Medium-sized enterprises are particularly well placed to benefit from the convergence of voice, data and video traffic over a single network. Anxious to reduce costs and complexity on one hand, and to improve and extend their business processes on the other, many will find that convergence offers the most effective solution.
Hayden Rees, UK mid-market marketing manager at vendor Alcatel, says: “The key business issue for medium-sized firms in any industry is to maintain a competitive advantage by reducing costs or improving productivity. Convergence can help both by significantly reducing communications costs, as well as providing a platform on which companies can add powerful new applications that enhance business workflow, increase productivity and improve customer service in a cost-efficient manner.”
As well as the cost savings achieved by amalgamating voice and data networks and the technical teams that maintain them, convergence enables medium-sized firms to reduce their telephone bills through free internal calls, flat-rate national calls and cheaper international calls.
Ian Cook, chief executive of VAR Logicalis, says: “Initially medium-sized firms look at convergence to reduce their phone bill. Integrating voice traffic onto the IP network offers a relatively easy, low-cost investment that reaps rapid return-on-investment (ROI) rewards.”
Bill Droz, chief technology officer at system integrator ETT, adds: “The ability of one technician to manage functions previously supported by three [voice, data and video] provides another compelling incentive.”
Vaughn Armstrong, marketing director at broadband hardware vendor Westell, says: “Migration can show very quick returns. Some of our customers make their ROI in well under a year by replacing leased lines with a single IP LAN and WAN.”
But cost cutting is only half the story, according to Cook.
“Medium-sized firms stand to gain the most from convergence and the business agility it promotes, because they’re looking to IT to deliver competitive advantage through innovation and growth,” he says. “Convergence is so much more than voice over IP (VoIP). Its real benefit is in helping companies develop more flexible, agile businesses, and help them become better equipped to service the 24-hour economy.”
For many medium-sized firms, a converged system may be their best chance to deploy customer service and unified communications technologies, such as interactive voice response, call recording and monitoring, voicemail-to-email, and true computer-telephony integration applications such as screen-popping in call centres and call-me buttons on web sites.
As they grow to become mediumsized firms, companies often open branch offices, employ field sales-forces or increase homeworking. All of these create a need for cheap, efficient, wide-area communications.
Alison Brewer, solutions marketing manager at IP vendor Mitel, says: “IP convergence ensures that call costs are reduced and the business operates smoothly despite its widespread workforce. Simple things such as implementing an organisation-wide telephone directory, access to voicemail on the move, being able to collaborate with staff in any office and centralise core activities, such as customer service, can really boost productivity.
“Another major benefit is the ability to manage the entire infrastructure from a central location.”
Homeworkers can be fully integrated into the business, according to Duncan Miller, channel marketing manager at business communications vendor Inter-Tel.
“The fact that VoIP can be integrated into call routing systems so that any call can be routed to the next available agent in any location at no extra cost, allows companies to offer homeworking as standard,” he says. “This should be a definite pull for medium-sized firms, because homeworking can reduce costs, increase productivity and reduce stress levels.”
Unlike many small firms, the average medium-sized enterprise already has the right building blocks for convergence, according to Cook.
“During the 1990s, medium-sized firms typically made major investments in internal infrastructures to connect the desktop to the data centre, and these firms stand to gain the most from convergence,” he says.
David Mitchell, channel sales development manager at telecoms vendor Telappliant, says: “Medium-sized firms can reduce the cost of technology upgrades by using their existing infrastructure to provide new services to the business and its customers. Various applications and devices can be used to integrate with existing PBX hardware, thus negating the need for the usual technology refresh.”
Making a business case is easy, according to Morris Becker, international sales manager at comms hardware vendor Funkwerk. He suggests summarising the medium-sized enterprise’s monthly phone bills and compare this with the cost of a flat-rate VoIP service.
However, he adds: “Knowledge among medium-sized firms is still low. There is huge potential for resellers that are familiar with convergence and able to offer the right solutions to the right customers.”
Since cash is usually tight, creative financing deals such as leasing are popular, Becker adds. Phased implementations are also common.
“The first stage of any migration is preparing the network by investing in an IP gateway, which will deliver fast ROI and begin the transition to IP,” Brewer says. “The next phase involves the deployment of handsets and the specific application that helped inspire the change in the first place, such as a contact centre or teleworking application.”
Brewer adds that many medium-sized firms end up with multi-vendor solutions thanks to a piecemeal approach, and open standards have simplified integration.
But Cook argues that most medium-sized firms prefer to work with a single vendor. Thomas Jaques, managing director of Nortel reseller 1st Communications, says mid-market firms prefer to buy through a package deal, preferably from one vendor, whereas small firms are more likely to shop around for the best price.
Phased migrations usually start with an incumbent provider of voice or data technology or infrastructure, says Armstrong. But he adds that it is important to get the size of solutions for medium-sized firms correct.
“SME solutions may not scale for medium-sized firms, while corporate solutions are too big or costly,” he says. “Although the technology has been around for some time, only now does there seem to be more effort on the part of manufacturers to move medium-sized firms from traditional PBX systems to new ‘medium-scaled’ IP phone systems.”
VoIP remains the most popular technology, largely because that is what medium-sized firms are being offered, according to Tom Sloan, managing director of real-time communications vendor WiredRed.
“From the reseller’s point of view, an IP-PBX or soft switch is where the money’s at,” he says. “So that’s what is being pushed.”
Hybrid PBXs, which can work simultaneously with analogue, ISDN-Asymmetric Digital Subscriber Line (ADSL) and VoIP, are in great demand, Becker says. Meanwhile, Session Initiation Protocol phones are an easy sale for resellers.
Unified communication solutions are growing in popularity among medium-sized enterprises, according to Rees, because of their open architecture and ability to boost staff efficiency by enabling simple real-time communication.
“Using new applications, staff can gain access to voicemail, email, instant messaging, telephony features and business information, irrespective of their location and the communications device they’re using,” he says.
Justin Turner, OneVoice business manager at networking and comms distributor Comstor, recommends GSM call gateways, which divert calls to mobiles from landlines straight onto GSM.
“In our experience, about 80 per cent of a medium-sized enterprise’s phone bill is taken up by calls to mobiles,” he says. “A GSM gateway saves the connection charge levied by landline companies and delivers savings of 50 to 80 per cent. It’s a massive ROI: a lot of payback in a year, which frees up budget that could be spent on buying new smart phones.”
Wi-Fi is particularly popular with retailers and professional firms, says Brewer, perhaps because of a requirement for flexible store layouts and hot-desking capability. Turner adds that telephone extension mobility and video conferencing are also common applications.
Video applications will soon be extended beyond the office, according to Droz.
“New video applications will employ the same infrastructure to deliver content to any end point, wired or wireless,” he says. “Fibre to the home and Wi Max will ensure high-speed applications are transparently delivered to small or home offices, or mobile workers.”
However, Mitchell warns: “The ‘one shoe fits all’ scenario should not be used for convergence technology as businesses start paying for services and features they’ll never use.”
However, when done properly, the capital outlay for convergence need not be large, according to Cook. Much of its attraction for medium-sized firms is the ability to re-use and tweak their existing infrastructure.
“What surprises many medium-sized firms is that once they’ve connected and converged their voice and data networks, they have access to a host of enabling technologies that don’t require the complex or costly back-office and infrastructure upgrades of old,” Cook says. “Instead, they’re focused around the desktop.”
With all these manifest advantages, it seems quite surprising that medium-sized companies have not yet beaten a path to the door of convergence vendors.
Sloan says: “The marketplace is still in its early adopter phase, despite VoIP having been ‘the next killer application’ since the mid-1990s. Medium-sized firms are undoubtedly ready for convergence, but the channel has been less than effective at providing the right training and promotion.
“All too often, convergence talks only about VoIP, mobile and wireless, when in fact this is generally just telecoms over different access methodologies. The real value of IP convergence is to include video and data sharing as well as VoIP.”
Resellers fulfil a vital role in putting all of the technology together. “As convergence becomes more and more complex, medium-sized firms know that they need to rely on a competent reseller,” Becker says.
Vendors also need the channel, says Marcus Gallo, head of marketing at ISP Tiscali Business Services. “DIY is not an easy option, so the direct route is not realistic for vendors or service providers,” he says.
However, resellers with ambitions to sell convergence to medium-sized firms are not in for an easy ride, warns Antoine Guy, EMEA marketing director at traffic management vendor Allot. “There’s definitely a learning curve for resellers,” he says. “The market will probably see the emergence of a few successful specialist system integrators and the demise of those that are not committed enough.”
Voice resellers tend to have the competitive edge over their data-centric counterparts. Armstrong says: “Pure data resellers still struggle with near-100 per cent delivery of high-quality voice, and in setting up all of the services that medium-sized firms have been used to on advanced legacy systems.”
To be really successful in selling convergence, resellers will need to demonstrate a convergence in their own skills.
Rob Shervill, part of the channel strategy and support team at vendor Nortel, says: “The key to entry is having the mix of technology and integration skills or having services partnerships to get hold of implementation specialists. IP networking and telephony applications capabilities are both required to specialise in this field.”
Lee Perkins, director at distributor Azlan, says: “Voice has become an integral part of the network now, so much so that we don’t set it aside as something different: it’s a part of the whole solution and has to be presented and sold in that way.
“It’s not a matter of being able to speak both languages and switch effortlessly between them any more. There’s only one language now, and if you have a limited vocabulary that will certainly limit your opportunities in the mid-market.”
Resellers who lack implementation skills will also lose out, says Rees.
“Medium-sized firms may not have the expertise or resources to manage the implementation of business applications themselves, so resellers must be able to offer this service as well, or risk losing business to a competitor,” he says. “For some resellers, the best course of action may be to find themselves partners.”
The value of convergence sales to medium-sized firms varies widely, although many fall into the £500-£10,000 bracket, and margins are well into double digits, according to both vendors and distributors.
“Depending on the equipment and the price structure of the vendor, the margin on the equipment can be 20 to 35 per cent,” Becker says.
Value-added opportunities are plentiful. “It’s very easy to wrap service around convergence, from consultancy on how to approach convergence to installation services and maintenance,” Armstrong says.
“Companies are used to paying for these in the voice arena, because they simply can’t survive without phones, so they’ll pay to make sure of them.”
Resellers are missing a trick, believes Turner. “There are many extensions and additional applications you can use to tailor the convergence solution to your customer’s needs, such as call recording and video conferencing,” he says. “Many resellers miss out on these, and add-on sales bring in good margin and develop a deeper relationship with your customer.”
The propensity of medium-sized firms to grow and change, the evolving nature of convergence technology and the phased nature of most migration programmes all make convergence a ripe market for repeat business and ongoing revenues. However, resellers are also failing to grasp the opportunity here, Becker claims.
“Resellers don’t use follow-on opportunities often enough,” he says. “To win a new opportunity is more difficult than generating additional revenue at an already pleased customer who has additional requirements. Big systems integrators are used to getting the maximum out of one customer. Resellers can get much more out of this if they focus on it.”
Managed services or hands-on proactive management of the converged network are a good area of potential, says Perkins.
“We’ve already worked pretty closely with a number of VARs that are offering or developing this kind of service, and it does seem to be popular in the middle ground of the market,” he says.
Comstor’s resellers have had similar success with hosted telephony solutions and applications for medium-sized firms, Turner says. As more medium-sized enterprises become convinced of the value of convergence, resellers who acquire the necessary skills will reap the rewards.
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