits: Reduced real estate costs, ability to hire knowledge workers where they live avoiding relocation costs As the company grew so did their communications and real estate costs. By implementing Mitel s teleworker solution (using both hard and softphones) the firm was able to transform their business model by closing many remote offices and having employees work from home resulting in significant real estate cost savings. To ensure efficient communication and collaboration between employees, the UC Client was deployed to give employees a view of each others presence allowing instant messaging, voice calling, and escalation to video and web collaboration. With seamless communications between home workers, the business could hire the best and brightest employees where they lived while avoiding the difficulties of relocation. 5. Education and Training Services Type of Business: Professional Education and Training Business Problem: Growth of business was constrained by geographic proximity of potential clients to existing training facilities UC Solution: Video Conferencing, Teleworker Target Users: Trainers, clients Business Benefits: Expanded business by employing distance learning without increasing the number of trainers This company conducts training courses to help prepare professionals, such as accountants, tax practitioners, attorneys and financial planners, to achieve or renew their professional certifications. Prior to implementing the UC solution, the trainers would need to travel to remote locations to conduct courses, or the professionals would need to travel 7
some distance to the nearest training center. By using videoconferencing, the trainers can conduct a training session at their home locations and the professionals can participate remotely from the location most convenient to them while saving travel costs. This has enabled the company to expand their business without having to increase the number of trainers. 6. Retail Type of Business: Entertainment Ticketing and Marketing Company Business Problem: Improve customer service by increasing the accessibility of its employees UC Solution: Mobile Integration Target Users: Sales Professionals Business Benefits: Increased customer service, improved competitive advantage and reduced communications costs With over 250,000 customers and 60% of business bookings conducted over the telephone, the organization acknowledged that its sales staff must always be accessible. With the mobile phone integration, team members were able to twin their business extension with their cellular phone. Incoming calls would simultaneously ring both phones, ensuring that sales team members were continually accessible to customers regardless of whether they were in the office, working remotely or on the move. Call twinning enabled sales team members to provide their customers with a single reach number and to manage just one voice mailbox greatly improving their accessibility. Furthermore, with fewer calls being transferred to voicemail, customer service levels increased and the volume of closed deals grew by 5%. The sales team was able to make, or take calls on their mobile devices when away from their fixed work locations. When arriving back at their desk, the calls could then be seamlessly switched to their office phone. The ability to switch calls off of a wireless network helped reduce cellular usage by 30% and allowed the organization to renegotiate lower cost wireless plans with its carrier. 7. Travel Type of Business: Corporate Travel Consultant Business Problem: High costs to support travel consultants working from home, ability to tailor service to high value customers UC Solution: IP Contact Center, Teleworker Target Users: Travel agents Business Benefits: Significant cost reduction to support home workers, enhanced customer service 8
To effectively support customers and enable travel consultants to work from home, each home office previously required one to three phone lines. With the Mitel Teleworker Solution, home-based workers now seamlessly link to the corporate telecom infrastructure with just a single Internet connection delivering the organization $180,000 in landline savings in just three years. Additionally, teleworking capped future real estate costs by allowing corporate expansion to occur through the hiring of additional homebased consultants. A Mitel Contact Center Management solution was also deployed, allowing the organization to enable priority call routing and automate the distribution of calls. The organization achieved its guarantee that 85 percent of calls will be answered by a live consultant. And assigning key accounts to specific consultants translated into superior service delivery to customers. Finally, multiple corporate offices were connected via IP Networking which resulted in considerable savings over traditional digital trunk connections. 8. Retail Type of Business: Automotive Dealership Business Problem: Expensive and complex communications UC Solution: IP Communications system, unified messaging, Target Users: Sales staff Business Benefits: Lower communications costs, improved customer service; The dealership had grown over time to incorporate many locations and ended up with a complex and costly Centrex phone system. By replacing this with an IP Communications solution, monthly phone costs were reduced by 65%. With the new system, a call to the parts department, for instance, rings simultaneously at all the phones in that department, increasing the likelihood that the call gets answered promptly. And a new four-digit dialing capability lets employees quickly transfer callers throughout a dealership or even between dealerships. The solution has also allowed the company to set long-distance calling privileges by job function, a cost-saving capability unavailable with Centrex. In addition, the new system is used to track the success of advertisements and other promotional efforts. By assigning a new and unique telephone number to an ad or direct response marketing campaign, success of these campaigns can be quickly assessed. 9. High Tech Type of Business: Independent software vendor Business Problem: Time away from office had negative impact on the productivity of software developers UC Solution: Teleworker Target Users: Software developers Business Benefits: Higher margins by increasing developer productivity 9
This software company s main office is in the UK, with satellite offices in three different countries. The productivity of the software developers was impacted by the combination of high commute times at the headquarters location and disruptive travel between offices. Teleworker application enabled them to have the same work environment whether they were working at home, in their regular office or at one of the satellite offices. The resulting improvement in developer productivity contributed to higher margins for the company. Conclusions These customer examples clearly demonstrate that UC applications can deliver real business value to SMBs in a variety of different vertical markets, especially when focused on specific workgroups or process improvement. The common thread across these examples is the use of UC applications to improve the productivity of selected types of users. Usually these workers were highly mobile and often their jobs involved direct contact with customers. But in the nine vertical market examples, there were twelve different UC applications; nine different types of workers; and three different types of mobility traveling away from the office; mobility within the primary work location; and working at home. There were also several different categories of business value. Higher productivity of key employees resulted in reduced costs, higher margins and the ability to serve more customers and expand the business without increasing staff. Reducing employee travel not only cut costs but it improved employee job satisfaction. Faster response to customer inquiries and higher first call resolution led to significant increases in customer satisfaction and retention. These are the type of quick ROI and practical benefits that SMBs should be expecting their IPT/UC vendors to focus on during the UC applications sales process. Mitel has demonstrated that its approach can deliver rapid, quantifiable value to SMB customers. SMBs should avoid vendors that only talk in terms of whiz-bang product features and generalize about overall productivity improvements. 10