April 2002  

Unified Networks -- Creating Opportunities In The Small And Medium Business (SMB) Market

By Jacek Jarmoc, Nortel Networks

A typical workday at Ubizen, an e-security provider, spans 9 a.m. to 5 p.m. in several time zones spread over five continents. Even with such extensive demands, Ubizen's 500 employees still enjoy fast, reliable communication between company offices and locations, thanks to unified networks that provide Internet Protocol (IP) telephony, unified messaging, call center and IP routing for company users at any location. Key sites remain at peak competence with their new communications solution.

Unified networks ' the combination of data, video, voice and other media onto a single platform ' can enable small and medium businesses (SMBs) to mimic larger enterprises in their interactions with customers and partners while increasing the effectiveness of their workflow. SMBs like Ubizen represent a fertile market for convergence solutions suppliers.

CATEGORIZING SMB MARKETS
To be successful with these companies, equipment providers and service providers need to view SMBs as distinct groups within a single market. Nortel Networks conducted three years of research in a variety of locations and then created a schema that categorizes the organizations in one of five groups depending on size, complexity, buying behavior and needs:

Stand-Alone Start-Up
These organizations are price sensitive and they seek a trusted partner to guide technology decisions. The decision maker is burdened with a variety of responsibilities, including technology selection.

Company Description: Professional services, such as a one-person consultancy in its first year operating in a small office home office (SOHO) market, or small clinics or restaurants.

Needs: Incoming voice and Internet access. Their application needs vary based on business operations from basic to sophisticated. No network management is required.

SMB Multisite
These companies are similar to the stand-alone, but encompass additional locations to leverage local brand name and presence.

Company Description: Any small retail chain.

Needs: Employee expertise sharing and other logistics requires significant cross-location voice traffic. Requirements are incoming voice and Internet access (like the stand-alone) plus more sophisticated requirements, such as the use of virtual private networks (VPNs), access to a remote server and a greater need for security. There is high perceived need for network management, but only basic requirements are actually needed.

Loosely Coupled Franchise-Type Business
In these businesses with diverse size and locations, local purchasing decisions are guided by recommended products/ procedures from the franchise. The decision maker is likely to understand some aspects of convergence technology.

Company Description: Food service, retail or service franchise.

Needs: Data networking to support ordering/logistics with franchise. Internet access is required, but may be limited to centralized systems. For example, Buca di Beppo, a fast-growing Italian restaurant chain with 62 locations, implemented a VoIP and call center solution. The restaurant saved an average of $300-$400 per month, per location on communications costs by replacing each location's dial-up connections with a single T1 line. Like the SMB multisite, there is generally a high perceived need for network management, but only basic requirements are actually needed.

Highly Replicated, Many Branch Locations
This group is characterized by a 'cookie-cutter' provisioning of many branch locations. Existing sites have separate voice and data networks. Priorities are conflicted between cost control and revenue generation.

Company Description: Any national retail business with replicated locations.

Needs: Voice and data networking with a particular need for a centralized data repository. There is high need for sophisticated network management. BankAtlantic, a large financial institution headquartered in the state of Florida with duplicate branch locations, is a good example. The bank's steady growth and two major acquisitions over the last six years created a need for a unified network capable of providing standardized services to all branches. Disparate telephony systems needed to be replaced and essential features such as voice mail, automated attendants with customer-controlled routing, fax overflow and four-digit dialing needed to be implemented while maintaining branch independence. Nortel Networks helped BankAtlantic deploy a VoIP solution including Business Communications Manager systems in 22 of its branches networked over frame relay to a Meridian 81c PBX at the central site.

Highly Integrated, Multiple Locations
Expertise is distributed and inter-office travel is common in these businesses. This group supports the centralization of applications (so the application use pattern is similar), and capabilities are standard.

Company Description: Government agencies, manufacturing businesses or distributed professional services. Professional services might include a consultancy with multiple locations whose work requires employees to travel to other offices in collaborative project teams.

Needs: Sophisticated voice and data networking for project collaboration and customer support is very important. There is a desire to manage only one infrastructure. Like the highly replicated category, there is high need for sophisticated network management needs.

WARMING THE MARKET FOR THE SALE
Among these five SMB categories, small businesses, such as stand-alone start-ups and SMB multisites, are unlikely to have an employee dedicated to working on the converged solution. Particularly in these two groups, the decision maker is not likely to have much understanding of telecommunications technology. This paradigm means they are less likely to purchase converged solutions.

Sellers can overcome challenges like this one by demonstrating that SMBs can benefit from converged concepts, such as unified PSTN, PDN and Internet capabilities. Suppliers can combine their efforts and work via industry associations, such as the Telecommunications Industry Association (TIA), which has expertise in this area. Industry organizations can help vendors reach out to SMBs and increase their awareness of convergence solutions.

HITTING THE STREET
The SMB market's size, combined with its low adoption rates thus far, create a great sales opportunity. To begin the sales process, service providers and vendors should provide education on the benefits of converged concepts. They can work with organizations such as TIA to facilitate the education process through success stories, credentialing programs and end-user forums. Such education informs potential end users and prepares the way for service providers and vendors to expand their customer base.

Jacek Jarmoc is the leader of Enterprise Voice Operations at Nortel Networks. He addressed a group of leaders from TIA member companies on these topics. TIA is a leading trade association serving the communications and information technology industry. TIA represents the communications sector of the Electronic Industries Alliance (EIA). For more information, visit their Web site at www.tiaonline.org.

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SMBs associate the following benefits with converged network solutions, which may be indications of why they would consider investing in new solutions: 

• Simplified systems management,
• Toll savings,
• Savings on equipment/line charges,
• Increased productivity from more efficient communications, including via customer relationship management solutions and efficient database retrieval,
• Lowered maintenance costs,
• A single vendor, which clarifies problem resolution,
• Consolidated billing to make accounts payable simpler.

Conversely, it is also important to understand the disadvantages that SMBs associate with unified networks. SMBs do approach converged network solutions with some trepidation. The likelihood of a sale can be increased if these concerns are addressed:

• Decreased quality, such as voice delays and echoes with voice communications,
• Network downtime and the effect on reliability,
• Protection against failure through redundancy,
• Appropriate bandwidth, in terms of meeting voice and data needs during peak capacity,
• Overly technical explanations, when the buyer only understands layman's terms,
• Breaches to data security,
• Compatibility and interoperation with existing hardware and software applications,
• Investment protection, so that ROI is achieved and technology does not become obsolete,
• Expense, especially front-end costs of consultants.

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