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A Big Business Image at a Small Business Price

Hosted VoIP Delivers Enticing and Affordable Alternative to CPE

By Ron Raffensperger

October 2006, Volume 9/ Number 10


The market for Voice over IP (VoIP) technology is poised to grow significantly over the next five years. Hosted VoIP services are increasingly becoming recognized as an attractive option over customer premise equipment (CPE) for communication services, especially in the small to medium-sized business (SMB) market.

Hosted VoIP solutions enable SMBs to improve productivity and efficiency by giving them more control and flexibility to grow or contract their business as needed. By using a hosted VoIP solution, cost-conscious SMBs can save on capital expenditure, operating and ongoing maintenance costs. Essentially, they gain a very high-end communications solution with features and functionalities that are typically only affordable by large enterprises. As SMBs look to purchase communications services or transition from a CPE solution, they should understand the benefits and options of hosted VoIP services.

Improved Productivity

The ability to be in control, particularly by self-provisioning, is the number one reason companies adopt a hosted VoIP solution. With a vendor managed solution, businesses will typically wait a day or two and incur a couple hundred dollars of cost to add a person to the local PBX (News - Alert) or key system. This slow response hampers the ability of businesses to react quickly and respond to their customers. The self-management and provisioning of hosted VoIP is much easier and MACs (moves/adds/changes) can be made readily through its easy to use portal by an office manager.

The self-management and self-provisioning capability also allows companies in vertical markets (such as retail, real estate, healthcare) to bring new capabilities online quickly. For example, many businesses experience fluctuations with inbound customer calls. During peak period calling, businesses with hosted VoIP can easily expand the group who takes inbound calls with entry level call center products. This allows businesses to respond to increased customer demand without installing lines, cards, or engaging outside vendors and fees. The office manager or administrator can easily add users to the incoming call group with a click of a mouse. Users can even take calls from remote locations using call forwarding, standalone VoIP phones, or even their cell phones. When the peak period is over, calls can be routed normally across the user group.

The productivity of �road warriors� and telecommuters is much improved with a hosted VoIP solution. It allows employees to work outside the office as they would inside the office by giving people one number to reach you wherever you are. Road warriors can make any phone their office phone by using the �Remote Office� feature. Instead of making calls from home or remote offices, users can tell the service to make a call from the remote phone so it appears as if they are calling from the office. This presents a better image to the customer that employees are in the office and responsive even when they are traveling. This feature also eliminates the need for businesses to reimburse users for remote phone service and allows the business to save costs by taking advantage of the rates negotiated for normal calls from the office.

�Find Me Follow Me� Contact Increases Mobility

Hosted VoIP provides real-time call control interfaces that allow users to be monitored by presence-based applications. This enables users to actively control their calls and easily activate useful functions such as placing calls on hold, click-to-call, conference initiation and controlling their telephone, including capabilities such as hands-free answering. It also allows employees to prioritize their call backs just like on their cell phones. Companies can also create a hosted �Find-Me Follow-Me� contact directory so that everyone�s various contact information (including office, cell, home, PDA numbers) is always up to date. This allows employees to look up contacts from a single contact directory and reach each other more efficiently especially when they are dispersed across multiple locations.

For example, many companies find themselves in the situation where, at the end of the month, the sales organization is waiting for a few key orders from VIP accounts. Instead of waiting by their phones for important orders, they can work remotely using the Find-Me Follow-Me Feature. Important callers can be labeled as VIP in the single hosted directory. Users can turn on the Find-Me Follow-Me feature when they leave their desks. This allows users to choose where their important calls should ring, to their cell phone or remote phone. With this key feature turned on, users will never miss an important call.

In addition, companies can control call routing by analyzing call data (such as dialed digits or class of service parameters for a user) and environment data (such as time of day/day of week routing) and routing calls to appropriate facilities as needed. This feature is particularly useful in disaster recovery situations. Should disaster strike a remote office or telecommuter residence unexpectedly disabling service, companies can remotely forward all calls to another office or location so that business communication and productivity isn�t negatively effected.

Achieve Same �Look and Feel� Across Office Locations

One of the enticing capabilities of a hosted VoIP solution is that it allows the multi-office locations to be under the same �corporate umbrella� and use the same communication services across every branch of the business. With hosted VoIP, all remote offices look alike even though they are in diverse locations. Everyone is on the same voice mail system and able to dial each other using four-digit dialing. This corporate consistency creates the appearance of a more mature, larger business image for SMBs.

When all remote locations are on the same service, the company saves money on interoffice calls, typically termed complementary �on-network calls.� Any call that the business makes to its other locations are free because a hosted VoIP solution works as if those calls were in their office. With on-network calling functionality, SMBs look like a large company with consistent services even though they might be a small company.

Reduction in Telecom Costs

Most importantly, hosted VoIP is economical because it reduces telecom costs. From the start, companies don�t have to make a large capital investment; they can be �up and running� with a hosted service immediately. They are given a flat monthly rate based on the number of users, which gives them an immediate cost per person per month. It eliminates multiple phone bills through various vendors with varying rates. This helps businesses keep track of cost and facilitates better budget planning for the future. With an estimated 70 percent of SMB outbound communication service usage being interoffice, the ongoing savings of reducing long-distance calls with free on-network calls is significant.

In terms of maintenance costs, SMBs often realize 35�40 percent reduction in maintenance costs overall even in a short two- to three-year period. When businesses own the CPE, they�re paying a telephone company for their lines and services, a vendor to manage their equipment, and they�re paying a vendor maintenance contract. With hosted VoIP, the whole ongoing maintenance, multiple vendors and complex management of CPE goes away. SMBs enjoy a very simple management process with hosted VoIP and an ongoing reduction in maintenance costs long-term.

Operational Efficiencies

From an operational standpoint, hosted VoIP allows SMBs to focus on their business instead of using scarce or costly resources to run and operate communications equipment. This gives them more control of their business on a daily basis because they can expand and contract on demand without engaging outside vendors.

With CPE solutions, it�s very common that businesses have to deal with several vendors: the telephone company, the phone vendor and often, a system integrator as well. When problems or billing issues arise with CPE, businesses have three different people to deal with to get issues resolved. SMBs in growth mode don�t have time or resources to chase all these vendors down to get issues resolved. With hosted VoIP services, SMBs only have one vendor to deal with and one bill for communication services. This improves operational efficiency by speeding service issue resolution and reducing internal resource involvement.

Who uses Hosted VoIP?

Today, most of the businesses that are buying a hosted VoIP solution are growing or have multi-office locations. The businesses using hosted VoIP are usually in acquisition mode where they�re acquiring locations or opening new locations. Additionally, larger enterprises may put hosted services in remote offices (which look and act as SMBs) and manage it from their corporate offices. A hosted VoIP solution fits the needs of SMBs today but is clearly migrating to mid-market and larger enterprises. Growing, multi-location SMBs that are looking for a new communications solution usually fall into one of two categories: newly formed companies or companies migrating from an existing CPE solution.

Start-Up Companies

Typically, newly formed companies have approximately five to fifteen users, a hodge podge of communication services and are trying to start their business and save money at the same time. They are often awestruck at the cost of buying CPE when they go out to look at a communications solution. For this category of customer, a pure hosted solution doesn�t require a piece of CPE at the corporate office or any of the remote offices. They get access to voice services across their existing broadband connection. Pure hosted VoIP is a great way for these kinds of companies to get many of the same capabilities that they would have to pay a lot of money to get usually in a solution that�s targeted at a larger business.

Companies Migrating from CPE

The second kind of company is usually more mature, and has already made an investment in a CPE solution. The users typically are very familiar with CPE. They�ve bought a CPE system; they�ve used it over some period of time. They�re used to buying a new piece of equipment just to get a couple new features every three to seven years. However, many of these companies are not interested in continuing to make that ongoing investment in the CPE.

In this instance, an IP trunking option is available. An IP trunking solution can be utilized by companies that have existing CPE but may have not met end-of-life for their PBX yet. It allows them to get some of the IP capabilities (such as four-digit dialing, and free calling between remote locations) using an existing piece of CPE. For companies migrating to hosted, it offers a compelling value proposition. They can gain VoIP benefits and bring remote offices together under one system now with the ability to add other locations easily when they reach end-of-life, ensuring seamless migration in the future.

Is Hosted VoIP Right for my Business?

If a company needs new communications services or is approaching the end-of-life of existing CPE equipment, they should consider whether CPE or hosted VoIP is the right option for the future. If your company wants the flexibility to expand and contract and open up offices with employees on the same services relatively quickly, then hosted VoIP is a better choice than a CPE hardware solution that is more restrictive and costly.

Businesses must be careful to select a �business class� quality hosted VoIP solution that is built around quality of service (QoS) and a secure network. It should have SLAs in place to guarantee the network will remain up and features and functionality are more in line with what is offered in an IP PBX today.

Promising Future

Awareness of hosted VoIP is growing rapidly as more companies reap the benefits and cost savings of the technology. Hosted VoIP communication services continue to be integrated with key applications and customized to vertical markets. Ultimately, VoIP will help enable the �holy grail� of one portal for all business communication needs in a streamlined format that doesn�t require multiple Windows open on the desktop. Today, hosted VoIP gives businesses control and flexibility at a manageable price. In the future, hosted VoIP holds the promise to facilitate a great deal more productivity enhancements and simplification to everyday applications and communication. IT

Ronald Raffensperger is senior vice president of marketing at Sylantro Systems. For more information, please visit the company online at

If you are interested in purchasing reprints of this article (in either print or PDF format), please visit Reprint Management Services online at or contact a representative via e-mail at [email protected] or by phone at 800-290-5460.


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