August 2003

One Size Does Not Fit All

BY DAVID CORK

Large enterprises, with their in-house IT departments, exploit an array of business communications tools to stay competitive. They have come to rely upon common voice services such as caller ID and voice mail, standard data services such as Microsoft Exchange, and enhanced Web services including intranets and extranets. But small businesses -- which number over 25 million in the U.S. and make up 24 percent of the country�s employee base -- lack the IT resources to effectively manage these services.

REALITY BITES
The reality today is this: Most small businesses don�t have an IT manager because they can�t afford it. Within any small business, there are two people who are closely involved with procuring and managing the communications infrastructure -- the business owner and the administrator. They face a tough challenge, often dealing with an average of seven to nine suppliers to create a patchwork solution to meet their communications needs. This can include the local phone company, system vendor, long-distance carrier, LAN Administrator, Web site Host, Internet Access Supplier, etc. The management and ongoing maintenance cycle is fragmented and reactive -- time consuming at best, and always expensive -- taxing the exact resources the company was trying to conserve!

In speaking with small businesses, a common thread emerges about their experiences with their communications suppliers: They feel they are underserved, their needs are not met in a timely fashion, and the technologies they�re given are designed for a much bigger organization -- they�re not tailored to their unique needs. Ask them what they want, and the small business always has the same response -- solution that is simple, responsive, lowers costs, and that puts them back in control of their communications tools.

THE BUZZ
�Service convergence� is a legitimate response to exactly what the small business is asking for. It�s the vision of the service provider becoming a single supplier for voice, data, and Web services -- deploying a network-based service offering over their existing broadband networks. Already we�re seeing early validation for this type of solution, with innovative �Integrated Communication Providers.� Established carriers are seeing this as the way to achieve increased service revenues and realize the promise of customer retention. The obvious place to start is with improved voice services -- the most immediate need for small business, and the carrier�s heritage and core competency.

SMALL POTATOES?
The small business market generates over $200 billion in recurring annual service revenues for telecom carriers in North America alone. However, in spite of the aggregate size of this market and their track record of high customer loyalty, carriers have traditionally viewed this market as fragmented and hard to reach.

There are numerous business drivers on the voice side alone that make sense for small businesses to upgrade their telco solution: Six to nine percent of small businesses replace their phone systems in any given year. There are also major technology drivers that enable a new communications model. The widespread deployment of broadband services, the availability of reliable, low cost IP phones, and the development of robust, carrier-grade software. Regardless of why that business is looking at a new solution, a converged solution may be the right choice.

And it�s precisely because the small business doesn�t have the technical savvy nor the resources to independently take advantage of all these emerging technologies that positions the carrier to offer convergence via simple, easy-to-use products. Centrally hosted and delivered by the carrier, they present themselves as a self-serve package that the small business can select and manage for themselves as they grow.


SELF-SERVING SOLUTION
Customer self-service has been an empowering model in many other industries, from gas stations to banking. It is an idea whose time has arrived for telecom service.

Imagine you�re a small business owner upgrading to a converged broadband solution. In the world of self-serve voice, you will be supplied with a service using a single access pipe to your carrier -- replacing the multiple voice lines, fax lines, and data lines, which have proliferated as you�ve grown. Inside your premises, the service uses one single LAN wiring plan instead of the segregated telephone wiring plus LAN wiring, which is common today.

From your desk, you�ll be provided with all the essential features of a modern phone system, delivered over this single broadband network. You simply sign yourself up for your services at a subscription-based flat rate. There is no expensive capital equipment to purchase, no system hardware to become obsolete or outgrow. Even the IP telephone is delivered via this model.

The service can be personalized and administered directly by each business user, or a central delegate. Equipment ordering, delivering, and desktop discovery are all done with a few clicks on the Web. Once the service is activated, management is all self-serve on the Web as well. For example, adding a new employee is a simple three-step process:

� Register the employee for the service and then select their phone model on the Web site;
� Receive the phone directly from the manufacturer overnight;
� Plug the phone into the LAN and power it on.

Based on this simple model, all management of features, profiles, changes, and additions or deletions can be pre-selected on the same Web site or customized as the company�s needs changes. There is no more waiting -- or associated costs -- for a service technician to schedule a site visit. And because the system is part of the carrier�s overall offering to your business, there are no nasty surprises as it grows with your business needs.

This all stands in stark contrast to the traditional cumbersome key system model that small businesses have been using for years.

ALL-AROUND ROI
This self-serve Voice over IP model delivers bottom-line benefits to the small business and carrier alike. For the small business, the simplicity of the system stands in stark contrast with the tiresome reality of purchasing, administering, and maintaining all the elements of a more traditional phone system. Because the system is subscription-based and grows as the company grows, costs are completely predictable and within their control and come at an average savings of 20-30 percent.

For the carrier, the simplicity of the system translates into a robust value proposition with reduced access costs, phone inventories, and premises wiring. But more importantly, it enables the carrier to deliver on the vision of service convergence -- starting with voice, but easily providing and managing all of the business lifelines -- voice, data, and Web -- for its small business customers. Most compelling is that it does so at double the margin!

And this ultimately reduces churn as the small business finally gets what it wants -- a set of communications tools built and delivered just for their needs.

THE NEXT WAVE
Small businesses have been slow in their adoption of the Web. That�s been largely due to the fact that most small businesses don�t see the value in global Web services; they draw most of their customers from within a 20-mile radius. This is where the power of converged services lies for this market segment -- enabling the small business to put real power behind local Web-based services, so that they can build stronger relationships with their customers, be it on the phone, or over the Web or e-mail. The next wave of communications services for small businesses is here.

For the carrier, their future success will demand their ability to introduce new services quickly, deliver services their customers need and want, and deploy those services efficiently and rapidly. The self-serve model enables all of this, and also dramatically reduces the operating expense and increasing the profitability, for the telco.

Carriers are rediscovering the small business as a significant customer base, with real loyalty. It can be the reawakening of a successful relationship, all starting with service-based Voice over IP services. It�s a winning formula for the future.

As co-founder and CEO of Natural Convergence, David Cork leads the company�s strategic direction and growth strategy. Natural Convergence develops and markets broadband communications software to telecom carriers, enabling them to better serve their business customers.

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