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Small Business VoIP: Is it an Elephant or Gorilla?
[October 02, 2007]

Small Business VoIP: Is it an Elephant or Gorilla?

Co-Founder, President
 
Understanding and succeeding in the SMB market means figuring out exactly what small means.
 
I frequently hear companies fretting over the small business market. Yet, it’s little wonder that it’s such an elusive beast to tame when we can’t even decide what “small” actually means. Does a small company have two employees or $99 million in annual revenue? The answer could be both — at least according to two separate conversations I had recently. The latter of these definitions — definitely an extreme — is how one large enterprise software vendor views “small.”
 
The underlying problem is that for the most part, small businesses are all lumped together and treated the same. The saying goes that the only way to eat an elephant is “one bite at a time” and that’s just how the small business market for VoIP should be viewed. This means carving up the “small” in small and medium businesses into more palatable chunks.
 
Small Business is a Big Market
While similarities between eating five-toed pachyderms and the small business market may seem a stretch, let’s remember that they have one thing in common: they’re both very large. According to U.S. Census data, there are 5,083,750 businesses in the U.S. and of these, 4,931,237 have one hundred employees or less. So let’s settle on this as being the definition of a small business.
 
Before you pat yourself on the back and let out a collective exhale of relief, hold on a minute — you haven’t even gotten out your knife and fork yet. The real work hasn’t started yet — at least not for anyone in the small business VoIP market. It’s time to start slicing and dicing.
 
The Micro Enterprise — Elephant or Gorilla?
For example, let’s consider the office of less than twenty people — which I call the micro enterprise — and compare it with a business of fifty people. Both are technically speaking, small businesses, but when it comes to VoIP they have about as much in common as an elephant and a gorilla. They have different personalities, live in different worlds, and one needs peanuts to be happy while the other demands bananas.
 
Micro enterprises have specific nuances attributable only to a business of their diminutive size: they rarely have an in-house resource to manage IT; their network infrastructure is usually simple; and they can accomplish everything they need with an uncomplicated feature set. Financially, they are hyper-sensitive to reducing monthly costs and minimizing capital expenditures, and since their organizational structure is flat, decisions are made predominantly, and quickly, by the owner or chief sidekick. Finally, micro enterprises are hungry for any solution that reduces ongoing management complexity of their business.
 
From the Vendor’s Perspective
Given the smaller revenue potential at stake, it generally doesn’t make sense to service micro enterprises with frequent truck rolls or repetitive face-to-face visits. More so than their larger brothers and sisters at the other end of the small business spectrum, micro enterprises need special education on VoIP. No doubt most will have heard of Vonage (News - Alert) or Skype and tell you that a PBX, if they have one, is that black box living in the broom closet next to the stack of toilet rolls. By recognizing that what they need, in fact, is a low maintenance, reliable phone system with solid basic features and a minimal capital investment, you’re starting to put yourself within shot of making something of this end of the market.
 
A hosted VoIP deployment is, in most cases, a great choice for micro enterprises because it can be up and running quickly, can be administered easily over the Web, and gets big check marks for saving on capital investment and reducing monthly recurring costs. It is also a good choice for the channel since a hosted implementation allows the vendor to conduct much of the administration remotely and lends itself well to bringing multiple small branch offices under one umbrella.
 
Moving up the ladder of small businesses beyond the twenty person office — especially towards the fifty and above mark — the dynamic starts to shift. These businesses have a different personality than the micro enterprise and therefore need to be fed and nurtured in other ways. Their technical knowledge and resource is going to be greater, feature requirements may be broader, and since they generate higher revenue potential servicing the account face-to-face is going to more viable. As the nature of the beast has changed, so have the available solutions. As with micro enterprises, hosted VoIP can still play a role (Vocalocity (News - Alert) is a good start), although it may tend more towards a managed solution (have a look at ShoreTel). Additionally, we can bring in on-premise IP PBX implementations, such as Fonality or Avaya (News - Alert). Both approaches can work depending on the nature of the small business involved and deliver a solid return on investment for customer and vendor alike.
 
The Payoff
As soon as we recognize that not all small businesses are born equal, we can really start making VoIP a part of the SMB landscape. Slicing and dicing the “small” in SMB gives you better insight into the right VoIP solution. So the next time you approach a potential small business customer, first ask yourself does it need a peanut or a banana?
 
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Phil Hill is an experienced entrepreneur in the Internet space and has spent over 10 years building and developing businesses, including start-ups and established operations. Now co-founder and president of Vocalocity, a hosted PBX (News - Alert) provider for micro enterprises, he was a co-founder at Netzip, which was sold to Real Networks in January 2000 for $267 million after it created the de facto standard for downloading media files on the Internet. After the sale he assumed the role of VP Marketing at MusicNet, a wholly owned subsidiary of Real Networks, where his team innovated some of the first legally deployed music subscription services which are now in use by Microsoft, AOL (News - Alert) and Yahoo.
 
Vocalocity is the leading provider of voice over IP (VoIP) communication services to micro enterprises — companies with fewer than 20 employees. Vocalocity’s core offering, VocalocityPBX, is a hosted service providing customers with the quality and reliability of traditional PBX phone systems, with more features, flexibility and cost savings. For more information about Vocalocity, visit www.vocalocity.com or call 678.528.9000.
 


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