Summer of the Small Business June 2007

By Khali Henderson

Mike Rowley is the treasurer for Rowleys Tires & Automotive Services Inc., in Bay City, Mich. He is the third generation of Rowleys in the business, which was started by his grandfather in 1921. Like many people in family-owned businesses, Rowley has worked at the company for most of his professional life. He joined the company in 1987 and takes care of the accounting and, because of his personal interest in technology (he has a degree in systems analysis and design and is Microsoft certified), handles the data and communications technology purchasing as well. These tasks controlling costs and investing in systems can be at odds. Thats why Rowley was eager to participate in a beta implementation for a new communications system targeted at small businesses that would integrate key features like voice mail, auto attendant and Web-based administration without breaking the bank.

Earlier this year, Rowleys interconnect consultant, I.T.I. Inc. of Bridgeport, Mich., installed the new OfficeServ 7100 from Samsung Business Communications Systems at the auto service companys Bay City retail store and service center, which employs 15 people. In the three months since the system was installed, Rowley says the OfficeServ 7100 appears to be as feature-rich as the higher-end system it uses in its wholesale business and the Web-based admin capabilities are superior.

The OfficeServ 7100 is a network- and IPenabled key system. Unlike its larger predecessors in the 7200 and 7400, it comes preconfigured to work out of the box. The default settings support up to four lines and eight stations with prelabeled TDM phones. It also includes four voice mail and auto attendant ports.

Prepackaging these capabilities enables Samsung to offer the 7100 at a very aggressive price point, says Deb Goswami, manager of marketing research and competitive intelligence for the company. The standard package (four lines and eight TDM stations) has an $1,800 list price. This puts the OfficeServ 7100 at a price comparable to most KSUs, which typically are less than $1,000 plus $150 per phone.

A solution is not a solution if no one can afford it, Goswami adds, noting a lot of vendors have been looking at a converged system for the small business market, but have not been able to put it together at this price.

The OfficeServ 7100, which is generally available this summer, is but one of several new converged communications solutions targeted specifically at small businesses those companies with two to 50 employees that attempt to combine feature richness with simplicity and low cost.

Small business, when you look at it, is 90 percent of the market, says Scott Lange, assistant operations manager for I.T.I., the Samsung dealer thats been working with Rowley. If you ignore it, you are missing the majority of the market.

Lange says its also very competitive and while interconnects like I.T.I. try to differentiate themselves based on service or other attributes, he admits, sometimes its the product that has to sell it.

You have to have something different to help them justify spending money. Thats how we are using [the OfficeServ 7100], he says, explaining its a great pitch to I.T.I.s installed base with a good reason for them to finally change systems they may have had for a decade. The product as a whole has come out at a good time. We have a huge customer base in that small business segment that [is] ripe for new technologies.

In addition to voice mail and auto attendant, five CTI-based productivity applications have been extended to the 7100. And, features can be accessed via wired or wireless handsets or a softphone. It also allows wireless devices and PDAs to integrate with the phone system through add-on wireless access points.

Other vendors also are looking at ways to enable small businesses with more applications and capabilities.

As one example, Nortels new My Business campaign debuted mid-May to address the challenges faced by small businesses, which have the same business needs as larger enterprises but limited resources. All of the messaging is about the value proposition, focusing on the SMBs business, not telephony and IT infrastructure, says Net Payne, vice president of North American marketing for Nortel. Its all about their profitability.

My Business is not only a slogan but a group of solution packages that integrate voice, data, mobility and unified messaging capabilities built specifically for small businesses. These packages are based on the BCM50 in four-, 10- and 20-user versions; the 30-user BCM 200; and the 50-user BCM400. On top of that, Nortel adds LAN/WAN kits that include a secure router, Ethernet switch and wireless access point. Optional VPN and enterprise-class router are available. A VoIP gateway option also is available to help users migrate from TDM to IP. Packages also can include Nortel-provided installation, operations, administration, maintenance and technical support services.

This is focused on four to 60 users, says Payne. Weve chosen that sweet spot because above that level, the deployments end up being a custom solution.

In May, NETGEAR Inc. and Avaya Inc. teamed up to deliver an IP telephony solution for small businesses of 20 users or less. The solution will feature the Avaya Quick Edition peer-to-peer technology, which puts all the intelligence in the IP phones rather than a central server or PBX, and NETGEAR network infrastructure, Smart Switches with power over Ethernet (PoE) capability and NETGEAR VPN firewall for teleworkers.

Office in a Box

There also is a number of vendors that are cramming all of these functionalities into one appliance. Like larger multislot chassis cousins, they combine the functionalities of an IP PBX, router, Ethernet switch, firewall and sometimes even a wireless access point.

Research firm In-Stat calls these systems multiservice business gateways (MSBGs), and says the worldwide market for MSBGs will grow from $615 million in 2006 to $2.6 billion in 2011.

Cisco Systems Inc. has a commanding lead in this product category with its Integrated Services Router, In-Stat says. This summer, it will roll out a version just for small businesses called the Smart Business Communications System (SBCS).

Rick Moran, Ciscos vice president of solutions marketing, says the integration of voice, data, video and wireless is the genesis of SBCS. Weve built the best of Cisco in one box that is small not from the capability standpoint, but in size, he says. That box is the UC500, which is based on Ciscos unified communications Manager Express and Cisco Unity Express. It is an eight-port system that supports Cisco unified IP phones and Communicator softphones. It has an optional wireless access point built in.

The SBCS can be expanded to 16 ports with the addition of the Cisco Catalyst Express 520 and Cisco wireless LAN controller. Cisco partner IPcelerate jointly announced prepackaged vertical market applications specifically for the UC500.

Another pioneer in the space is ADTRAN. Its NetVanta 7100 includes fullfunction IP PBX with voice mail and auto attendant, an integrated PoE switch/router for data, a stateful inspection firewall for security, VPN for secure Internet tunneling and a DSU/CSU for network termination. Due out this month, its newest release, AOS 15, adds Shared Line Appearances common to KSUs to support small businesses migrating to VoIP from legacy key telephone systems. Customers are used to phone systems with buttons on their phones representing trunk circuits (line 1, line 2, etc.) to answer/handle/place calls, and the 7100 can now replicate that user experience in our SIP IP PBX, the company tells PHONE+.

Digium Inc., the makers the open-source PBX Asterisk, also will target a similar customer set with a solution that combines the low-cost basis of open source with the ease of an appliance. Available in June, the Asterisk Appliance includes a PBX, IVR, voice mail, conferencing and ACD software as well as five Ethernet ports (one WAN, four LAN) and a built-in router.

Weve designed the Asterisk Appliance specifically for smaller companies and remote offices by packing it with features their users want, but in a very easy-to-use-and-manage solution, says Digium founder Mark Spencer. This is a milestone for Asterisk and for Digium as we make open source a meaningful option to small businesses.

In May, Samsung also announced the U.S. availability of its Ubigate line, which it rolled out in Asia last year. Specifically, the iBG 2016 is designed for small businesses and branch offices. The Ubigate iBG Series offers carrier-class routing, including MPLS; large switching port-density; unified threat management; and VoIP features. It supports both analog and digital voice interfaces, as well as IP telephony.

Vertical Communications rolled out in May its Xcelerator IP Business Communications System, an integrated SIP-based IP telephony, data router/firewall and wireless access point solution. In addition, Xcelerator IP customers can reduce monthly communications costs by combining voice and data links through SIP-based access solutions provided by one of Verticals certified Internet Telephony Service Providers.

In June, Linksys announced release 2.0 of its LinksysOne software as well as three new service routers (one is wireless) that provide the CPE component for this hosted solution. In addition, it announced that the product would be available on a subscription basis through several U.S. hosted solutions providers, including CommPartners, Hancock Telecom, NeoNova Network Services, SaskTel and Solution One.

The new software release 2.0 provides enhanced data and voice features, such as a PBX feature set that supports up to 100 users, multisite voice and data (up to five sites) and teleworker capabilities, as well as the ability to switch calls back and forth between mobile and desktop devices.

Low Cost & Simplicity

LinksysOne enables service providers to deliver office in a box on a subscription basis, which lowers the cost of entry by using a pay-as-you-go model. The CPE-based solutions also are designed to deliver low first cost.

Verticals Xcelerator, for example, ranges from $300 to $400 per user, depending on the number of users. A small business would pay more than $700 per user for Ciscos UC500 solution. ADTRANs NetVanta is around $500 to $600 per user list.

In contrast, pricing for the open-source Asterisk Appliance begins at $995 for VoIP-only and goes to $1,595 for eight analog device interfaces. This does not include the devices, but the appliance supports VoIP and analog phones so customers can use legacy equipment they already own.

While the lower price tags are important to the end users and key to sales, they can make it difficult for dealers to make money on small business clients. A critical component of these right-priced systems is that they are easy to install. Some are prepackaged and preconfigured for virtually plug-and-play installation.

This gives dealers the ability to get in and out of an installation quickly, so they retain the margin; or, in very competitive markets, to be aggressive on the price point and still make money. It also enables them to maintain and manage the systems remotely, further preserving margins from ongoing maintenance contracts. Samsung has cut out a lot of the labor to make it more competitive, says dealer Lange. Thats huge. Sometimes, you can keep the margins, but where we are, we need the price flexibility.

Outside of the Box

While there is a move to consolidate functions into multipurpose boxes, the need for such systems is up for debate.

Executives at TalkSwitch Inc., a company thats been providing communications systems just for small businesses since 1990, say that it sounds good in theory, but it doesnt always find a receptive audience. Our feeling is that networking gear for small businesses is robust and inexpensive, says Tim Welch, vice president of sales for TalkSwitch. We dont want to muddy the waters [with an all-in-one system]; we let the channel decide.

He says a dealer can increase a typical PBX sale by adding in networking equipment, UPS, cabling and installation.

Samsung dealer Scott Lange, assistant operations manager for I.T.I Inc., agrees that the office in a box concept is a hard sale. We are not seeing demand for it because of allegiances customers have to Cisco or 3Com for networking gear, he says. The primary market for it would be greenfield deployments with companies that have less than 25 users and that are unlikely to have an IT manager, he adds.

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Serverless System
Avaya Inc. has an interesting take on the small business phone system with its Quick Edition. Introduced in March 2006, Quick Edition does not have a server; all the intelligence is in the phones. Read about it online.

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