September 2007 | Volume 10 / Nuber 9
8x8’s Bryan Martin
Rich Tehrani’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 president Rich Tehrani, as well as providing analysis on industry news and trends.
The IP Communications landscape has changed tremendously over the past year, including consolidation, service shut downs, and, of course, constant innovation of products and services. On a daily basis, new products and service offerings are announced that take advantage to the latest technologies to drive growth and enhance communications capabilities for businesses and consumers alike. Perhaps the area that has witnessed the most growth of late is the hosted VoIP space, as 8x8 will attest - it recently reported its first profitable quarter.
In addition to introducing innovative new services, a requisite part of successfully running a technology-based business, 8x8 has developed a business model that has driven its growth, perhaps faster than anyone could have predicted. Rich recently spoke with 8x8 CEO Bryan Martin, who explained how the company’s Packet8 service has been able to achieve sustainable growth and how 8x8 differentiates itself in a marketplace full of both players and pretenders.
RT: You recently announced your first profitable quarter since the launch of Packet8. How does it feel to be the first profitable consumer VoIP company?
BM: I feel very fortunate to have been a part of the team that turned 8x8 around after the telecom bust hit us so hard six years ago. When I became CEO of the company in February 2002, all of our service provider customers that had been buying our VoIP technologies had gone out of business or had shut down their new IP communications initiatives. We started our own service - “Packet8” - in November 2002 as a way to bring all of those technologies to market ourselves as a service provider. We have never looked back since.
Since day one, our goal has been to build a profitable, worldwide phone company with zero debt and, as our most recent quarterly results demonstrated, we have now achieved that goal. We have made more money, faster, than any other pure-play VoIP service provider in the business. 8x8 is living proof that a technology-driven, well-managed, independent VoIP provider can deliver outstanding replacement phone services to consumers and businesses while operating a financially successful company.
iRT: How did you do it?
BM: In one of my first interviews on CNBC after becoming CEO, I predicted that success in the VoIP service provider market would be a “marathon and not a sprint.” We have grown our business with an eye towards a return on our investments and, while we may have grown more slowly than some of our competitors, we now have a profitable customer base and a sustainable business model, while those that chose to grow at any cost are no longer in business or are on their way out. We never lost sight of our underlying business goals and focus on the numbers in making our business decisions.
We also pushed the technology and R&D side of our business hard, as we were not satisfied with merely offering a replacement voice service that mimicked copper networks and their antiquated limitations. We introduced our first video services in 2004, our first hosted PBX services for businesses in 2004, and continued to develop and enhance the capabilities of these services over time. We also pushed the development of new customer premises equipment, including the co-branded Uniden/Packet8 first cordless consumer VoIP phone in 2005 and our latest invention, the Tango video terminal adapter. We were delivering working VoIP E-911 services more than a year before the FCC mandated it, and intend to continue to push the bleeding edge of the technology curve in this industry.
RT: Where did others go wrong?
BM: I have read a lot of opinions lately that state that service providers who do not own their own network are doomed to fail. This statement is wrong in the modern VoIP marketplace. However, I do believe that service providers who do not own their underlying technology are doomed to fail. Many of our former competitors are no longer in existence because becoming a VoIP service provider looked so much easier than it actually is.
I have always said that it is easy to walk onto a rugby field, but very difficult to walk off. If you do not control your own technology in IP communications, then you are unable to control your own destiny. You are at the mercy of equipment and softswitch vendors and your features will be identical to your fellow competitors who are using the same technology, if they work at all. You will also pay these technology vendors dearly and will be at a price disadvantage to companies like mine who own and control all of the software and technology used in their services, including the software on their networks and the firmware in their customer premises equipment. We can deploy unique features, like video and business service applications, faster and cheaper than anyone else in the market. We fix our bugs faster, too!
You also don’t need to own your own network, and all of its associated debt and expense, to deliver high quality communications. Businesses subscribed to Packet8 Virtual Office, by far our most discerning customers, represent the lowest churning segment of our customer base. This statistic proves that we can provide superior telecommunications services over networks we do not own because we own the underlying technologies that make our services possible.
RT: You have openly invited SunRocket customers to switch to your service after their well-publicized bankruptcy. How is this going?
BM: We have been swamped with business since July 16, when SunRocket began to shut down its network. As of the first week of August, we had signed up more than 22,000 SunRocket subscribers, with 61% of them ordering our annual calling plans, providing tremendous cash flow into our business.
While our fulfillment, number porting, and customer service facilities have been overloaded with the new business, I am pleased to report that the majority of these new customers have been thrilled with the speed and proficiency we have demonstrated in transitioning their service and phone numbers over to Packet8. We are exceeding their expectations and providing better service than they had with SunRocket. I can’t tell you how thrilled we are to provide a new home to these customers.
RT: Why should customers switch to your company’s service?
BM: First and foremost, after going through the “chains on the door” experience that these customers suffered with SunRocket’s closure, they should know that they are signing up with a stable, respected, long-term service provider. 8x8 has been in business for more than 20 years (I have been with the Company for more than 17 years), and we are publicly traded (Nasdaq: EGHT), which provides financial transparency and reassurance that we will be around to provide customers’ IP communication needs for a long time. We are one of the emerging “Broadband Bells” of the 21st century and will not disappear in the middle of the night.
Second, our services are among the most mature in the industry, with features not offered by anyone else in the space, and at price points that are significantly less than what is available from the Bells, the CLECs, or the local cable company’s fixed line service.
SunRocket’s demise does not mean that saving money with VoIP services is out of vogue or no longer possible - it simply means consumers have to be careful whom they choose as a service provider.
Finally, we have always placed a huge emphasis on customer service. All of our call centers are on-shore here in California, and we will never send a customer’s call for help or technical assistance overseas to India or the Far East. The Bells are making that mistake now and it will cost them in the long run.
RT: Tell me about your new
services, like in the call center space and remote installation. What are customers saying about these announcements?
BM: Our new hosted call center services greatly diversify the suite of Packet8 Virtual Office business communication solutions we have offered to date. The new call center services enable both iPBX dial tone and multimedia contact center functionality. Packet8 Complete Contact Center, as we’ve named this new suite of business services, enables companies to quickly deploy and operate multi-channel contact centers within Packet8’s hosted iPBX infrastructure without the time and expense of purchasing, installing and maintaining costly, specialized call center equipment and software.
We have been using the service in our own call centers for several months and our agents are enamored with the services’ features. Our business customers have also been asking for these capabilities for some time. The service includes skill-based routing of calls, emails, web chats, and voicemail messages; real-time monitoring and reporting; voice recording and logging; historical reporting; multi-tier menus with customer-entered digits; and queue look-ahead logic for reporting the number of calls in queue and expected wait times to your callers; plus CRM integration with leading software packages such as Salesforce.com and Netsuite.
RT: What pains are you solving for your customers?
BM: We are offering turnkey IP communications services with features and capabilities our customers did not previously have at price points lower than what they have ever paid before. Our main goal is to ensure that our customers can sign up for our services and begin using them without any hassles or specialized technical knowledge. This goal is why the support component, both before and after the sale, is such an important ingredient for our success.
In the business space, hosted telecommunications services are a new concept to most business owners when they think about their telecommunications needs, but one that these business owners embrace once they see how easy it is to adopt IP communications from a provider like 8x8. With over 8,000 U.S. small businesses now using Virtual Office as their primary phone system, we know that these early adopter business owners are, indeed, realizing the cost and performance advantages of our IP communications services and we believe we are on the brink of mass adoption of these services by the more then 23 million U.S. small businesses in existence today.
RT: Are you on track to hit your professional goals? What else are you working on?
BM: I’m an engineer by background, and the greatest thrill in my professional life is to see new technologies and services launched into the marketplace. There is nothing like sitting in the lab the night before a product launch, knowing that the product and service before you, unique in the entire world, will be purchased and used the next day across the globe by your customers.
I also believe, as one of my fellow Board members preached to me long ago, that anything worth doing is worth doing for money. We are starting to see the Packet8 business accomplish both goals, with world-changing technologies and profitable growth. So yes, I am very satisfied with my professional accomplishments at 8x8.
Late last year, California Governor Arnold Schwarzenegger appointed me to the California Broadband Task Force for the Business, Transportation, and Housing Agency, where I am currently serving as Chair of the task force’s Emerging Technologies and New Applications sub-committee. Our goal is to recommend policies and actions that should be taken by the State of California in order to further the adoption of broadband technologies and applications across all demographics, a critical necessity to keep California and the United States competitive in the 21st century. I believe this work is critically important to our collective technological future.
RT: What do you think of the 700 MHz spectrum auction?
BM: I don’t know much about it, other than what I read in the trade journals. In general, and based upon his regulatory actions the past couple of years in VoIP, I would have to say that if FCC Chairman Martin supports the current spectrum auction process, then it is probably not good for the small, innovative, non-incumbent providers.
RT: Will this have bearing on SMB or consumer VoIP services?
BM: Eventually, yes. But mobile/cellular IP communication services has been one of those topics that the press publicized early on, well before the relevant technologies underlying the services had been developed. We are making progress, but I predict it will still be some time before we see widespread adoption of wireless IP communication services. The industry is just now beginning to take baby steps. We are not there, yet.
RT: What should potential customers know about 8x8/Packet8?
BM: They should know that 8x8 is a well-managed, fiscally responsible company with 68 awarded U.S. patents in the fields of communications, Voice-over-IP, and video technologies; that we have been based in Santa Clara, California for more than 20 years; that we handle all of our customer service out of service centers located right here in California; and that we are dedicated to listening to and learning from our customers. We run a Packet8 customer community at http://community.packet8.net, where our customers can interact with our employees and management team.
RT: Where will Packet8 service be in the next 3-5 years?
BM: My prediction is that we will be big, a 21st century “Broadband Bell,” and wildly profitable. Having said that, we will still be deploying new applications and services long before others have thought of them. I also predict that we will still be utilizing our own IP communications technologies to provide the best possible customer experience, support and service in the industry, no matter how large we become. IT
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