Communications and Margins

When Avaya (News - Alert) started pushing $99/user unified communications solutions, I knew there would be a price war in the UC space. In my opinion, price wars are bad. Nobody wins in a price war because in order to deliver low prices, margins are cut to the bone and inevitably service suffers.

Mind you, the implication here is not that any single vendor is providing inferior service at the moment. My concern is for the long term.

Having said that, while UC vendors fight to get cheaper, open source vendors like Digium and Fonality (News - Alert) have found ways to add value to free and in doing so have generated solid revenue. We aren’t talking billions of dollars (yet) but these two companies seem to be generating good money for small to medium-sized organizations.

I got to thinking about pricing and communications when I read that Objectworld (News - Alert) has a new UC offering for 7 cents per day per user. This comes out to $2.10/month or $25.20/year.

Objectworld seems to have solid products and I am unsure as to whether this move is smart in the long-term or not. On the one hand it takes price out of the equation for a company considering a UC solution. On the other hand it gets potential customers wondering if the company can make enough money at these price points to be around in a few years.

As prices decrease across the board for communications products, one wonders where resellers fit in. After all, with margins shrinking, how do resellers make ends meet? In some cases, resellers I interviewed for this story tell me they offset lower communications costs by selling more expensive IP-based systems. In addition, many resellers are making money off of SIP trunking.

One such reseller I interviewed was Zig Fekete, a Co-founder of IP Communications, LLC (www.ipcomm4u.com) based in Stamford, CT. Fekete explains that he sells many Allworx (News - Alert) systems such as the 6x, 10x and 24x and he went on to say that on CAT5e or CAT6 cabling, the systems deploy beautifully. He says these systems are excellent for teleworker implementations and moreover, he is a fan of connecting his PBX (News - Alert) systems with service from bandwidth.com who he says has excellent service, deployment and timing.

Although he concedes porting phone numbers from large carriers is a lengthy process, he continues by saying bandwidth.com keeps a handle on it.

He also implements Allworx systems on broadband from Cablevision – especially the company’s Optimum (News - Alert) Online Boost service (www.optimum.com/order/boost) where he has seen a minimum of 5 Mbps upstream and 15 Mbps downstream.

He is also happy with the Allworx 9212 handset which he says is a great handset with excellent audio quality.

Fekete also installs Vertical Communications (News - Alert) systems and he tells me that the Wave 2500 systems may have shipped a bit prematurely as all the promised features have yet to be implemented. He did also mention the company’s DX120 is a great TDM system (formerly Comdial) with excellent bang for the buck and as the company gets the software ironed out, their expertise in TDM and IP will make them a force to be reckoned with.

Space limits me from publishing other reseller interviews but some interesting things I heard from resellers who wanted to stay off the record were rumors about Cablevision getting into the SIP trunking business and Allworx getting into the ACD and large screen phone space.

Resellers are vital to the health of the communications space and moreover they allow small communications companies to innovate and compete against dominant players without having to build a global sales force.

It is my hope companies will continue to support a healthy reseller community and work to ensure customers get tremendous value and at the same time they make sure resellers can make a living and support their customers for the long-term. IT

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