Business VoIP Featured Article

Hosted VoIP for SMBs to Grow: Study

April 26, 2007

By Susan J. Campbell, Business VoIP Contributing Editor

Voice over Internet Protocol (VoIP) is gaining market share as companies are recognizing the significant benefits of the technology. Improvements in quality and security have also helped to drive adoption, especially in the small- and medium-business (SMB) segment of the North American market.

According to Access Market International (AMI) Partners Inc., between 2005 and 2010, the cumulative growth rate will cross 56.9 percent for hosted business-VoIP technology targeted to the SMB segment. This industry is set to reach $416 million this year – up from $165 million in 2005.
"In particular, the small business (SB, or companies with up to 99 employees) segment is forecasted to grow at a spectacular 69% on a cumulative basis for the next 5 years," says Sanjeev Aggarwal, AMI-Partners' New York-based vice president for SB Infrastructure Solutions, in a Thursday statement.
"The concept of hosted VoIP is analogous to software-as-a-service (SaaS) where upstarts like and NetSuite are gaining rapid adoption. Similarly, the concept of voice communications as a service is becoming very appealing as these small businesses have almost no IT/voice communications expertise and resources."
The market opportunity for hosted business-VoIP for SMBs is considered to be huge and is growing rapidly. The same is true for the competition, which is increasing with participation from traditional telecom and cable companies, equipment vendors and focused complimentary service providers.

SMBs are adopting hosted business-VoIP for a variety of reasons, including predictable monthly voice communications expenses with no up-front capital expense, toll savings for intra- and inter-company long distance and local calling.
"Simple, secure, very reliable, easy-to-use solutions supporting unified messaging and mobility are key for small businesses that never want to miss a customer call," Aggarwal added. "Helping SMBs appear more professional and larger, especially SMBs that have a store presence and web presence."
AMI-Partners’ report, “SMB Interest Perks Up in Hosted VoIP: North America Hosted VoIP Forecast Outlook, Needs Assessment and Positioning Implications” provides a comprehensive five-year market forecast and vendor market analysis of the North America hosted VoIP market for SMBs. Key findings from the report include:
--Hosted VoIP installed seats in the North America SMB market are forecasted to rise from 393,967 in 2006 to about 3 million seats by year 2010.

--The market penetration of hosted VoIP seats will increase from less than 2% in 2006 to over 7% by 2010, with a CAGR of 65%.

-- Companies with 10 to 50 employees will generate particularly high adoption rates of hosted VoIP.

-- Leading vendors, based on seats, include Covad Communications, XO Communications, Packet8, Cbeyond, and M5 Networks.
--Fears of cannibalizing the customer base and revenues are keeping telcos from marketing VoIP services aggressively to SMBs. This is expected to change as market growth and adoption rates increase.
-- Vendors covered in the report include Covad Communications, XO Communications, Packet8, Cbeyond, M5 Networks, AT&T, Verizon, Sprint Nextel, Qwest, Aptela, Speakeasy,, and Apptix.
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Susan J. Campbell is a contributing editor for TMC and has also written for To see more of her articles, please visit Susan J. Campbell’s columnist page.



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