Getting a grip on the vertical markets
Voice and data vendors have been trying to concentrate their sales and marketing resources on specific vertical markets. But their resellers are interested in making a buck in whatever verticals they can. Martin Courtney considers both points of view
Vendors are competing so intensely over growing demand for IP telephony (IPT) technology that many of them have sought out market niches away from the more exacting middle course.
In the shelter of a vertical market, a vendor can build up its strength before trying the choppy, open waters with a general sales strategy, said Keith Humphreys, managing consultant at market research firm EuroLAN.
For example, Cisco has focused on banking, finance and insurance, which it has “pretty much sewn up”. Any other vendor wanting to get into finance should be very careful, Humphreys said.
Vendor 3Com is another example to prove the theory. According to Mike Valiant, market development director for enterprise voice, it is targeting the public sector, most notably education, healthcare and local government,
Valiant said these sectors have shown interest in everything from basic telephony, including voicemail, to complete systems, such as contact centres based on its enterprise VCX IP telephony platform.
Valiant was reluctant to limit 3Com’s businness opportunitiesentirely to a single sector. “We certainly feel our solution set is more suited to the public sector, but that doesn’t mean we don’t go after other markets.
“We just have to make sure that we have the capabilities that customers want, and at the moment those capabilities are focused on the public sector” he said.
Keeping the options open, even while sticking to specific verticals, does seem like a wise, long-term strategy.
Peter Tebbutt, UK marketing director for IPT equipment vendor Alcatel, said many key vertical markets in the UK are interested in the new convergence technology.
He listed among the areas of opportunity: central and local government, retail, hospitality, health and manufacturing. Yet, just like Valiant, local government clients were among those on which Tebbutt heaped the most praise.
“Leicestershire County Council and Trafford Metropolitan Borough Council in Manchester have both recently moved to hybrid analogue and IP systems based on unified data networks and voice over IP (VoIP) links between sites,” he said.
Perhaps it is the case that the IPT vendors have vertical strategies that just happen to coincide in the same verticals because they are the only sectors where there are any customers with the money to spend on the technology.
After all, no matter where you sell IPT, the benefits are roughly the
same. The basic elements in the business case for voice and data convergence is the same to a retailer as a manufacturer, a local council or a hospital.
Take IPT reseller Datapoint, for example. According to David Du Toit, the firm’s solutions director, it has been busy selling Avaya IP contact centre equipment into the financial services sector – the vertical that Cisco is supposed to have tied up.
“Our biggest market focus is the financial sector, though we are doing some solutions in the retail and utility markets. IP telephony is on the agenda of most of our customers, and most are doing a pilot or some sort of project,” Du Toit said.
Lisa Fox, head of marketing for Touchbase Group, another reseller of IP equipment for contact centres, said Touchbase is also making inroads into the financial sector with Avaya.
If there was any reason why customers in this sector refused to bite on a vendor’s vertically-endowed marketing hook, it has little to do with the sector being already dominated by a single vendor.
It might have more to do with the general quality of the bait. The enthusiasm customers have for the potential cost savings and efficiency gains they can get from VoIP are tempered, said Fox, by concerns over resilience and reliability of the technology per se.
“Organisations in the financial services arena are deeply concerned with reliability and you will typically find great reluctance in removing the [traditional] handset from the desk,” she said.
Yet the market is not completely dry. Customers do see some benefits to using the technology, claimed Fox. “They recognise how IPT can build additional resilience and mobility into their environment, and IP is often used to complement and extend their existing voice networks,” she said.
That the opportunity exists and that suppliers are already tailoring their solutions for specific verticals, suggests that those trying to compete will feel a need to customise their services, said Richard Mahony, senior analyst at research Ovum. He claimed that vendors will feel a greater need for more verticalisation.
Mahony said customers were beginning to expect more from a sale than just the same technology.
“They want technology fitted around their business. To do that demands a good understanding of how their business operates,” he said.
An IPT technology that will encourage this trend, said 3Com’s Valiant, was the SIP, which is making gradual progress as a standard in an industry dominated by proprietary technologies.
Greater standardisation makes it easier for Session Initiation Protocol (SIP) to integrate with third-party applications that are therefore more likely to be designed from the ground up for key vertical sectors.
“More and more applications vendors will support SIP in the future,” said Valiant.
Another development, presence-aware technology, which among other things can identify the users of handsets, will also encourage more sophisticated, specialised, vertical, applications.
EuroLAN’s Humphreys insisted that there is little evidence to suggest that vendors and resellers are starting to tailor their IPT solutions to individual market sectors.
“But this is changing and people do realise that they have to adapt [their offerings],” he said
Channel marketing programmes run by vendors are also proving to be engines of change in the direction of verticalisation. Cisco’s Solution Incentive Programme, for example, gives channel partners a rebate if they can come up with a solution to offer vertical customers over Cisco infrastructure.
There are also readymade examples of vertical IPT solutions to show the naysayers.
Some vendors and resellers have created solutions that combine IP telephony, IPTV and wireless data directly to give hotels a means of integrating their back-office information systems with the entertainment systems they have in their rooms.
Alcatel, for example, is developing XML-based applications to run on IP telephones in hotel rooms. They will synchronise with guests’ TV, as well as the PC in the hotel reception for unified billing and other facilities such as on-screen restaurant booking.
Avaya is treading a similar path in the hospitality trade, having installed an integrated IP platform in the Wynn Hotel in Las Vegas.
The system uses phone applications from Citrix Systems to enable guests to use their IP telephones to access guest services
Alcatel is also working with its software partners to provide hospitals with a system that has the ability to call up patient records on an IP telephone. It is also examining how handsets can connect directly to CCTV cameras for use in manufacturing and other industries.
“The way for Alcatel to expand its UK business is to give attention to detail in key vertical markets and grow our way upwards.
“The number one criteria is to understand customers’ business” Tebbut said. This is all very well, but resellers appear to be less enamored with vertical strategies.
Resellers pointed out that demand for IP telephony is fairly consistent in all sectors, because whatever the industry, the benefits of IPT are the same. They believed it would be wrong to concentrate too much of their efforts on one particular market.
Indeed, the business case for IPT is a general one. According to Fox, the benefits of IP contact centres and virtual call centres apply to organisations in a wide variety of industries, especially those involved in off-shoring or employing people in many different locations.
Among call-centre customers, the big selling point for IPT is that it allows them to create virtualoperations, with staff dispersed no matter what their location. They no longer have to house them in one massive and expensive call centre.
The advantages of staff mobility and virtualisation equate to identifiable cost savings, with remote workers able to make IP-based calls for little or no cost over broadband and other forms of WAN connections.
“There are a lot of cost savings possible in the retail market when customers use media gateways to connect remote branch offices.
“Trafford Borough Council also managed to cut their communications costs from £4.6m to £2.3m by using a unified, converged VoIP network,” Tebbutt said.
With 33 per cent of public-sector workers operating remotely to some degree, there is an opportunity for IPT resellers to do business.
Any potential cost savings have to be offset against the capital investment required to install a converged voice and data system in the first place.
This initial expense is often too high, so much so that many organisations are deterred from implementing IPT until they are forced to. This is either because their existing analogue PBX is no longer up to the job, or because they are moving premises or opening new ones where no telephone system is already in place.
For those upgrading an existing network, the financial outlay associated with IPT can be partially reduced by installing a hybrid system that integrates with the existing analogue telephone system (see box, page 26).
There are general advantages for IPT that can be applied to any business case in any sector when they apply a hybrid system. Yet many industry watchers are of the opinion that vendors have played the costsavings card too often and too poorly to prospective customers, which has backfired.
Vendors have inflated the return on investment calculations to make them, at best optimistic, or at worse plain false. This is one reason why the migration to IPT has advanced more slowly than many expected.
This is also why verticalisation might be a good idea. Rob Bamforth, principal analyst with Quocirca, a research firm, stressed that suppliers need to stop promoting the lower costs of IP and tailor their pitches with more service elements.
Vendors and resellers need to be re-educated, he said, so they can sell IPT properly. “Not enough VARs are selling IPT on value. Instead they are tending to focus on cost reduction and ultimately that is not the way forward,” he said.
Vendors such as Alcatel are looking to address this problem by improving customer knowledge of IPT though marketing.
Presumably, this approach will address the wrongs that have been committed previously by those vendors who misled their customers into expecting more from IPT than it was capable of providing.
If a vendor’s vertical offerings are any better than those that jaded the market in the first place, perhaps it might even win some business.