Soap Box: Time to Take the S Out of SMB

Its time to take the S out of SMB, allowing small businesses to stand alone and be recognized as the clearly unique market that they are. It is a mystery why small and medium businesses ever were categorized together to begin with. Small businesses of less than 50 employees have organizational structures, communications needs and spending practices that are vastly different than those of larger enterprises. Understanding the small business drivers and providing products and services specifically for them are the keys to profit in this massive market of small margins.

Small businesses are distinctive from other businesses.

Why then do so many communications vendors continue to keep the small business lumped in with the medium enterprise when developing and marketing their products and services?

In the past, the small business had no choice but to buy the overly complicated phone systems designed for the larger enterprise. But that isnt the case anymore. The widespread availability of broadband and the low cost of private IP networks changed everything. Service providers now can manage the last-mile link into the end user and offer quality assurance far beyond the best-effort public Internet. Such advances in technology are the underpinning for service choices, such as hosted VoIP, which were previously unavailable.

A recent Yankee Group report finds that incumbent service providers are betting on IP as the enabling technology platform to deliver highvalue applications to offset declining access-line revenues. Hosted IP Centrex voice service began as a defensive strategy for the RBOCs to keep their Centrex customer base. For competitive carriers, it is a potent offensive strategy to acquire customers who are not interested in managing CPE and to target remote branch offices or distributed workers.

Unlike the dynamic with CPE, the mismatch is not so much due to feature sets the small business doesnt want, but the exclusion of those it does, e.g. the key telephone system features. For example, key systems have multiline phones where anyone can select and pick up most if not all incoming calls. Park and page is another highly used key system feature; the ability to pick up the incoming call, determine who the call is for and then page the person to pick up at park location is used in many small business applications. Too often, these features, which do not apply to the large enterprise market, are not successfully brought to market by IP Centrex solutions providers.

It is just a matter of time before the small business market realizes its options and choices, and chooses not to continue to buy a one-size-fits-all communications system that in reality does not fit.

Technology advancements alone, however, wont gain entry to the small business segment. Perhaps incumbent service providers dont really believe they profitably can serve the small business as a separate category. They instinctively understand the priority is to keep operational costs down and, therefore, strive for simplicity in product and solution design. A simple, repeatable solution comes with many tangible benefits, including less time spent setting up and supporting each customer. But this model requires a change in vendor mindset that takes into consideration the high-volume, low-margin characteristics inherent to small businesses.

One obvious yet often overlooked goto- market approach is engaging an existing channel that already has established valuable and trusted relationships with small businesses. This relationship represents a fast and cost-effective way to accelerate market penetration. When a VAR, agent or reseller, with whom a business person already has a relationship, says, I can replace your old phone system with a new one that works in a simple, familiar way and save you money at the same time, its an easy sale.

The opportunity is real. According to The Eastern Management Group Inc., in the United States there are 32 million key systems, averaging 12 years in use. Meanwhile, firms with 11-100 employees are the fastest-growing market segment for VoIP services, with a compound annual growth rate of 29.7 percent from 2006 to 2012, say researchers at ATLANTIC-ACM. Those aging key systems and the propensity to embrace VoIP mean opportunity, but service providers will have to embrace product design and sales channels that truly meet the needs of the S market.

David Cork is co-founder and CEO of Natural Convergence a supplier of hosted VoIP software enabling service providers to sell services to the small business market.