SIPping into Something More Comfortable: SIP Trunking Offers Real SMB Opportunity

By Tara Seals

While channel partners wrestle with the difficulty and complexity of selling hosted VoIP to SMBs, another converged technology has emerged as a bright spot in the IP landscape: SIP trunking. The demand for that PRI replacement solution has been steadily growing, and, more importantly, partners are finding businesses to be more comfortable with SIP trunking as a concept than other flavors of VoIP. Service providers and IP PBX manufacturers are seeing the momentum too, partnering up to offer bundled solutions to the channel.

“Weve seen a lot of growth in our base, seats being added and partners interested,” says Matt Wilson, director of product management for voice services at New Global Telecom, which offers a variety of flavors of trunking, both TDM and SIP. He sums up the benefit succinctly: “The key value proposition is the same one that surrounds the whole idea of convergence you put VoIP and data onto a single infrastructure and rip out the TDM, gaining efficiencies along the way.”

Essentially, a SIP trunk allows companies with an IP PBX to connect their internal voice and data traffic to the outside PSTN via IP. In the traditional world, a typical business may have a local PSTN gateway, a dedicated line to route voice calls to the outside (usually a PRI), and a dedicated Internet circuit for data and Internet access (usually a T1 line). Because the data circuit is often underutilized, moving voice over to it in the form of VoIP not only is possible, but allows users to eliminate the voice PRI (which can cost $700 to $1,000 per month), leaving the business to pay only for the T1 circuit and the number of SIP trunks which should be thought of as concurrent calls they happen to need. “The collapse of multiple TDM lines into a converged solution can equal really big cost savings in opex,” adds Wilson.

And because SIP trunks are often sold as concurrent calls, the service adds an additional benefit to businesses wanting to grow incrementally. “Questions to ask are, are they growing as a company with a central location, or geographically, or with distributed offices?” says Henry Kaestner, CEO at Bandwidth.com, an IP telephony service provider/reseller. “With SIP, you can buy in increments of one, which is very difficult to do with a PRI.”

Many also see SIP trunking as having the potential to be a gateway product to get SMBs interested in the more enhanced aspects of VoIP, like unified communications. “Its a catalyst for SIP adoption in general,” says Steven Johnson, president at Ingate Systems, a creator of firewall and SIP traffic technology. “As people see the value of SIP trunking, and as they recognize the power of the other features included in their PBX, they will start to do more with the SIP they have installed. Were at the first step on the adoption cycle and as the experience grows, youll see significant growth from adjacent applications.”

Over time, global SIP connectivity between enterprises will mean not requiring a service provider for making calls at all, Johnson adds. “Well see much more peer-to-peer [traffic], more SIP-based IM and video. The applications on top of the standard voice are going to mushroom as companies see how much power they actually have with the PBX and as they add unified communications servers, etc.”

Toshiba America Inc., for one, is preparing for the snowball effect. It SIP-enabled its family of Strata CIX IP PBXs in January, and offers the MIPU card, which enables SIP trunking, but also supports IP stations, soft clients, multisite networking and applications. So, if an SMB would like to implement any of these down the road, it simply needs to buy an additional license rather than swap out any hardware.

“Almost every business has some kind of IP communication need,” says Jon Nelson, product marketing manager at Toshiba. He cites the examples of telecommuters using an IP phone as an extension off the PBX or a mobile worker using a softphone connected to the PBX, or wireless IP phones that work off a WLAN. “These are all really practical and usable solutions to most people, and once they discover these are things that are out there, and theyre already converging with an IP PBX and SIP trunks, theres a lot of interest there.”

All of this is great news for channel partners, for whom SIP trunking represents a new area of opportunity. VARs, for instance, can add an annuity stream since SIP trunks generally offer a monthly recurring commission. It also gets them closer to their customers, so VARs are able to offer additional services instead of a one-time contract. “They rely on us more we can go back in the door and give something else to them,” says Sam Bishop, president of TotalCom, a VAR and Toshiba dealer. “I have Toshiba systems out there from 1985, and Ive made no more money off of them since then. I need something with ongoing revenue and additional service opportunities.”

That becomes critical especially as hardware margins continue to decline. “The No. 1 reason VARs are interested in this is that given the equipment cost with an open-source PBX, the margins are being slashed, list prices are dropping, and if they are going to maintain the size of the organization they have to find another source of profit,” says David Byrd, vice president of marketing and product management at Broadvox LLC, which delivers SIP trunks over its private, nationwide network. “The VAR can go ahead and make that SIP trunking sale and can also reflect to the customer how much money theyre saving by switching over to IP communications; its a 30 percent savings on the low end, 70 percent on the high end.”

Kaestner says that SIP trunking allows partners to enhance their core hardware business, too. “Five years ago we thought it would be enough for a VAR to make a residual earning on a service this is a way to sell a complementary service. But that was the wrong way to go about it. Some telecom VARs became agents, but its not that widespread. Its been most successful for us when we have positioned it as a way for VARs to sell more boxes and professional services.”

Increasingly, the lines are blurred between network services, like SIP trunks and data circuits, and hardware sales. “A fair number of VARs understand that they can safely sell telecom services, in a way that they dont have to change their business model, to get involved in circuit installations and customer service issues,” Kaestner says. “A lot of the individual VARs understand that this all-in-one approach is now a scenario theyll have to look at pretty hard. Three years ago, a customer would have gotten a PBX from a VAR, and services from an agent or carrier. Now, the VAR or agent can do both, plus charge for the professional services to set up SIP trunks, and to get some long-term revenue in network monitoring, etc.”

Accordingly, alliances between IP PBX makers and service providers are providing the bundle for the partner. Toshiba, for instance, is working with service providers like Cbeyond Communications and American Broadband Services to certify network-to-box compliance, so the partner can go into an account with a full solution. New Global Telecom, meanwhile, is testing its services with various manufacturers, and leveraging those manufacturers marketing channels in the process. Similarly, Telesphere, a business VoIP service provider and reseller, has an agent program, but is working with hardware makers ADTRAN and Cisco Systems to reach out to their VARs. Ingate leverages its own relationships with the PBX vendors, including Pingtel, ShoreTel and 3Com, which suggests to their VARs that they should offer Ingates firewall and NAT traversal box as part of the solution.

Despite all the good news, agents and VARs should be aware that for SMBs, there still is plenty of confusion as to where SIP trunking fits in. “We definitely still see a lot of education required in that space. Its a new service for them, and theres a lot of nuance in VoIP,” says NGTs Wilson. “Small businesses want to wring additional costs out, but they may have experimented with Skype, and are not going to trust their business line to it. Partners can differentiate the offers and position this as a feature rich, carrier-class service.”

TotalComs Bishop says despite the increase in adoption, the concept is relatively new and it has to be introduced to the prospects. “Most havent heard of it, and those that have dont understand it,” he says. “They tend to think that VoIP means they get free phone calls and they think about consumer-grade products, which is a different beast.”

Thats not to say that a conversation on cost savings shouldnt be the opener. “Right now, the end user is making a decision thats principally based on cost and the need to replace aging equipment, or if they move into a new facility and have an event change,” says Byrd. “Features are not at the top of the list. However, having said that, as people become more familiar with what can be done, they will be more interested, [especially] when they start to understand the value of presence, and when they see what Microsoft and its partners are doing with unified communications, in the next nine to 12 months. Cost and event change may still lead, but well start bringing in the feature set, too.”

VARs also should keep an eye on how SIP trunking fits in with other options in the market, such as hosted VoIP. “What were seeing is that trunking is the lions share of the different options available,” says Greg Roth, director of SIPconnect development at Cbeyond. “With hosted PBX, there were predictions about it being very large and it just hasnt come to fruition. Its the right solution for some companies in some instances, but its a niche market. The forecasts have been right on about the disruptive technology that the IP PBX would be and ended up being. How can we complement that? We thought the right way would be SIP trunking.”

Kaestner says that SIP trunks will eclipse hosted VoIP for the next 12 months. “However, after that, price points will come down and the applications integrated into voice will start to provide compelling value,” he says. “Until then, SIP trunking will continue to lead the way.”

Telesphere CEO Clark Peterson says there is room for both options. “Were seeing a huge migration to IP PBXs in the market,” he says. “We offer a hosted PBX model, but we are now able to serve customers with hardware installed, too. When they get to the point where they outgrow the existing equipment, we have a migration path to a hosted play. Its a product portfolio that caters to all customers.”

Partners would do well to get on board now, Byrd says. “They really shouldnt be afraid of this particular market, given the growth,” he says. “By way of example, 80 percent of new lines last year were IP enabled. At the end of 2007, we exceeded our 2008 goal, with the installation of 11.7 million lines.”

Technical Notes

For all the benefits of SIP trunking, agents and VARs alike should be aware that there are challenges in marketing the product successfully, particularly when it comes to the technology itself.

“The most successful partners are the ones that have taken the time to get trained and to get their sales engineers trained,” says Henry Kaestner, CEO at Bandwidth.com. “Wed like to see SIP trunks as a SKUable product thats easy and turnkey to sell. Folks think it will provision automatically. But its not the way it works. VARs have to understand the application notes as to how to go about it.”

Eric Abing, product manager at Toshiba America Inc., says that a partner must have training, and must have the programming process down. “If they can program a PRI, they can do this,” he explains. “We try and make it as seamless as possible where they dont need to learn a whole bunch of new programs. We have documents outlining step by step where to put in the IP addresses, etc. If you follow directions, within half an hour the user can make calls on it.”

Partners also should be aware that end users will have to prep their networks for the solution. That means dealing with QoS, bandwidth allocation, security and so on. “The biggest challenge that IT people have is to truly understand what they have to do for the QoS,” says Sam Bishop, president at TotalCom, a VAR. “One small change to the router and the system sounds like a cell phone. Thats going to be the longest-term challenge.”

On a related note, partners should make sure the solution theyre implementing is running on a dedicated circuit. “A lot of the people that are trying to use the SIP trunking tend to be $69 packages, where they throw it over a cable connection,” says Telesphere CEO Clark Peterson. “We offer the ability to do private networking and most businesses can use this without jeopardizing their image with poor quality.”

Also, beware of SIP trunking providers that have chosen to implement non-carrier grade network. “They might have a single softswitch, a regional footprint, and are working with open-source solutions like Asterix,” says Brian Watters, director at American Broadband Services. “Weve spent a lot of money in our footprint and weve carried a lot of traffic. Its one thing to be on the bleeding edge of technology, but one of the things you dont want to do is actually bleed.”

Theres also the question of making sure traffic doesnt get hung up in security measures. For instance, many firewalls arent SIP-aware, points out Greg Roth, director of SIPconnect development at Cbeyond. “I will be happy when all firewalls are all SIP-aware,” he says. “But for now, we have a VoIP LAN assessment tool a three-step process.” The VoIP LAN assessment is an online tool that checks for firewalls, line quality, speed thresholds and VoIP handshakes between parts of the LAN. If the tool identifies issues that can not be immediately resolved by the VAR, she or he can consult with a local Cbeyond Design Engineer for guidance.

Steven Johnson, president at Ingate Systems, says Ingate has solved the fundamental issues with NAT and firewall traversal. “We have implemented a number of enhancements for that; we sit in the middle, so we are able to normalize the SIP traffic between a trunking provider and an IP PBX, and perform the NAT traversal, security and control.” He adds that VARs can improve their value proposition with Ingate. “By having our solution in the catalog, they can offer the customer an immediate solution to any traffic issue that they will run into, plus they know that the network will be secure. It provides a VAR the tools he needs to make this work in an easy way and with as little time involved as possible.”

And finally, interoperability is a notorious SIP bete noir. If the SIP trunk isnt interoperable with the IP PBX, it simply wont work. While SIP is a standard, its made up of a large family of reference points, and support of SIP in a PBX doesnt necessarily mean support of all of those points, or even all the functionality within a particular reference point. Further, there are often multiple ways of accomplishing the same technical task in SIP, which can complicate interoperability with “extra” choices, according to the SIP Forum.

The SIP Forums SIPconnect Technical Recommendation has been developed to address these problems, and many manufacturers and service providers have signed on to conform to it; meanwhile, many others are simply doing their own interop testing on a case-by-case basis. NGT, for one, performs internal testing for PBXs and provides a sort of cookbook for partners, so the agent can configure the PBX and ensure that it works with the NGT network right out of the gate.

“Last year, Mitel was out in front of the pack in getting certified with service providers, but now theyre all are realizing that they [should be] getting on board with interop and working on the SIPconnect standard,” says Kaestner.

Looking for More?
Join TAG Nationals Dale Stein as he moderates a discussion on “The Secrets of Selling SIP Trunking” at the Spring 2008 Channel Partners Conference & Expo on Monday, March 10. Stein will be joined by a lively panel including industry experts Ken Bisnoff of TelePacific, Eric Eckman of Broadvox and Michael McGhee of CommPartners Connect. Visit www.channelpartnersconference.com.