May/June 2001

BY MARC ROBINS

Sylantro Systems is the developer of a powerful product called an applications-enabled softswitch -- a carrier-grade softswitch tightly integrated with an application server and pre-packaged applications modules that allow service providers to immediately roll out new value-added voice applications. The company's Applications Switch and its suite of application modules synthesize the best features of a Class 5 central office switch with PBX, key system, mobile phone and browser-based features, providing end users with a very robust set of communications capabilities that in most cases far exceed those of legacy phone systems.

Sylantro Systems recently undertook, with the help of Research First, a study to define the state of the SMB market for managed telephony services that involved a series of nine focus groups comprised of representatives from over 100 SMBs (small and medium-sized businesses) and telephone interviews with over 900 SMB participants with five to 50 employees. Key areas of focus for the study included: The willingness of participants to use new communications options such as outsourced phone services, which next-generation services have the highest perceived value for SMBs, what is the optimum price for unique new services, and the likely adoption rates for new advanced services.

A Study In Change
Some of the key findings to come from this research are as follows:

• There are roughly 7.4 million businesses in the United States with 10 to 100 employees that are considered SMBs. According to the latest Census data, 95 percent of those are businesses with fewer than 50 employees. Moreover, 90 percent of SMBs, or roughly 6.3 million, use a legacy phone system of some type. These phone systems are predominately key systems or hybrids as opposed to PBXs, which most SMBs are unable to cost-justify.

• SMBs spend almost $20 billion in the U.S. on purchasing and maintaining telecom systems for their offices, and about 20 percent of this total is spent on moves, adds and changes, and other maintenance costs.

• There is a growing trend among SMBs toward outsourcing various business functions and services. Most now outsource their payroll, Web hosting, and even e-mail services.

• SMBs are apparently eager for new communications services, so much so that the majority of them would sign up for new broadband access services solely in order to receive new communications service offerings. The study found that almost 30 percent of respondents were "willing" to "extremely willing" to switch to an outsourced communications service rather than buy, install, and maintain a legacy phone system. The study suggests that a minimum of 10 percent of the total SMB market could be outsourced by 2003.

• The research indicated that SMBs are also much more open in general than larger businesses to purchasing services and products through a CLEC or other service provider, rather than their existing telco. Another finding: SMBs are currently using CLECs at a rate three times higher than the national average.

• Respondents gave high marks to features that were similar to those available on a mobile phone, and generally felt the same way about getting access to Web-based functions that increased the ease of making phone calls, such as "click-to-call" functions, and moves, adds, and changes. They also responded enthusiastically to features that brought new usability and control to the use of telephony functions and processes.

• The optimum pricing for a discrete set of managed telephony services, such as those offered by Sylantro, was determined to be $61 per employee per month, and possibly even more depending on the features and options included. This $61 price point is exclusive of any other bandwidth or dial tone offering, and pricing for data, local, or long-distance services can and should be added to the managed service offerings.

• A five-year revenue forecast of the market for advanced new services found that the fifth-year estimate approximates the current size of the residential caller ID market, or roughly $3 billion.

The research also pointed out, and I wholeheartedly agree, that the current downturn in the economy represents a unique opportunity to offer SMBs the ability to outsource their telecommunications needs rather then spend the $20-50K typically associated with buying in-house phone systems. Outsourcing communications services is highly attractive to these companies in terms of conserving fiscal and personnel resources.

Marc Robins is Vice President of Publications, Associate Group Publisher, and Group Editorial Director for Technology Marketing Corporation. His Change Agent column appears in each issue of Communications ASP magazine. Marc appreciates your feedback, and may be reached via e-mail at mrobins@tmcnet.com.

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