Hot Zone: Hosted VoIP

By Tara Seals

Like a virus gone airborne, suddenly, hosted VoIP offers for channel partners are everywhere. But far from being bad for the industrys health, the outbreak is creating a hot zone of opportunity.

This falls Channel Partners Conference & Expo was a breeding ground for the hosted VoIP explosion, with several service launches making their debut. The conference activity reflected the national reality: IDC believes the market for hosted IP voice services among U.S. businesses will reach nearly $455.9 million by the end of 2008.

While hosted VoIP isnt new, a new generation of offerings is emerging. In fact, capabilities enabled by IP will create a rich applications environment that will easily surpass the Centrex model and lead to a promised land of communications and desktop applications delivered seamlessly in a Web services-like architecture, the firm says.

The SME market is continually evolving and getting more and more sophisticated, says Robert Marschall, managing director of IP services at Broadview Networks Inc. A few years ago, VoIP was all about cost savings and cheap dial tone. Lately, customers have embraced hosted IP telephony for its disaster-avoidance attributes. Now we see more and more buyers requesting converged services, computer telephony integration, hosted applications and software as a service.

Dan Huffman, president and CEO at outsourced VoIP provider M5 Networks Inc., says the renewed interest in hosted VoIP also indicates a larger shift in the channel partner community as it struggles with the threat and opportunity of convergence. VARs making a living supporting data networks are increasingly being expected to support phones because of VoIP, he says.

These new VoIP VARs are competing head to head with the established bifurcated go-to-market model wherein traditional interconnects are selling phone systems and agents are selling connectivity. All partners realize they are leaving money on the table and that sets up a clash.

If the goal for these partners agents, VARs, interconnects is to add value, increase margins and become trusted advisors to clients, the new wave of the hosted VoIP phenomenon is just what the doctor ordered.

A hosted system marries the two pieces connectivity and gear, says Russell Markman, president of National Billing Systems (NBS), explaining the neutral territory represented by the service-delivery model. NBS has taken it a step further and included the phone sets in its service contract so users dont have to buy them separately upfront.

Channel partners also can leverage a hosted VoIP offer to become strategic partners to their clients, rather than simply remain tactical partners.

It allows them to be a different kind of partner, says Phil Hill, Vocalocitys president. Vocalocity, which targets hosted VoIP services to micro enterprises (offices with less than 20 employees) has created a partner program for its VocalocityPBX service that it showcased at the Channel Partners Conference & Expo. Micro enterprises have no technical resources in-house, so you deal with the business owner, secretary, office manager or chief sidekick. Its not just a phone its Web, e-mail, security and backup. So all of these bundled together are great in a hosted environment. The person that goes in there with a bundle of solutions involved in managing the network a great place to be.

Channel partners can further leverage hosted VoIP with advanced unified communications features to help their SMB clients look much bigger than they are a boon for businesses struggling to compete in an ever-more complex and customer service-oriented world. To that end, Broadview Networks Inc. has re-launched Broadspeed OfficeSuite, a hosted IP telephony solution targeted at SMBs with four to 50-plus employees, at any number of sites. It enables a small business to look and operate like a large business, with common three- or four-digit dialing among employees at all locations, on-screen directories, hot desking and twinning capabilities, programmable phones, common voice mail and unified messaging services, and auto-attendants and hunt groups that can span locations. Its all self-managed by the customer via an intuitive Web portal.

While most users remain phone-centric, unified communications helps sell the hosted VoIP proposition, says Bruce Chatterley, CEO of Best Buy acquisition Speakeasy Inc. The idea of unified communications is definitely spurring interest in hosted VoIP, with the primary focus being around receiving voice mails as e-mails, and additional investigation into further unification such as voice/video into instant messaging applications and soft phones, he says.

The idea is to play up the capabilities you cant get in a TDM environment, says Len Camara, vice president of IT at TNCI, which launched its TNCInet VoIP service this fall. The ability to layer on other apps [like] find-me/follow-me and presence management, remote connections for traveling and telecommuting employees are what sets the hosted service apart, he says. We see the market is moving that way, and the features are what customers are demanding.

The unified communications functionality enabled by hosted VoIP platforms also might enable partners to broaden their base of customers, moving upmarket to ever larger businesses. Hosted services will interest larger organizations and will be offered by a greater number of service providers as premises-deployed, small-business VoIP solutions become more cost-effective: targeting advanced features and applications, says Stan Schatt, ABI Research vice president and research director. This is attributed to several factors, including hesitance to invest in new premises equipment and an interest to upgrade satellite offices that require larger equipment installations than if the volume of users were centralized in one location thus making a hosted service more economically feasible.

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To make the most of the hosted VoIP epidemic, channel partners need to recognize the inherent challenges in the market. For instance, selling hosted VoIP requires knowing how to position it, which in turn takes knowledge of the wide range of VoIP options in the market. Its no longer just a conversation about trading capex associated with a premises-based solution for a monthly fee to a provider, while gaining cheaper calls.

The most successful channel partners will understand the advantages and disadvantages between the types of hosted VoIP and premise-based solutions, says Robert Marschall, managing director of IP services at Broadview Networks Inc. Channel partners should demonstrate two or three features the customer needs, as well as describe the ease of the transition and the opportunity cost gained by having complete control over features and functionality through the customer Internet portal.

Its also a question of explaining whats new to the user. In the past, LD was a commodity, but now its a different animal, says Eric Thomas, CEO and founder at FreedomVoice Systems, which launched its hosted PBX service, FreedomIQ, at the Channel Partners Conference & Expo. Now youre replacing the PBX, the LD, adding virtualization, getting rid of LEC line. Plus youre getting administrative tools and reports. FreedomIQ offers standard PBX features plus users can add new features and phone stations instantly through the WebLINK Internet control panel.

Often, services can be tailored to the SMBs specific needs, to eliminate feature fog and demystify the overwhelming number of options and call applications that can be found in hosted VoIP and that requires a more in-depth conversation with clients than may be typical. Diverse types of small businesses are seeking VoIP applications. Most of these small businesses use IT consultants, says Bruce Chatterley, CEO of Best Buy acquisition Speakeasy Inc., which recently launched its EasyVoice business VoIP plans with shared minute buckets and flexible pricing. Channel partners trained to sell and manage VoIP services represent a new skill set that is in demand.

Its also about understanding the transport. With all the different choices out there, its important to understand the network on which its delivered, says Brenda MacDonald, vice president of carrier relations at TNCI Inc., which launched its hosted VoIP solution, TNCInet, at the Channel Partners Conference & Expo. We, for example, use a private MPLS network. We sell to a business market, and they cant deal with the public Internet 3 oclock decline in service, when everyone gets home from school and hits the Web.

Finally, its important for channel partners to realize that hosted VoIP as an industry segment faces challenges. Foremost is the issue of including presale design and implementation as well as post-sale service and support, says Will Stofega, research manager for VoIP services at IDC. Second, service providers must continue to develop the service, including integrating with existing enterprise applications in order to create a unified flow of information from voice and data applications. Because of these ongoing challenges, price will continue to be the most important differentiator when competing with a premise-based solution, Stofega adds.