Telecom Bundles

Are Packages Of Voice & Data Services A Cost-Effective Convenience Or Potential Straightjacket For SMEs? Businesses large and small have never been more reliant on telecommunications technology. From Sun Microsytems’ (www.sun.com) marketing slogan, “The network is the computer,” to über-pundit Tom Friedman proclaiming the wonders of a world made flat by cheap networks, the language of business reflects the revamped business processes made possible by the ubiquity of low-cost voice and data communications. Because a robust telecom network is the lifeblood of most companies, IT managers are constantly on the prowl for ways to enhance their functionality and efficiently stretch the telecom budget. One trend that has recently made the jump from the consumer market to business is the bundling of various telecom products into a single packaged service. In the consumer space, such bundling is known as the “triple play,” which typically incorporates cable television, phone service, and broadband Internet. The baseball metaphor has carried over to the business side, with the “triple” encompassing local and long-distance voice along with Internet access. According to a recent report by Forrester Research analyst Michele Pelino, an emerging variant involves adding wireless voice service to create a quadruple combination—because you can’t have a quadruple play in baseball, perhaps this ought to be renamed the “grand slam.” Forrester’s survey of 830 North American companies with fewer than 1,000 employees found that bundled services have become quite popular with SMEs. It showed that “More than 75% of North American SMBs subscribe to some type of service bundle. These service bundles primarily take the form of a triple-play combination of local voice, long-distance voice, and broadband access (35%). However, nearly 20% of SMBs currently subscribe to a quadruple service combination of local voice, long-distance voice, broadband access, and wireless service.” Perhaps belying some similarities to home users, the smallest businesses (those with fewer than 100 employees) had the highest adoption rates of bundled services. Bundle Advantages According to Pelino, there are four primary reasons to purchase a telecom bundle: lower price, greater accountability, increased convenience, and unified billing. Pricing is the driving factor behind most SMEs’ interest in telecom bundles, with nearly 90% of Forrester’s survey respondents citing it as an important factor in their purchasing decision. Cost alone may not be enough incentive for some businesses, however; Pelino notes that most SMEs, particularly those in the retail and wholesale trades, like the accountability inherent in dealing with a single vendor. Similarly, SMEs like the convenience of dealing with one vendor in the event of problems. Pelino notes that companies like the simplicity of having “one place to call and one throat to choke” when problems invariably arise. David Lemelin, senior analyst at In-Stat, believes that for smaller businesses taking on more enterprise-like qualities of a distributed and mobile workforce, bundled services make a lot of sense; less so for firms with just a single location. He believes that emerging unified messaging and communications technologies will necessitate a more complex telecom environment that might best be delivered by a suite of bundled services. Features such as fixed/ mobile phone convergence and presence-based communications services will drive greater adoption of bundling because the interdependencies between many of these services will make them hard to price individually. Drawbacks Of Bundled Services While bundled telecom offers tangible and significant business benefits, they aren’t without a downside. Pelino notes that in order to deliver the best pricing, most telecom vendors require a fixed-length contract for the bundle, very similar to the scheme used by wireless phone companies to aggressively discount new handsets. This effectively locks a business into a vendor for a set timeframe or, as In-Stat’s Lemelin puts it, “creates a sticky relationship.” Pelino adds that another potential pitfall with bundled telecom is often a lack of flexibility in tailoring the specifics of each service to a business’ needs. For example, she says a company needing to exceed standard limits on voice minutes or bandwidth or add another feature may find à la carte pricing prohibitively expensive. She stresses that before contracting for bundled services, companies should be clear on exactly what is included and how easy it is to modify or add services should their needs change. A flip-side to the caveat around overly restrictive bundles is Lemelin’s caution that some of the newer, more comprehensive bundles may actually contain more features and capability than a business needs. For example, if a business doesn’t do much international long-distance calling, yet the bundle incorporates a VoIP PBX with cheap international rates, you could be paying for something rarely used. Potential New Bundled Services Analysts at both Forrester and In-Stat agree that the current crop of voice and data packages are but the beginning of the services telecom providers would like to bundle into standard offerings. Pelino identifies three so-called value-added services that are likely to appeal to SMEs: Web and email hosting, managed security services, and applications delivered via SaaS (software as a service). M5 Networks (www.m5net.com) is one vendor drawing on the SaaS paradigm to offer what it calls Voice as a Service, described as a “combination of hosted phone system software, an IP network optimized for voice, and expert service.” According to Vice President of Marketing Jeff Silbert, this eliminates the need for small businesses to own a phone system and allows the transparent addition of features without the need to modify onsite equipment. He points out that M5 installs a point-to-point network with QoS to ensure voice quality that is adequate for the Internet needs of most customers. In-Stat’s Lemelin believes that as unified communications solutions become more common next year, businesses with distributed and mobile workforces will increasingly turn to telecom bundles with wireless voice and data components. He adds that as more advanced features become available—such as unified messaging; presence services; and fixed/mobile convergence phones, which can automatically switch between a Wi-Fi/VoIP mode when in the office to a cellular network when on the road—more extensive service bundles will be required to gain the added functionality. Vendors Most major telecom vendors, such as AT&T (www.att.com) or Verizon (www.verizon.com), and specialty carriers, such as XO Communications (www.xo.com), already offer a number of service bundles that augment their traditional voice and data products. Pelino notes that many SMEs turn to VARs or system integrators, with whom they already have a working relationship, that can package and resell telecom solutions often better tailored to specific business needs. In addition, a number of vendors, such as Covad Communications (www.covad.com), M5 Networks, and PingTone (www.pingtone.com), offer voice/data bundles that include hosted VoIP service, further reducing the barriers to IP telephony on a converged network. Whatever the source, SMEs are likely to see continued growth with telecom choices offering increasingly rich functionality and service integration