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Rich Tehrani’s (News - Alert) ’s Executive Suite is a monthly feature in which leading executives in the VoIP and IP Communications industry discuss their company’s latest developments with TMC (News - Alert) president Rich Tehrani, as well as providing analysis on industry news and trends.

In this issue, Rich speaks with Whaleback's CEO and co-founder Mark Galvin for a discussion about his company and its market environment.

Mark Galvin






 

Mark Galvin

 
 
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Whaleback Systems Looks to Make a
Big Splash in the SMB VoIP Market


Whaleback Systems is a new and fast-growing VoIP managed services provider based in Portsmouth, NH serving major metropolitan markets across the country. The company's CrystalBlue Voice Service is based on software technology developed by Whaleback and includes an on-premise, software-driven IP-PBX (News - Alert) system and a voice quality management system for providing centralized monitoring and control of system elements and service levels.


RT: What was the reason you co-founded Whaleback Systems?

With a multitude of IP telephony products and services already in the market place, where do you add value? Well, having just come off of Cedar Point (News - Alert) where we had built an 80G multimedia switch with an optical backplane to initially serve as a VOIP Class 5 residential switch for Comcast and Charter, it was clear to me that broadband's reach into small and medium business was growing rapidly and that there wasn't any good solution for providing purely broadband-based voice communications to this class of customer. All the incumbent vendors were busily repurposing products that had been developed for completely different applications and each of them seemed to have significant technical and operational limitations that made them far less than ideal. Thanks to our prior successes we were able to take a bunch of really smart people who fully understood the market and technologies along with a clean white board and some money from great investors, who had succeeded with us many times before, and build exactly what this class of customer needed. We knew this would give us the differentiation and advantage we would need to take on the "big guys" who would be selling something that was left over from some prior market in history… technology vs. dinosaurs.

RT: What's wrong with the existing small office PBX solutions designed for the SMB space?

Actually, when compared to what is now available from Whaleback, a substantial list of things was in need of improvement. Starting with some of the less "techie" items, existing systems were built for specific line sizes. Great for the vendor, but bad for the small business owner, as you grew your business; your phone system couldn't grow with you so you had to forklift and upgrade to a larger capacity system every couple of years. Sometimes the vendor would offer some sort of hardware add-on or software upgrade which would allow you to keep existing phones and still grow to the next size, but that often came with substantial technical limitations and a big price tag. Whaleback scales with your business and provides a completely predictable expense. It is also predictable because we provide a fully-managed service with all the support, product assurance, and upgrades included in their monthly service price. There is no need for extra staff to manage the phone system and it's very nice for the finance folks to eliminate spikes in expenses associated with the office telecommunication system. Technically, most existing hardware point products don't follow industry standards and have not been structured for proper migration to the ubiquity of IP communications. Having a system designed from the ground-up for the broadband revolution facilitates the introduction of new features like our remote worker and home office integration capabilities. The global Internet virtualizes the phone system allowing the customer to access a full range of voice services from anywhere. Systems having to support legacy TDM interfaces are severely hampered in this regard. I could go on and on…the list is impressively long.

RT: Hosted VoIP services have taken hold to offer a simpler and more cost-effective solution than a traditional PBX system… with many of these services offered by large providers… how will Whaleback Systems compete against them?

The good news for all providers of hosted VoIP services in the SMB market is the rapid growth projected for the next 3 years. According to a recent study, this market segment will grow over 50% annually and surpass a billion dollars in less than 3 years. With 8 million small to mid-sized businesses in the US there is a huge opportunity for the right solution to be wildly successful. The even better news for Whaleback is that we have developed unique technology that allows us to virtually guarantee quality of service for our customers and a suite of PBX features that dwarfs every competing solution on the market. Our technology allows us to meet a broader set of customer requirements than hosted alternatives and also ensures their satisfaction with VoIP.

RT: What prevents other hosted VoIP providers from matching Whaleback's service quality and feature set?

It all starts with a service architecture that combines network redundancy with innovative management tools capable of tracing the route taken by any and every customer call. Our NOC (News - Alert) team can isolate service problems down to a single router in any transport or access network used by our service. We have early warning systems tied to call quality metrics that allow our technicians to solve problems before customers are impacted. This capability is unmatched by any competing service. On the feature side, a crack team of software engineers has transformed the sophistication of a big company PBX system into a flexible service for small to mid-size businesses. Our CrystalBlue Voice Service combines an integrated voice mail/email/IP fax service, multimedia conferencing, contact center applications and road warrior mobility with an unlimited nation-wide calling plan for a fixed monthly expense. Small businesses are responding extremely well to this value proposition.

RT: How do you market your CrystalBlue Voice service and how is the company doing?

We have built an interconnect VAR channel in major metropolitan areas around the US and we are adding new territories all the time. Because interconnect VARs sell traditional PBX systems to business, they bring an existing installed customer base and deep industry experience to the table. That said, we are also finding success with data VARs as well. They understand IP networking extremely well and are highly motivated to add an IP telephony solution to their service portfolio. And earlier this summer we introduced a technology licensing program for carriers and cable operators as well. With so many markets to cover, it's important to have many horses in the race. As for operating results, we have increased our customer base by 10-fold during the last 12 months while our seat volume and recurring revenue numbers are growing by more than 80% per quarter. So our market traction has been very good - to say the least.

RT: Most interconnect VARs have a long long-standing relationship with one or more PBX manufacturers. Why should they add a new managed service offering to their existing and already-proven product portfolio?

There is an over-distribution of products in the channel from the major PBX suppliers and that results in shrinking hardware margins. Plus, it's getting more and more difficult to sell service contracts given the reliability of hardware components these days. Contrast that picture with Whaleback's new technology and business model. We provide the interconnect VAR with a solution that wins more deals because of our simplicity, cost-savings and feature set. On top of that, we provide the VAR with a very profitable and recurring source of income tied to long term service contracts. The old PBX model generates revenue that is 90% up-front and one-time. The Whaleback model generates revenue that is 70% long-term and recurring. When you do the math, our approach is a much more appealing business proposition than the status quo.

RT: You mentioned a technology licensing program for CLEC's and Cable operators…tell me about that. What are the business and technology benefits of your approach for their environment?

In this era of marketing wars between carriers and cable operators we provide new technology that seriously raises the bar for commercial voice service delivery and can put them in position to leap-frog the competition. However, our licensing program goes well beyond technology. It's a total business opportunity that includes our full-featured IP-PBX with advanced voice applications and comprehensive monitoring and management facility plus a documented process for operations and management as well as the promotional programs and merchandising collateral to go to market. Our solution leverages an existing consumer VoIP service infrastructure so there is usually no additional capex required to implement Whaleback technology. We are providing a sure-fire strategy for accelerating revenue and market share growth in the commercial VoIP services segment.

RT: What are key technology elements and how would they integrate with the existing carrier and cable infrastructure?


It all starts with our software-driven IP-PBX and the benefits of an intelligent device on the customer premise to monitor the remote end. The IP-PBX server is actually an appliance with no customer access to its operational parameters. NOC personnel remotely manage the device or run end-to-end diagnostic analysis of service quality and availability. This is an enormous advantage over competing solutions. We use SIP-compatible phones and we have designed our software to optimize the use of hard and soft keys as well as line appearances and other functions such as voice mail, auto attendant, group paging, hands-free intercom, multi-party conferencing and call management. Any dedicated broadband connection can be used for the access link and multiple WAN connections can be aggregated and intelligently managed using RAIL, Whaleback's own multi-WAN link management algorithm. Complementing the on-premise appliance is a NOC-based voice quality management system we call OrcaVision. Using OrcaVision, Whaleback remotely manages the PBX configuration and monitors service levels for each customer with the help of automated alerts and drill-down diagnostics for isolating any problem the customer may have from a central location. OrcaVision can be thought of as the element management system for Whaleback's VoIP service platform and it will complement existing management systems in use by a carrier or cable operator. The remaining elements of our service architecture are Sonus GSX (News - Alert) 9000 gateways owned and managed by Whaleback in multiple co-location facilities. These gateways terminate VoIP sessions initiated by the on-premise PBX and hand-off traffic to the PSTN. Whaleback has performed extensive compatibility testing and integration with Sonus equipment but we have experience with other gateway systems as well.

RT: What is your service footprint and your plan for expanding the business?

Our service foot print is limited only by our sales and marketing coverage because we leverage commercially available broadband for access to a nationwide IP transport network. As a result, our partners can instantly extend their own market reach without expensive T1 networks to connect customers in multiple geographies. Our plan for growth is to expand our distribution channel while following a well-defined formula that looks a lot like a franchise model. We add partners, provide them with sales and marketing support to ramp the business and augment their technical resources with centralized management and customer support to eliminate unnecessary truck-rolls.

RT: What is your (Mark Galvin's) vision of the future for Whaleback and its partners…what is your crystal ball telling you?

We have only seen the proverbial "tip of the iceberg" in the world's conversion to all voice going over IP networks end-to-end. As this conversion continues to evolve, many new features and benefits will be available to those that have made the move. Already we have ubiquitous "Roadwarrior" connectivity for everyone on these systems. We have also provided "take it with you" unified messaging integrating fax and voicemail with email. The telephone device, which runs IETF SIP protocols and is pure IP starting at the handset, is already integrated with laptop contact databases with "click-to-dial" functionality from within any application. For the first time in history, HD codec's have allowed us to provide sound quality far beyond that of the older digital systems, and this equates to real benefits for people trying to conduct business. We have barely scratched the surface of new capabilities which are facilitated by this modern architecture, updated compute resources and advanced programming techniques. I expect to see an ability to have my office telephone number and extension with me on a wireless device that is simply another station on my primary line appearance - no need for "find-me-follow-me". Just call me.

Rich Tehrani is President and Editor in Chief at TMC.

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