By Khali Henderson

Whether you are an IP PBX dealer in denial or a reluctant telephony agent, it’s time you thought long and hard about your stance on hosted VoIP. You see, hosted VoIP sales are growing despite the recession. For the first three months of 2009, U.S. service providers experienced an average of 43 percent year-over-year growth for hosted IP telephony services, according to data released in May by Infonetics Research Inc..

A random sampling of hosted VoIP providers by PHONE+ found double-digit increases in year-over-year revenue by several providers. Smoothstone IP Communications, for example, reported an increase of 55 percent. Apptix Inc. reported an increase of 160 percent. Others reported significant increases (20 to 40 percent) in quarter-over-quarter sales for the periods ending Dec. 31, 2008, and March 31, 2009, respectively.

While there could be lots of possible reasons for the increase — growth in distributed workforces, need for more functionality and flexibility, etc. — most vendors give credit where due. It’s no coincidence that hosted VoIP sales are up in a down economy, they said. “While some new customers are attracted to the enhanced capabilities of VoIP service, the economy is easily the primary reason for the growing interest and adoption in VoIP and hosted VoIP in particular,” said Rick Rumbarger, vice president of product at Apptix. “The ongoing recession is forcing existing and new businesses to take aggressive cost-control measures, which plays to hosted VoIP’s strengths.”

These measures go beyond the direct costs for the communications solutions to include indirect costs associated with changing business processes.

Direct Cost Savings

As you know, hosted VoIP is delivered as a subscription and costs less up front than does a premises-based system. Evaluating the exact cost differential is complicated by different types of hosted VoIP offers (BYOB, managed IP) and pricing plans (unlimited and metered) targeted toward a range of customer sizes (from five seats to 500 or even more).

Smoothstone’s CMO James Whitemore told PHONE+ most companies see a 25 to 50 percent cost reduction as soon as they switch from a premises-based PBX to Smoothstone’s hosted solution. The company targets midmarket enterprises, with an average of 750 end points. The price per seat ranges from $25 to $50 per month and includes VoIP, security, Web conferencing and contact center functionality.

At the lower end of the market serving very small businesses (five to 15 seats) is GLOBALINX. The company offers an unlimited local and long-distance (U.S. and Canada) plan with four-digit dialing, free on-net calls, music on hold and typical Class 5 features, for $49.95 per month plus $14.95 for each extension up to six. And, with a three-year term, GLOBALINX will bundle in the IP phones for $10 to $20 per seat per month. For six lines, that’s $200 to $260 per month on top of the existing broadband connection — DSL, cable or T1. Companies that don’t do much LD can save $25 on the monthly fee while paying 1.9 cents per minute for long-distance.

“Small businesses are especially hypersensitive to costs,” said Mike Machonkin, vice president of sales and marketing for GLOBALINX. “VoIP is a great way for them to get more feature functionality … and save a lot of money while doing it.” He added that GLOBALINX’s ability to bundle in IP phones also has helped remove upfront costs to get started.

Calculating the cost savings doesn’t stop at the sticker price. There are also installation, maintenance and management costs that are, in the case of hosted, largely avoided.

8×8 Inc., for example, claims its Virtual Office business phone service can be installed by the customer in minutes. The phones are shipped overnight or can be purchased from Office Depot.

Doug Johnson, CEO of Telanetix, stressed that quick install is a huge selling point, particularly for SMBs his company serves. “Most phone systems require a specialist to install it, costing hundreds of dollars. Out offering at Telanetix is literally plug and play,” he said. “We can’t overstate the value this process provides an executive who simply wants efficient, affordable phone services without the hassle of a lengthy installation.”

And, because the application is hosted, users are assured of using the latest (debugged) version of the software along with any new features and functions that become available. “By delivering our VoIP applications as a software-as-a-service (SaaS) model, we are able to provide periodic enhancements to customers at no extra charge,” said Johnson. “This also allows us to custom tailor our services to their needs, which is a significant advantage during these uncertain and changing economic times.”

And, customers can manage their service from a Web-based portal without technical expertise. Office managers can set up new users, for example, and users can manage their own features. With GLOBALINX’s service, users access a Web portal to manage their features, including “find me, follow me,” voice mail to e-mail, call directories, call logs, out-of-service forwarding, click-to-call, conference bridge and more.

Indirect Cost Savings

Hosted VoIP also is an enabler of the “do more with less” business model that companies have been forced to adopt during the recession.

Julie Buchanan, director of marketing for New Global Telecom Inc., said one cost-cutting measure companies are making in this economy is reducing real estate. By eliminating or reducing the size of the monthly lease payment, businesses can save money or stave off headcount reductions. But at the same time, they “need communications solutions that are flexible enough with unique call control to the distributed office to still seem like a bigger company in one corporate location,” Buchanan said. Hosted VoIP allows companies to create “virtual offices” by enabling some or all employees to work from home but tying them together with auto attendant on the front end and four-digit interoffice dialing, etc.

Apptix’s Rumbarger agreed. He said downsizing and relocations are opening new markets for the hosted VoIP company. “Relocation to smaller space or more affordable localities also enables firms to re-examine the cost benefit of moving aging, on-site PBX systems or deploying expensive new on-site equipment versus the cost benefits and enhanced capabilities of a hosted VoIP solution, “ he said.

These added capabilities increasingly include unified communications, which aggregates telephony, presence, messaging, collaboration and conferencing into a unified service. This is appealing to companies that are looking to move toward a more mobile and flexible organizational structure. “Many are migrating from equipment that may be at the end of its service line,” said Smoothstone’s Whitemore. “This equipment is outdated or perhaps does not provide the functionality or collaboration necessary.”

While hard numbers are difficult to come by, UC is touted for its ability to increase productivity — a must for any staff post-layoffs.

As companies reduce headcount, hosted VoIP can be right-sized (and right-priced) to fit a business’s new dimensions. But, it also works just as well in reverse. “Firms have recognized the scalability — both up and down — of hosted VoIP solutions as they adjust employee bases but also position for a future upturn, “said Rumbarger.

Hosted VoIP is ideally positioned to help companies as the economy recovers, but it’s already found a fan among displaced workers turned entrepreneurs. 8×8, which reported the number of new subscribers to its Virtual Office service was up 15 percent for the quarter ended March 31, 2009, said startups account for a many of the new signups. In addition to the recounted upfront cost savings and enterprise-like functionality, hosted VoIP provides a quick time to market for entrepreneurs that want to seize an opportunity.

LOOKING FOR MORE?
Learn about hosted VoIP/UC from soup to nuts in a 90-minute workshop, including a live demo, at the Channel Partners Conference & Expo, Sept. 23-25 in Miami. For more info, visit www.channelpartnersconference.com.

On the Rebound: Startups Tap Hosted VoIP

It’s not just hard-hit businesses that are looking at hosted VoIP; it’s cash-strapped startups, too. These entrepreneurs can’t wait until the economy recovers — in late 2009 or early 2010 by some forecasts — to get their new ventures going.

Jase Garner is one of those entrepreneurs. A crop duster by trade, Garner began seeing a decline in his market when the farmers he serviced weren’t able to grow crops due to financial setbacks and increasing water shortages in the area. “Between the mess of Hurricane Katrina and a drought that went on way too long, the need for crop dusting started to fall, and so did my business,” said Garner. “I could let life happen to me, or I could figure out something else.”

That something else was to become a franchisee for Just4Him Men’s Haircut Lounge in Missouri City, Texas. His is one of 40 locations and was an idea created by entrepreneurs who wanted to supply Hurricane Katrina aid workers with a place to get a haircut and get comfortable without an appointment. “It isn’t your typical salon,” said Garner. On any given day, you’ll find the “receptionist” is actually a “hostess” serving drinks to waiting customers who are relaxing in the salon, which has been compared to a modern-day “man-cave” with a high-end bar, low lighting and flat-screen televisions as far as the eye can see.

For communications technology, Garner chose Virtual Office service from 8×8 Inc., which routes incoming calls around his busy “hostess” to each stylist’s cell phone, an advantage that pays off for both the business and the stylist. “Our clients are looking for personalized service, and, let’s be honest, a little bit of pampering,” he said. “They want a place to relax and unwind. With 8×8 Virtual Office, this means that the stylists can give their full attention to their clients without having to turn away and take a call. It also means they don’t miss calls from clients that want to come back to a specific stylist if that stylist is on break or off work for the day.”