VoIP Industry Getting ‘Busy Signals’ from Small / Medium Businesses (SMBs)

A study of 300 SMB decision makers, and an analysis of the product and pricing strategies of major VoIP providers, conducted by the technology consulting firm Savatar and presented at the Fall VON 2005 Conference this week in Boston, reveals that the SMB market is ready to move to VoIP. Yet, in contrast, the study also shows that VoIP providers have not tuned their sales processes or their pricing and offering strategies for this market, and that SMB decision makers are unclear where to turn for the best VoIP options.
he major findings of the study demonstrate that the SMB market is still wide open for VoIP players who want to seize this growing segment of the industry:
Key Findings
* There is more work to be done in educating the SMB market about VoIP.
While there is general familiarity with VoIP (24% and 51% are “somewhat
familiar” or “familiar”), a striking 25% of SMB companies are
“unfamiliar” with VoIP and its advantages.
* Current pricing and service offers will likely create a commodity
spiral in the next 18 months — offering breakout opportunities for
companies who shift their positioning from a Return-on-Investment (ROI)
pitch to Total Cost of Ownership (TCO) models. Lowering monthly
recurring charges is a primary driver for most of this market (74%
indicate MRC as “compelling” or “very compelling”), yet lowering TCO
and easing administrative costs were almost equally important (73% and
68% respectively) for SMB decision makers.
* The SMB segment is wide open for traditional or new players to capture
the market. Respondents were evenly divided among traditional and non-
traditional telcos, ISPs, cable operators and equipment providers as to
who they might turn to for VoIP service. Thirteen percent weren’t sure
who to turn to for VoIP solutions.
* Traditional telcos, ISPs, and cable operators who have already deployed
VoIP aren’t succeeding in the high-touch, high-cost sales process
needed to convert this market. They may need to turn to channel
partners who have stronger knowledge of the product and can offer a
more “consultative selling” process.
* There is a growing opportunity in the SMB market for providers to offer
related services such as Web collaboration tools, email hosting, and
high-speed data services as part of new VoIP offerings.
* VoIP delivery models — premise-based or managed services — are not
well understood by the SMB market. More than 50% of the respondents
weren’t aware of the different internal and external delivery options
available to them.
“The small and medium business market is that gem the entire VoIP industry is chasing, yet this segment isn’t well educated about the benefits of VoIP,” said John Macario, president of Savatar. “VoIP providers are struggling to reposition their product, services and pricing for SMBs, and are looking at some dramatic changes in their sales processes, service offerings and pricing structures to reach and serve this market.”
One element of the study was an in-depth analysis of product, pricing and service offerings, as well as an examination of the sales processes used by leading VoIP providers. The analysis revealed that traditional telemarketing and high-touch sales meetings are either not working or not sustainable in this market.
“The data shows that SMB decision markers are pretty sophisticated and need a more consultative sales process, not just a sales call touting a bunch of features,” said Richard Grange, president and CEO of New Global Telecom (http://www.ngt.com/), one of the sponsors of this study. “We see the VoIP industry turning to channel partners who can help penetrate this market.”
This study, unveiled at the Fall VON 2005 conference, offers one of the first detailed views of the SMB VoIP market and the product, positioning and total cost-of-ownership factors that will drive this industry segment.