1. How VoIP will help your business?The VoIP decision shouldn't be based on technology, but on how it will affect your business. Before any smaller company invests in a new phone system, Steve Hilton, Yankee Group's vice president of enterprise research, recommends they ask themselves four simple yet major questions:
1. Will it help me grow my business?
2. Will it help me protect my business?
3. Will it simplify my business?
4. Will it support my business?
The needs of the individual business drive the decision to change phone systems, whether it's price, company growth, the lack of
IT resources or any number of individual reasons.
2. What are VoIP service's cost savings and added features?
Unfortunately, there are so many variables that definitive numbers on the cost of VoIP compared with traditional phone service for smaller companies aren't easy to come by. One advantage for less-capitalized small businesses is that hosted VoIP usually offers a flat monthly rate per user and a flat-rate price for the Internet connection--usually a dedicated T1 connection. Because of the converged voice and Internet platform, VoIP services usually offer unlimited local and long-distance calling, compared with the per-minute or per-call traditional voice-service plans.
Even though the initial promise of VoIP was cheap calls, many of the most successful VoIP providers don't hold themselves out as poster children for the lowest cost. Instead, they market their services as a predictable-cost option with the added benefits of VoIP service features and applications. In addition to all of the traditional voice features that customers are used to, VoIP users can have incoming calls "follow" them to whatever phone they happen to be using--whether it's the traditional desk phone, a computer-screen "soft phone," or a cellphone. Many systems offer voicemail options that show up in the user's e-mail box.
The key drivers for moving to hosted VoIP, according to Sanjeev Aggarwal, vice president of SMB IT infrastructure solutions at AMI-Partners, include
predictable monthly costs with no upfront capital expenses; reduced local and long-distance charges; no IT support requirements for installation and maintenance; decreased expenses for moves, adds, changes and removals from the voice network; access to advanced calling features, increased mobility; and conferencing and collaboration tools. The conferencing call features alone can save businesses hundreds of dollars each month, Aggarwal says. The only feature it not included is
video conferencing.
"There isn't just one kind of [small business] out there," agrees Yankee Group's Hilton. "For some, skipping the capital expenses and going to a hosted model is the answer."
3. Is VoIP voice-quality sufficient?Early consumer-oriented VoIP services often suffered from voice delays, or the person on the other end would sound like they were in a tunnel. Sometimes they would just disappear. In the past two years, though, the available
bandwidth has increased, and network performance has become much better. Even the cost of
T1 lines for connectivity have come down to more affordable levels," according to AMI-Partners' Aggarwal. "In addition, vendors like Cisco and Nortel are designing equipment especially built for the SMB market."
Providers like
Verizon (nyse: VZ - news - people ) offer several guaranteed quality metrics on their
IP networks. Businesses not familiar with the metrics, however, should insist on plain English translations of what the guarantees mean in terms of network downtime, credits for outages and how the metrics are gathered.
4. What phone features does your business really need?
Most businesses want the same features they're used to on their
traditional analog or digital phone systems. Many vendors promote VoIP with the promise of "next generation" features that may sound interesting and productive, but be aware that learning to use them will take time. "At first, customers just want the thing to be up and running. They want to dial in and out, put people on hold and know how to transfer calls," Yankee's Hilton says.
Other benefits may have to wait until users are comfortable with the new system. On the other hand, businesses with mobile sales forces may quickly discover that the ability to have calls find and follow them on the road is a huge advantage. If your business has employees working remotely or traveling globally, they may save time and money by accessing your company's voice system via computer using a "soft phone" headset and dialing from a keypad on the computer screen.
5. Should you outsource VoIP or manage it in-house?While competitive market research firm AMI Partners projects that the hosted VoIP model will be adopted the most quickly in the small-business market of up to 50 employees, there's no hard and fast rule about what kind of service suits which company. In an April 2007 survey, AMI found that hosted VoIP spending in 2005 was $80 million for small businesses with one to 99 employees. That number is expected to grow to $1.12 billion by 2010. For businesses with 100 to 999 employees, 2005 spending was $66.7 million, which AMI projects will reach $310.8 million by 2010.
6. How IT-savvy is your company?
When weighing whether or not to outsource phone system management, examining your in-house technology expertise can help make the decision. Companies with fewer than 50 people often don't have a dedicated IT person, while the average 100-employee company has two, according to Yankee Group's Hilton. Businesses with 500 to 1,000 employees often have four or five IT people.
But the size of the company doesn't tell the whole story. Some very small businesses are completely Internet-based and have sophisticated technology needs and expertise. Although the Lloyd Group has plenty of IT people in the 60-person company, CEO Eiseman decided to outsource the whole thing. "As an IT firm, we're in the business of business continuity. I couldn't afford the level of business continuity for us that M5 gives us in case of an outage," Eiseman says. "If there's some sort of outage, our customers need to be able to reach us."
7. What service and vendor options are available in your area?Among small and mid-size companies, recommendations for communications providers often come by word of mouth. Asking around is definitely worth it. At Cbeyond, a managed VoIP provider based in Atlanta, Chief Marketing Officer Brooks Robinson says 50% of his customers come from referrals.
Businesses should check with the obvious players, like the traditional phone companies, or cable companies that may have business voice and Internet options. But in the hosted VoIP market, many of the most nimble players are small regional or local companies that specialize in hosted voice and data services in a much smaller geographic region than the traditional phone companies. These include Covad Communications, Cbeyond, M5 Networks, Packet8 and Smoothstone IP Communications, to mention a few. For very small businesses, Best Buy (nyse: BBY - news - people ) for Business offers Speakeasy, a voice, Internet and IT service, through its stores.
But be careful. The hosted VoIP market hasn't settled out, and there are all kinds of vendors out there. According to AMI-Partners' Aggarwal, the smaller companies are the innovators that will help VoIP evolve from a low-cost alternative to the traditional telephone network into an advanced communications service that can be integrated into all aspects of a small business' operations. Just try to find a vendor you're sure will be around for the long haul. Otherwise, you might find yourself having to change providers or dealing with the hassle of having your provider acquired by a bigger company.
A quick look at a VoIP provider's Web site can give you an idea of how user-friendly the company is. Case studies about happy customers are a good sign. So is easy-to-find information about different features. If you can't find what you need, however, or if descriptions are too overloaded with technical jargon, doing business with that company may be as frustrating as its Web site.
8. How much capital you can lay out for equipment?
Most smaller companies are capital- and resource-constrained, and any way to spread out the cost is a good thing for them. "There isn't just one kind of [small business] out there," says Yankee Group's Hilton. "For some, skipping the capital expenses and going to a hosted model is the answer."
Even within the hosted
VoIP market, which offers generally lower upfront costs than doing it yourself, providers may offer several ways to reduce upfront costs of buying or leasing the necessary IP phones. If your business doesn't want to buy individual phones that can easily cost $300 apiece, some providers may spread out the cost by bundling the phones in with the monthly service fee. In some cases, the equipment may be owned by the provider, which further reduces upfront costs but may increase monthly fees.
To get the benefits of VoIP, your business doesn't necessarily even have to get new IP phones.
Verizon Communications, for example, offers two "hybrid" VoIP services,
Hosted IP Centrex and
IP Flex T1, that let businesses use their existing phones, while Verizon manages the IP-based service in its network. Cbeyond has engineered its service to allow the use of analog, digital or IP phones.
9. What is your business-continuity plan in case of an outage?One of the big advantages of a hosted VoIP service is business continuity in case of an outage--the phone equipment isn't on the customer's premises. Even so, in the planning phases, a major point of discussion should be what kind of backup system the service provider has in place.
When Adam Eiseman at Lloyd Group talks to potential customers about his outsourced IT services, he uses a water-main break, not a terrorist attack, as an example of the advantages of outsourcing. "If you plan for that, you plan for just about any event," he says. "Your customers will have sympathy for you in a major disaster, but if you have a water main break outside your building, customers will be sympathetic for about five minutes," he says. Eiseman looks at M5 as his solution for that water-main break because his phone system isn't in-house, and employees can use soft phones from their computers no matter where they're working.
10. Is it really time for a change?"Most SMBs have an 'if it ain't broke, don't fix it' attitude toward their phone systems," Yankee Group's Hilton says of small businesses. Unlike large enterprises that may be on a routine technology-refresh schedule, smaller companies don't invest in
technology just because it's cool. If the existing equipment is still on a maintenance contract or has some life in it, the company may wait until it's entirely broken before making a change.
In the past, small and mid-size businesses might hang on to the same
phone system for 15 years. But VoIP seems to be compelling enough to alter that equation. Lower prices, higher quality and more features have driven the average life-cycle of a phone system in a small to mid-size business down to about seven years.
So, when weighing your options for your telephone system, think about whether you want to wait until phone service problems interrupt business as usual, or whether it's time to be proactive and take advantage of high-tech options that didn't exist 10 years ago.
Kate Gerwig has covered the
telecommunications industry for more than 15 years as a writer, editor and industry analyst. She was principal analyst of telecom services at Current Analysis from 2001 through 2005.
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