The landscape of VoIP, hosted PBX, UCC, and Internet telephony in general is constantly changing and evolving, not just from a technological standpoint, but from a business perspective as well. We at GetVoIP are dedicated to getting the best information and analysis not just from our own team but from outside experts as well. With that said, we bring to you a roundtable discussion with some of the biggest names and best minds in the field of VoIP, on the state of the industry in 2014.
Meet our VoIP Expert interviewees:
First and foremost, I’d like to sincerely thank everyone below for sharing their invaluable expertise and for giving their time to the interview. Without further ado, meet…
Jon Arnold (@arnoldjon): Jon is Principal of J Arnold & Associates, an independent IP communications analyst and consulting agency. Jon is a noted public speaker and can be seen giving speeches at industry events and private engagements. He is a frequent contributor to UCStrategies, Ziff Davis, and TMCNet.
Ronald Gruia (@rgruia): Ronald is a director at Frost & Sullivan, covering emerging and expanding telecoms. In addition to his work there, he has written for many publications, including VoIP magazine and Telecommunications Magazine. He also speaks publicly at events.
Dave Michels (@davemichels): Dave has 20 years of experience in research and analysis in the telecommunications arena. He is a frequent contributor on his own blog TalkingPointz.com, NoJitter.com, and UCStrategies.com. Dave oversees the Innovation Showcase at the industry trade show Enterprise Connect.
Brian Riggs (@brian_riggs): A member of Ovum's Enterprise Team, Brian looks at the market for hosted and UCC services both in the cloud and on-premise. He also contributes to NoJitter.
Blair Pleasant (@blairplez): Blair Pleasant is President & Principal Analyst of COMMfusion LLC and co-founder of UCstrategies.com. Her 20 years of experience informs her research analysis aimed at helping her end-user and vendor clients both tactically and strategically.
Irwin Lazar (@imlazar): Irwin is VP and Service Director at Nemertes Research, where he manages research projects, develops cost models, conducts seminars and advises clients how to best navigate the dynamic telecommunications landscape.
JON: Awareness of VoIP has been growing for years, and a big adoption holdback for smaller businesses has been a lack of simple options for buying. The technology has long been available, but the right value proposition requires a lot of things to fall into place. One is an easy deployment model, and that has come into focus now with the rise of hosted VoIP services in the cloud. Another would be the ability to support the needs of end users wherever they are. Today’s offerings go beyond the desk phone, and include things like mobile integration and on-demand video conferencing.
In terms of biggest development for 2014, I think we’ll see the emergence and acceptance of cloud-based VoIP offerings that can be run completely from the Web. This means the business can provision and manage everything online, and literally have the entire voice infrastructure virtualized, running solely from the cloud.
RONALD: The CPE refresh cycle of the existing aging TDM base began last decade, with the migration from circuit switched to packet switched solutions(“pure” IP LAN solutions and hybrid converged systems). Most of the adopters of CPE-based VoIP are medium and large enterprises, while SMBs mainly remained sidelined choosing a simpler option such as IP-enabling their existing TDM equipment or deploying SIP trunking just to get used to VoIP. On the hosted IPT side, based on the success of SIP trunking, many pundits expect a healthy year. However, the hosted IPT numbers are not quite there yet. The discrepancy lies in the fact that the sale of a VoIP/SIP trunking line is a lot easier to make than the sale of a hosted IPT seat, which is more involved than pitching the 20% OPEX savings, the IAD concept and its benefits.
I believe that 2014 can be a good year for VoIP overall because the SMBs will begin making that incremental purchase alongside the SIP trunking by deploying solutions that allow them to leverage their legacy endpoints at afraction of the cost of buying brand new IP phones. Therefore SMBs will migrate to VoIP more gradually than by undergoing the traditionally prescribed VoIP forlklift upgrade.
A key development to watch is the advent of SDN (Software Defined Networking) alongside NFV (Network Function Virtualization), which will boost the hosted IPT segment as larger enterprises will incur additional benefits, such as the programmability of the network, and the flexibility of SDN (openness via efforts such as Project OpenDaylight, OpenStack, etc.).
I am unsure what studies you are referring to. The year of VoIP came and went. It was followed by the year after VoIP, the Year of Excuses, and then The Year of Laggards. There's still firms hanging on to their digital phones because they work, but the costs of maintaining and using that stuff long ago favored replacement. That's all just the telephony stuff – factor in all other applications that VoIP enables such as mobility, teleworking, and integrated applications and the case gets stronger. Yes, there's still lots of TDM out there – and some people still FAX. Perhaps this Year of VoIP you speak of is like a retro trend or memorial like Presidents Day?
BRIAN: 2014 will be the year that cloud becomes real for many enterprises and SMBs considering an alternative to premise-based communications systems. The underlying platforms for cloud-based UC have reached a level of maturity so they are longer changing radically from years to year, and the number providers offering cloud-based UC services has risen dramatically. This will result in more businesses trialing and then fully deploying cloud-based UC than we have seen in recent years.
Businesses of all sizes are definitely looking more closely at the cloud, and many recognize that hosted offerings make more sense than premise-based solutions. The days of evangelizing are over, and companies now recognize the business value of hosted VoIP solutions. But there are so many different options, that it’s a bit confusing for customers. There are pure-play cloud vendors, traditional carriers and service providers, and most of the legacy vendors now offer hosted VoIP services. It’s hard for companies to determine which solution makes the most sense, and which will provide the capabilities, reliability, QoS, and other things that they require. Security is still the big issue that’s holding back many companies, especially those in health care and financial services.
I'm not sure what you mean by “Business VOIP” Nemertes' benchmark research from more than 200 companies shows that about 28% of companies have fully deployed VOIP, another 52% are aggressively deploying it (meaning they are phasing out existing TDM systems) while 10% are maintaining their TDM and only moving to VOIP where they have to (e.g. new facilities, to replace failing equipment). About 2% still have no plans to move to VOIP.
If you are referring to cloud VOIP, our research shows that 23% of companies are using or planning to use services, with another 17% evaluating such offerings. the percentage of companies with no plans around cloud VOIP fell from 75% in 2012 to 59% in 2013. Still, most adopters are small-mid-size companies though larger companies are increasingly evaluating such services.
JON: In simple terms, these changes mean that the value a service provider brings will be based less on operating a physical network, and more on the applications that customers will use. The need for a physical infrastructure doesn’t go away – at least just yet – but the real differentiation comes from delivering a great user experience. For operators, they will have to become more savvy with applications – otherwise, new players will enter and do the same using the operator’s network.
For businesses, this creates more choice, which should be a good thing. However, this puts the onus buyers to do more research in evaluating these options, especially when considering offerings from outside the realm of known and trusted operators.
VoIP service providers will attempt to make that extra incremental sale of IPT alongside SIP trunking particularly to SMBs, by making the requirement upfront investment much smaller. The SDN transformation will require early adopter business VoIP providers to re-architect their network, consider the vendor of choice for the controller, and the “southbound” protocol to use (e.g. OpenFlow, NetConfig/Yang, etc.).
DAVE: Year of the Cloud is something else. I expect the rapid growth of hosted voice and UC to continue for some time. Why carry all that risk around technology, size, future requirements, etc. when a service provider wants to carry it for you? I think SPs need to be looking very carefully at how they enable Line of Business applications. Voice, as a stand alone service, will begin to level – but the hockey stick part relating to business apps is just beginning.
BRIAN: Business VoIP service providers will see increased customer interested in hosted UC services that deliver the full set of UC features, not just network-based telephony functionality that has been around for years and years. Whereas before providers could get away with offering only telephony-cenrtic IP Centrex-type services, they will need to also deliver established and mature hosted UC service offerings.
I expect 2014 to be the year of the “cloud shakeout,” with vendors and service providers jockeying for position and trying to get the attention of customers. I think we’ll see a lot of changes for some of the hosted business VoIP players – some will merge, some will get acquired. There are too many companies right now trying to get the attention of businesses, and they need to differentiate themselves somehow.
I think the biggest trend we see among service providers is the broadening of service offerings to include video, contact center, and web conferencing. In addition, there's growing demand for integration across cloud services so if I'm buying VOIP from one provider, i should be able to integrate with other cloud services like Salesforce, Google, Box/Dropbox, etc.
JON: Only one scenario is possible – lower prices and possibly a race to zero. Lots of innovation here is well underway – on two fronts. First, the UC platforms continue to tack on new applications, although it’s too early to tell which combinations will actually gain adoption. Second, UC vendors moving quickly to cloud-based options – with many being solely hosted.
In general, supply is ahead of demand with UC, and moving to the lower-cost cloud model seems like the best way to accelerate adoption. There’s a lot of competition out there, and since many UC platforms are similar, price becomes the best way to close deals. As such, expect to see aggressive pricing, made possible primarily by the attractive economics of the cloud.
RONALD: UC and collaboration is yet another instance of an incremental sale. In the old modus operandi, whenever the key underlying system (e.g. TDM PBX) was refreshed, so was the existing voicemail or unified messaging solution. This continues today with IP PBXs and UC. The question lies in the incremental investment required and whether or not there is a tangible (i.e. “hard dollar”) justification as opposed to the traditional “soft dollar” pitches that were made in the past. The advent of the CEBP concept certainly helped, but this is still mostly an investment that finds its sweet spot in the medium/large enterprise segment as opposed to the more cost-conscious SMBs. The latter group might be more receptive towards partial UC solutions that build incrementally on the older infrastructure. But for hosted solutions, since the initial CAPEX is low, the difference in monthly cost might be a bit easier to digest and as such, the UC premium might become more palatable to SMBs.
DAVE: Voice itself is a commodity. There's no loyalty to it. There's no profit in it. Providers need to deliver more if they want to keep their customers. More means things like presence, video, mobility apps, and APIs. The cloud is growing so quickly that channels can grow for now with just basic services. They will do all the hard work of converting the customer to a cloud mindset and maybe even selling them SIP phones. When the market begins to slow, there's going to be rapid consolidation and elimination. UC, collaboration, and integrated solutions are the keys to long term success.
BRIAN: I don’t think we are going to see the prices of hosted UC service plummet in 2014, if that’s what you’re getting at. Operators have made huge investments in the infrastructure required to deliver the services. They need to recoup their investment and deliver a profitable services. If a huge discrepancy in pricing does emerge it’s likely that vastly cheaper services will be vastly cheaper in quality.
We’ll see more bundling and packaging, as providers try to offer the features and capabilities that different types of business customers need. Pricing won’t go down, but more capabilities will be added to bundles and packages, such as conferencing, enhanced mobility, etc.
IRWIN: I think you'll see more ala-carte type service offerings where one can buy what they need for specific groups of users.
JON: There are definitely ways to make the buying process easier for VoIP, especially online. As mentioned earlier, more and more VoIP elements are becoming cloud-based, and we’re at a point now where almost everything can be done this way, including the buying process. Potential buyers can even use click-to-call from their PC and experience VoIP first hand while talking to a sales agent or a technical specialist to properly assess your needs.
The main reason for this trend is that today, telephony is primarily a service, where the VoIP applications are the main attraction, not the handsets. This is completely opposite to legacy telephony, where POTS was a simple buying decision, and all the attention was focused on the hardware, namely the phone system.
RONALD: The difference between SIP trunking and hosted IPT solutions manifests itself in the length of the sales cycle for the two solutions as well: the average length of the sales cycle for a SIP trunk is only roughly two weeks. On the other hand, the average length of the sales cycle for a hosted IPT seat tends to be around two months, which is about four times as long when compared to the VoIP trunking sales cycle. This is consistent with the fact that the hosted IPT sale is much more difficult, as customers need to evaluate the solution, determine extra costs for writing off their existing equipment and refurbishing their infrastructure including LAN and desktop phones. A business case needs to be made and the enterprise needs to evaluate it before making the decision of whether or not to embark on the hosted IPT path.
In order to speed up the process a few things might help – one is being able to leverage a trusted third party ROI calculator that can allow the customer to perform various “what if” scenarios. Another is to use customer testimonials that can corroborate/quantify actual tangible sales due to IPT.
DAVE: This is a complex one. I agree it is too complicated now, but the solutions to fix this are not universal. The issues and priorities vary significantly among the providers. Top issues are in the areas of the endpoints, analytics, provisioning, security, apps, customer service, and go to market messaging. I can say that in the last 24 hours I went through setting up Outlook and setting up phone service on a new PC. One took about three times longer plus two support reps and it was't Outlook.
Some cloud-based providers already make it easy for customers to sign up for services over the web, and don’t have to speak with a sales rep. That works well for small businesses. For mid-sized companies, the process will be sped up with new bundles and packages I referred to earlier. For large enterprises, there’s still a lot of complexity and I don’t see it going away any time soon. There are issues of integrating with legacy equipment, integrating with existing applications and business processes, etc.
IRWIN: I think you are already seeing companies move to simplify web-based ordering or even allow ordering through sites like Staples.com. But given the complexity, most purchases will require interaction with a sales team (and providers are already differentiating themselves on their ability to provide customized service). In addition, as the hardware providers move to the cloud, they need to maintain their sales channels.
JON: Short-term, you can compete on price, but to stay in the game you have to position VoIP as a value-added productivity application instead of a commodity service. One way to do that is keep offering legacy telephony features for free, such as 3-way calling, call park, caller ID, voicemail, etc. Legacy customers may have these already, but chances are they’re paying extra on an a la carte basis.
After that, you can layer on free features that legacy service cannot provide, such as visual voicemail or call recording. From there, you offer a premium-priced VoIP package that includes enhanced versions of these free features, such as unlimited call recording versus a free version that only lasts a few minutes.
To really differentiate, though, you have to offer features that are more customizable. VoIP is very flexible by nature, and you can take advantage of that by developing packages or suites of voice-based applications that cater to a specific type of business. For example, medical offices, retailers, or restaurants. By thinking of customers in terms of vertical markets, you can add value to VoIP that’s distinct for their needs, and once you find a niche, you can own it by continuing to add more features.
RONALD: I believe that differentiation comes from delightful customized experiences for the end customer. These also enable the VoIP operator to command an extra premium versus the competition. The differentiation also comes via a quicker time-to-deploy, expertise in related cutting edge technologies (e.g. wideband CODECs such as G.722, Lync, WebRTC, HTML5, etc.) and proven ability to create value (customer pedigree, testimonials, etc.).
DAVE: The technical disparities among solutions are reducing. The big opportunity is an intuitive experience, and that includes the getting help process. Too many solutions are focused on the easy stuff – making a call, retrieving messages, etc. The stuff that needs to be equally as intuitive include video, feature management, mobile clients, changing a password, headsets, etc. When these things are not easy, I hear excuses and I'm not interested in excuses.
BRIAN: WebRTC should help with this in the near-term. Right now, WebRTC is more hype than reality. Sure, you can find services that incorporate it, but these tend to be far from business grade. Many of them are more test beds than anything else. Service providers of all stripes should have WebRTC in their labs and in the process of becoming the basis of productized UC services. Dragging their heels will give smaller, more nimbler application developers more of a head start in delivering innovative new communications and conferencing services based on WebRTC.
IRWIN: Customer service, integrated, bundled UC features (e.g. video, conferencing, contact center, mobile clients) and integration with other cloud services (e.g. salesforce, google, office365, etc.)
BLAIR: Vertical specialization, superior customer service and support.
Voice communication is becoming more part of a larger suite of features that each provider offers. Voice minutes, quite simply, are super cheap, and can be transmitted over the PSTN, SIP trunks, hosted or on-premise IP hardware, cellular networks, and so on. So the key to success in 2014 and beyond will be offering more features, and just as importantly, intuitive interfaces so that end-users can efficiently use said features. 2014 will undoubtedly be the year of cloud-hosted communication. But the year of VoIP sounds much more succinct.