• April 26, 2007
  • By Marshall Lager, founder and managing principal, Third Idea Consulting; contributor, CRM magazine

SMBs Welcome Hosted VoIP

Just as SaaS found its first foothold among smaller businesses, hosted VoIP is gaining traction with SMBs because of low upfront costs and infrastructure requirements, according to a new study from AMI-Partners. "SMB Interest Perks Up In Hosted VoIP" points out the similarities in development between hosted business applications and hosted telephony; upstarts like NetSuite and Salesforce.com successfully challenged larger vendors and became innovators in the market, and the same is happening in hosted VoIP, with smaller vendors gaining expertise with their SMB clients and helping evolve the industry segment. According to the study, the hosted business VoIP market is blooming in North America. Hosted VoIP market spending in the region was $165 million in 2005, and is forecasted to grow to $1.57 billion by 2010, a CAGR of 56.9 percent. The report notes that the adoption of VoIP is higher in the United States than in Canada. As the U.S. SMBs are able to realize greater toll savings and have a greater incentive to migrate to hosted VoIP, it is expected that the Canadian hosted VoIP market will continue to lag behind the U.S. market, the report says. "If you look at small businesses, especially those with fewer than 15 employees, they are expressing a clear need for simple, secure, easy-to-use VoIP," says Sanjeev Aggarwal, vice president of SMB IT infrastructure solutions at AMI-Partners and report author. "If they can, they prefer to get it in a hosted manner because it gives them a better professional presence. They also appreciate the ability to pay per user, per month with no up-front investment as they would have with a traditional PBX." He notes that the sorts of businesses that are most likely to adopt hosted VoIP include startups, small wholesale firms, small retail businesses (including restaurants, doctors' offices, and similar concerns), and service businesses with highly mobile field forces. In contrast, there is less of a market for broadband VoIP, a consumer version of the hosted VoIP offering delivered over the public Internet. "Broadband VoIP providers like Vonage and Skype...do not operate their own networks and cannot guarantee levels of service," the report states. "Consumers are the primary target for these providers. These services can also be useful for very small businesses (one to five employees) with need for a limited number of access lines and where voice communications [are] not critical." The types of SMB that would use broadband VoIP are limited to small businesses with fewer than five employees that are not yet ready to make the move to business-class VoIP, according to the report. The number of hosted VoIP seats is forecasted to increase greatly as more SMBs adopt VoIP, growing from 393,967 seats in 2006 to 3 million seats by 2010. This represents a change in market penetration of hosted VoIP seats from less than 2 percent in 2006 to over 7 percent by 2010, a CAGR of around 65 percent. "All types of vendors, small and large, are showing high interest in hosted VoIP," Aggarwal writes. "However, the small nimble companies are the prime innovators and trendsetters--the ones that will evolve VoIP from a low-cost alternative to PSTN telephony into a unified communications solution with functions and features integrated into virtually all aspects of SMB operations." Related articles: Five9 Hosts SMBs' Call Centers
VoIP Has Too Much Variation for SMBs HREF=http://www.destinationcrm.com/articles/default.asp?ArticleID=6728>SMBs Find Commonalities and Differences
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