The number of SME s in the UK has steadily increased during the last decade to over 4.5 million companies employing approximately 14 million people. This large addressable market has been slowly, yet steadily, adopting VoIP and Unified Communications for productivity gains and cost efficiencies. When discussing the commercial benefits of Unified Communications, the focus is usually on the buyer. This article shifts the focus onto the commercial benefits for the seller. As prices for IP PBX systems have plummeted along with the demand for traditional systems, is shifting from supplying old-world PBX to IP PBX the best strategy for today’s channel partners? When should system suppliers add hosted VoIP to their portfolio and why?
Consider a small professional services business with 20 full-time employees working from a single location. The business wants to move to Unified Communications to provide employees with desk-top collaboration facilities and be ready to support mobile working in the future.
In broad terms, the on-premise solution comprises the IP PBX itself plus desktop client software, 20 IP phones, design, installation, training and SIP trunking connectivity. The hosted alternative for each user consists of an IP phone, desktop client, the VoIP licence and connectivity.
To compare the financial opportunities for the seller, Larato has used an average of prices and margins across 3 different types of small business on-premise IP PBX and averages across channel partner providers of hosted Broadsoft and Lync solutions. Over a three year period, the total revenue from the on-premise solution including technical support and SIP trunking costs is circa £5,500 with a margin of approximately £1,650. Performing the equivalent calculation for the hosted solution shows an income of circa £13,300 and a margin of approximately £5,700.
The total cost of ownership to the buyer of these two solutions is actually comparable because the firm must either outsource the day-to-day management of the on-premise IP PBX or incur that cost itself. So we have a situation where the financial impact on the buyer is all but the same, yet the financial impact on the supplier is significant. The hosted sale creates more revenue, more margin and delivers a higher Average Revenue Per User. It is also worth considering that, as the market develops, the demand for complementary applications and services for hosted UC will grow, providing a strong opportunity for channel partners to up-sell at good margins.
The 5 things your SME UC solution must have
Many industry analysts predict that UC adoption will accelerate in 2014. There are 5 essential elements that a supplier must have in a Unified Communications solution to make it attractive to buyers.
The fifth element is key. Buyers are increasingly looking for case studies to give them ideas about how a UC solution can help their businesses in practice as well as provide the confidence to make that purchase.
The real cost of Skype to a small business
Whether you are selling on-premise or hosted Unified Communications, Skype can be a thorn in your side for a small business customer. It’s very low cost, the call quality is reasonable and the collaboration tools are fairly rich. The downsides of Skype usually focus on its relatively poor functionality compared with alternatives like Lync and Broadsoft. Although these comparisons are valid, the real cost of Skype to a small business is incurred when something goes wrong because there is no-one to call for help. To illustrate this point, here is a real example from 2013. With no notification and no notice, Skype deactivated a small company’s account including the credit within it. The company has a good rating and owed Skype no money. During a regular business day, the phones just stopped working and could not be recovered. As with Amazon and Google, support is delivered on-line or through forums. The Skype forum is particularly poor when it comes to helping customers with problems and is more focussed on promoting how great Skype is. After weeks of trying to resolve the issues and relying solely on mobiles this company was forced to source new lines.
The next time you are in competition with Skype, it could be worth asking your prospect the cost of being without any telephony for days or even weeks. Skype may save £10-£15 a month against a business class service but the business class service can be relied upon to work and, most importantly, be remedied quickly in the event of difficulties.