Small: The Next Big Thing?
Published reports have stated that small and mid-sized businesses (SMBs) will account for between 40 percent and 60 percent of all IT spending over the next few years. With numbers like these, it’s hard for speech technology vendors not to take notice. Already, many are expanding their marketing and development efforts to target the estimated 66 million non-enterprise customers, which account for roughly 70 percent of all firms worldwide. When it comes to speech-related product and service offerings, many speech industry insiders are calling this the year of the SMBs.
For AIM International, a Nampa, Idaho-based supplier of health and nutrition supplements, the watershed was actually three years ago. At that time, the mid-sized company that ships 25 product varieties to customers in the United States, Canada, the United Kingdom, Australia, New Zealand, and South Africa turned to LumenVox for a call center application that it believed could put it on a level playing field with much larger companies.
Like so many SMBs, AIM did not initially need or want a lot of bells and whistles with its call center application. Its caller menu currently contains just three options, allowing its independent brokers and distributors to call in to find out about new products, get information on promotions, or be transferred to a live agent to place an order.
But, just because it’s a simple application, that doesn’t mean it’s not important. “We get about 1,000 calls a month, so it’s definitely being used,” says Delia Jimenez, a technology analyst at AIM.
The company chose LumenVox because its application was inexpensive and easy to use and maintain, she says. “Ease of use was the deciding factor. We wanted something that we could set up and do everything on our own. We felt we could take this on ourselves after just a few days of training.”
For SMBs of all types and sizes, these factors have always been, and will continue to be, the keys to any speech implementation. “Cost is certainly a portion, but there are many other things as well,” explains Gerd Graumann, director of business development at LumenVox. “Enterprises are large businesses with large budgets, and they can allocate a lot of time, money and resources [to a speech application]. It doesn’t work that way for SMBs.”
“For the majority of SMBs, it’s not about the technology; it’s about flexibility,” says Caroline Leathem, a consultant at Fluency Voice, a firm that specializes in designing call centers for SMBs. “Smaller companies are likely to want applications that they can get up and running quickly and cheaply. “It’s unreal to expect a lot of SMBs to invest a lot of money in voice talent, VUI design, etc. It’s been better to train them on how to set up their own recording environments and design their own prompts. It’s better to have them own the application and the prompts so they do not have to pay again if they have to change anything,” she says.
As with any speech application, there’s an extensive tuning process, such as changing grammars and pronunciations or adding or taking away voice prompts, that has to occur on a regular basis. “If you can do that in house and not have to send it back to the vendor, it lowers costs,” Graumann maintains.
Because of the complexity of deploying and tuning applications, many smaller companies, Leathem asserts, are still locked into touchtone-based IVRs. Many also have been hampered by the fact that they don’t have the budgets for more specialized and sophisticated speech technologies. “For the smaller companies, it’s about taking the load off the agents, so they are likely to just have basic call routing, a basic IVR where there’s not a lot of interaction, and caller ID,” Leathem says.
Changes Are Coming
But all that is starting to change, as a vast majority of SMBs now are starting to look at more sophisticated offerings, like speech-enabled IVR self-service, IP telephony, and unified communications, as a way to attract more customers while boosting employee productivity.
“Among SMBs, we’re starting to see a lot more market pull rather than vendors trying to push things out to them,” Graumann says. “We’re moving from early adopters now to more mainstream.”
“Especially in the mid-market, a lot of companies have something rudimentary in place already and now want to replace it with something more sophisticated,” says Jim Dvorkin, chief technology officer at Five9, a hosted call center solution and equipment vendor to a number of U.S. SMBs.
Among those speech applications, Voice over Internet Protocol (VoIP) is expected to make the biggest splash in the SMB space. According to New York-based SMB analyst firm AMI Partners, the global SMB market for VoIP solutions grew by 26 percent in 2006 to about $3.26 billion, and is likely to grow by more than 65 percent over the next five years.
The key reason so many SMBs are becoming interested in VoIP is the cost savings that come from communicating over an Internet connection, even for long-distance and international telephone toll calls. Beyond that, companies are finding great appeal in the idea of a single converged network for voice and data; streamlined communications; and new functionality, like video and voice conferencing, unified messaging, find-me/follow-me, call logging and recording, and shared access to contacts, calendars, and documents, that are now possible with IP telephony.
“When I was introduced to VoIP, I fell in love with it. It was clear to me that this is the future of telecommunications,” says Keith Trawick, president of Intrannuity, a New York IT integrator, consultant, and management firm that runs an IP-based customer call center and help line with fewer than 100 employees. New York-based M5 Networks is its service provider. “What’s compelling is the aggregation of voice and data over one network, taking the same infrastructure and using it for both voice and data,” Trawick says.
At one point, Intrannuity was a pioneer in its use of VoIP, having been one of the first customers to sign with MCI/Worldcomm when it offered the service a few years ago. “It was a tremendous risk,” Trawick says, “but I’ve always been a risk-taker, and the business case was so overwhelming that we were willing to take the risk.”
“Compared to then, I think we’ve [seen] the tipping point and are now on an irreversible trend toward this technology. It’s getting harder and harder to make the business case to do it any other way,” he continues. “It will only be more and more difficult to choose the old ways of doing things.”
While M5 designed its VoIP and call center applications specifically with SMBs in mind, it is certainly not alone in that respect. Many more vendors, even those that did not previously pay attention to the SMB space, are starting to tailor their solutions for companies with fewer than 1,000 employees. Nortel, which has a 20-year history of marketing to SMBs, in May launched a special campaign that offers features like integrated voice and data, mobility, call routing based on agent skills, and unified messaging, all built specifically for SMBs. The program, called My Business, is designed to “prepare SMBs for the productivity gains that are possible with unified communications,” says Michael Segura, director of SMB and data marketing programs at Nortel. “Despite their size, they still need to communicate on time and effectively with their business partners, customers and employees,” he maintains.
Nortel also recently partnered with IBM to deliver the IBM Lotus Sametime unified communications and collaboration platform with Nortel’s suite of VoIP and multimedia technologies in a single solution that runs on a single system. “The Nortel-IBM System i unified communications solution will be designed to run the business processing and real-time collaboration needs of a small or medium-sized business simultaneously with IP telephony on a single system so IT employees can focus on the business, not managing technology,” says Mark Schearer, general manager of IBM System i.
Other long-standing service providers are now targeting the SMB market as well with VoIP services and pricing plans specifically tailored to their unique needs. “This market segment for SMBs is becoming fiercely competitive as vendors are developing and implementing solutions specifically designed for SMBs,” says Sanjeev Aggarwal, a vice president at AMI Partners.
Among SMBs, companies with fewer than 100 employees will generally look for very basic voice-only services, while mid-sized firms (with between 100 and 1,000 employees) will move to a more advanced unified communications solution, Aggarwal predicts.
Over the past few months, AT&T, Avaya, Alcatel-Lucent, Broadsoft, Cisco, IBM, Microsoft, Sprint, Skype, and many others have all introduced IP telephony initiatives targeting SMBs. And the SMBs are responding. Since partnering with Netgear to deliver an IP telephony solution with functions like an auto attendant, conferencing, unified messaging, and call transfer to a mobile phone, for companies of 20 employees or less, Avaya in early June announced that it had sold its 100,000th such system. It estimates that those systems cover roughly 3.6 million users around the globe. “Businesses are clearly recognizing the next wave of competitive differentiation will be built on a foundation of IP telephony,” explains Lou D’Ambrosio, president and CEO of Avaya.
GotVoice has also seen a huge uptick in the SMB space for its voicemail-to-email solution that lets businesses receive, save, playback, and forward their voicemails as MP3 files in an email or at the GotVoice Web site without having to upgrade or replace their existing phone systems. The solution, called GotVoice Business Services, is priced at less than $50 per month for five users. It can be set up in just a few days by providing GotVoice with a work phone number, voicemail access number, and voicemail password, and also supports mobile and home phones, enabling users to manage all their voice messages in one place. “By helping businesses manage voicemail like email, GotVoice is bringing a new level of efficiency to the workplace, especially for small and medium-sized businesses who cannot afford to invest in a new phone system. Using GotVoice, businesses can supercharge their corporate voicemail without breaking the bank,” says Curt Blake, CEO of GotVoice.
Cable’s Getting Into It
Even the nation’s two largest cable operators, Comcast and Time Warner, are starting to roll out comprehensive voice services for the SMB market. Comcast’s new SMB focus will involve firms with fewer than 20 employees. Company executives estimate that there are between 3 million and 5 million such firms within its service areas, representing a revenue opportunity of between $12 billion and $15 billion a year. Brian Roberts, chairman and CEO of Comcast, says his company can capture 20 percent of the SMB market over the next five years, and plans to spend about $3 billion over that time period to do just that.
Similarly, Time Warner executives outlined plans to launch a Business Class Phone service this year. Officials there say they will make this offering, also tailored for SMBs, available by January 2008.
In making their SMB intentions known, Comcast and Time Warner join Cox Communications, Cablevision, Charter Communications, and a handful of other cable/satellite providers in moving their phone service beyond their traditional residential customer base. And in so doing, the cable companies have gotten the SMBs to notice them, so much so that industry watchdog Insight Research Corp. predicts that traditional phone companies will lose more than 1.5 million SMB lines to cable/satellite providers by the end of this year, and nearly 10 million SMB phone lines by 2012.
But to reach this market, which is dominated by companies with limited budgets, IT expertise, and other resources, technology vendors and service providers are finding that they need to bundle and price their offerings to make them more appealing to SMBs. Many are now offering their solutions in a hosted or on-demand format, where all the equipment, software, and other components are managed by an outside firm for a monthly service fee or on a per-use payment structure.
The market opportunity for hosted business VoIP solutions for SMBs is huge and growing rapidly, AMI Partners’ Aggarwal says. Spending among North American SMBs for hosted VoIP solutions, his company found, is set to reach $416 million this year, up from $164.9 million in 2005, and will cross $1.56 billion by 2010, at a combined annual growth rate of 56.8 percent. Adoption is expected to be highest among small businesses with between 10 and 50 employees.
Let Someone Else Do It
According to the same research, the number of hosted VoIP installed seats in the North American SMB market was 393,967 in 2006 (representing a 2 percent penetration), and is expected to rise to about 3 million seats by 2010, representing a market penetration of 7 percent.
“SMBs are getting used to doing things in a hosted fashion. They are already implementing hosted solutions for collaboration, business applications, and infrastructure solutions,” Aggarwal says.
The benefits those businesses can expect from a hosted VoIP solution go far beyond the cost savings of up to 75 percent on their monthly phone bills. “Hosting offers companies an attractive alternative to own-your-own solutions because it reduces their upfront investment costs and places responsibility for ongoing technological maintenance and development in the supplier’s hands,” explains Jim Hennigan, executive director of Eckoh. “Return on investment is achieved in a matter of weeks or months and total cost of ownership significantly reduced.”
Typically, the hosted model brings predictable monthly voice communications expenses with no up-front capital expenses. M5’s hosted service, for example, comes with a monthly cost that includes a connectivity fee per location and a fee per user. Users can expect to pay roughly $50 per month per person. Five9’s pricing structure for its hosted, multitenant call center offering includes a monthly per-user charge and a yearly contract. “The alternative is laying out $100,000 or more up front,” Five9’s Dvorkin explains.
“On demand is the affordable alternative to buying a lot of equipment and a software suite with automatic call distribution, IVR, CTI, predictive dialing, quality monitoring, voice recording, etc.” he says. “The only things you need are a [PC running on the Windows operating system], a headset, and an Internet connection.”
A hosted solution solves the problem of having to buy a big phone system and then not having the people to run or maintain it, says Jeff Silbert, vice president and chief marketing officer at M5. “For SMBs, we are that team.
“Instead of having to buy a big phone system and have it sitting in a room, you can buy a phone and have all the background stuff as a service,” Silbert says. “And almost everything available is included in the service, including call center, find-me/follow-me, unified messaging, voicemail-to-text, and integration with contact lists and calendars.”
“Small business owners don’t have to worry about having a full-time IT person on staff to manage their phone system,” adds David Politis, executive vice president and general manager of Vocalocity, a VoIP service provider that is running a campaign to give 500 free minutes of VoIP calling time to SMBs as a way to introduce them to the service. The offer also includes access to a wide range of calling features, including auto attendant, voicemail-to-email, find-me/followme, music-on-hold, simultaneous ring, conference calling, and call queuing.
“We certainly spend less with this than with an on-premises solution, but it’s the value proposition that is more attractive,” Intrannuity’s Trawick says of his hosted VoIP and call center solutions from M5. “As an SMB, we are in an economy today where things are so fluid. There may be times when we scale up or scale down, ramp up with a new office, or set someone up remotely, and those things are so much easier to do with a hosted solution than if we had an on-premises solution.”
And updating the technology is flawless and automatic. “We can also be confident that we’re always on the latest version. We don’t have to worry about the technology becoming outdated,” he continues.
Additionally, the ability to add things like videoconferencing and other unified communications applications has made a huge difference in Trawick’s business. “If we use someone else’s tools, we can pick and choose more,” he says.
It’s the same for AIM International. The company hopes to automate a number of other pieces within its call center. “We’ll be adding other options as we go along, like functions for our resellers, the ability to check a shipment’s status, and order placement,” Jimenez says. “When we set up our system, we found that our callers really want to check on the status of their orders.”
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