VoIP Industry Newsletter: Hosted PBX - Why it Finally Makes Sense for Small and Medium Businesses

Feb 2010

Micah Singer, VoIP Logic

For years we have seen lists like “Top 10 Reasons to switch to a Hosted PBX” or “the Advantages of a Hosted PBX.” More recently, though, we are seeing a serious push among five to 100 person companies to consider a ‘hosted PBX’ as a viable option as they do periodic upgrades of various IT systems. According to the 2004 year filing of business census data in the US there are over 2.3 million businesses in that category with total employees of over 35 million. This amounts to a large target market— at $25 per user per month- valued above $10B in annual telephone service billings, not to mention additional add-on revenue from IT Services and LAN management.

I’d like to offer a few general reasons why this is happening now rather than a few years ago or a few years hence. Keep in mind that this is a short article, and much more detail can be found on these topics through this newsletter and elsewhere on the Internet.

There are several reasons why this is a notable time for selling Hosted VoIP services and, in particular, for establishing a Hosted PBX customer footprint. I would be happy to elaborate or discuss any of these in much more detail – drop a comment if you are reading this on our website.

It’s helpful to parse this discussion into two broad categories: General economic/business factors and VoIP-specific technology factors.

General Factors

1. More robust data networks are available including the public Internet. Video has really pushed operators to expand their network capacity quite rapidly.
2. The growing dominance of IT Services and LAN services companies makes voice/VoIP a logical add-on.
3. There are strong market trends towards integrated applications. Voice integrates nicely with many different service models. Google Voice is probably the current leader in demonstrating this on a large scale.
4. The prevalence and acceptance of “Cloud” services, applications, etc., makes SIP/VoIP telephony sales more acceptable.
5. The rise of telecommuting and a perpetually shifting workforce has transformed Hosted PBX advanced features from a ‘nice-to-have’ to a ‘must have’.
6. There is a trend to IT outsourcing – perhaps similar to point 2 above – that puts Hosted PBX as another core function you can outsource – a menu item, rather than a special of the day.
7. Economic conditions have led small businesses to look more closely for efficiencies, especially ones that help cut costs and improve operations.

VoIP-specific Technology Factors

1. There have been numerous successful scale deployments in the past few years, increasing the level of confidence of a positive outcome on any given deployment.
2. Coupled with factor 1 above, the trial and error period of VoIP deployments seems to be ending, meaning that most service providers are fully aware of vagaries of software and hardware systems required to keep customer premise systems operational.
3. There is a normal telecom purchasing cycle that takes place about every ten years, focused around the ‘0’ year. There is an uptick in purchasing also after delayed 2009 capex budgets.
4. Most PBXs, whether onsite or hosted, are rapidly becoming obsolete if they are not using VoIP technology. This means fewer software patches and upgrades, and often an end-of-life announcement.
5. Smart Hosted PBX providers are doing a better job of selling their services. Coupling the telephony component with other IT Services such as Hosted Exchange or OCS, and data services such as MPLS, removes network problems and many of the inconsistencies from the service offering.
6. Better quality. This reason reiterates all of the other points to some degree. The fear of quality risk hindered growth of Hosted PBX in the enterprise in the past.
7. Great features and integrations are available using VoIP. Most people still only do basic work on their phone. With more remote workers and more points where integrated applications such as email, salesforce, mobile devices can improve efficiency, VoIP technology is now a homerun. Also, many non-VoIP systems are not even bothering to build the newest features, thus embracing the inevitability quotient.

It is an exciting time to watch VoIP technology grow in prominence and ubiquity. At VoIP Logic we hear about, bid on, and/or deploy many different service applications for VoIP and its sub-protocols – it’s a fascinating intersection of technology, communications, and services, and hopefully our passion for the space comes through a bit in this newsletter.

micah@voiplogic.com

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