Innovate or die – succeeding in a changing telephony market

Chris-Wort

The telephony market is evolving fast. In the past three years we’ve seen many of the smaller cloud telephony service providers (SPs) either acquired or drop out of the market, leaving us with fewer competitors. However, this doesn’t mean less competition. Chris Wort, EMEA Director of IP Telephony at Polycom, explains.

The cloud or hosted telephony market seems to have homogenised itself around two sales offers; cost and the scale and reliability of networks. What this means from a customer point of view, is that there is often no clear differentiator between service providers. The most innovative SPs are looking beyond this status quo to offer services over and above basic hosted telephony. Like all industries, hosted telephony is looking at a case of innovate or die. In this context, it’s about looking at the changing purchasing habits of people and applying it in a telephony context.

Most of us have a smartphone. To buy a high-end smartphone handset as a sim-free device can cost anything up to £700, but the customer doesn’t feel the pain of that cost because they often sign up to a contract. Instead of purchasing a product (the hardware) they purchase a service (mobile connectivity). After six to twelve months of paying their monthly contract, the product moves from an ROI phase into ROA (Return on Asset) for the provider. From that point forward, as long as they maintain a reliable service, the provider can begin to upsell additional services. This can include anything from additional data to complimentary services such as Spotify, at a price that encourages brand loyalty. Of course, for consumer mobile contracts this is fairly simple; whilst it can get more complicated in a business telephony context, the principals stay the same. If you can find the value-add that is compelling enough for the customer to add to their services package, then you can shift from ROI to ROA and drive real value to your business.

The challenge for a B2B operator is that when selling hosted or cloud-based voice solutions with desktop VoIP handsets, you are essentially selling dial tone. The end users at your customers want a connection. The upsell often occurs once you’ve won the account. After the customer has invested in the solution, you can start to introduce extended services that integrate with their current package such as Unified Communications, instant messaging, presence, Outlook calendar and scheduling integration.

In fact, the demand for those additional services can be generated from within the customer, from their own end-users. Once users become accustomed to VoIP or UC, they’ll start to look to multipoint collaboration. Users will want to introduce content, which will demand a larger screen and drive them into a meeting room environment. It’s a natural evolution which can be supported from the SPs’ side to develop a strong business-case for the customer to invest an incremental additional amount to extract more value from their service. From the SPs’ point of view, if you can charge £10 a month for a desktop service for one seat, you can potentially charge up to £100 a month for a conferencing room with ten seats, with relatively little additional investment on your part. So how can you convince the customer?

A great start for presenting a solid argument is to make use of modern analytics to mine your data to make better decisions. Monitoring and understanding your customers and their users is useful in two ways. Firstly, you can begin building profiles of your customer base in order to better sell to them. But secondly, and this is where the real value lies, you can build profiles of your customers’ end users in order to deliver a better service. Show the client that they could redistribute their resources by downscaling in one location and upscaling in another for no additional cost. This would allow their end users in their call centres to answer more enquiries and be the foundation for a long-term relationship based on the trust built through honest recommendations. In this way, monthly usage reports of the services you provide can be a popular upsell for customers, especially when marketed at a reasonable ratio of cost per seat versus utilisation increase.

As much as the market is changing, it’s not stopping anytime soon. In the near future, we predict SP’s will no longer be able to charge for the connection alone. The value of a connection has waned as the value of content has grown. Think back to when you were charged 50p a minute to make a mobile phone call. Now providers give away hundreds of minutes and unlimited free texts, but they charge dearly for data. Business to consumer connectivity will ultimately become free. But in a business context, content alone won’t be enough. They’ll require meaningful information about usage levels, potential cost savings and optimisation options. Analytics will provide all of this and help them manage their estates better.

The analytics and support will be even more important given the move towards hosted and hybrid services. Customers no longer want to be responsible for their telephony solutions. From adding and reassigning seats to ongoing maintenance costs, they know there are savings to be made by reducing downtime and internal management. For example, one pharmaceuticals company with 14,000 seats achieved the significant cost savings and business benefits over a three year period by using Polycom telephony devices in a Hosted UC solution.

They recorded:
$12M Improved productivity and collaboration
$452K Employee relocation cost savings
$2M Phone purchase and installation savings
$582K Managed services cost savings

That’s a total cost savings and benefits of $15M. This potential overhead reduction is too significant a value for organisations to ignore, especially if their competitors are experiencing these savings and able to invest more in other profit-generating areas of the business. It’s not just the enterprise that can benefit though; according to UniVoIP an SMB of 10 seats can save 51% in costs over three years with a hosted solution versus an on premise PBX or an average of $11,000 per organisation in total.

In order to take advantage of all these growth areas within the SPs’ environment, the vendors need to focus on one key thing; quality of service. Think about your favourite shop, I bet you have a loyalty card. You probably chose to spend slightly more to purchase from your preferred outlet because of the rewards they offer, the quality of service or the offers they tailor to you. It’s the same in the SP’s environment, if you can provide a consistent quality of service, provide offers based on meaningful data and great rewards for your customers in terms of cost savings or ROI, then they will begin to purchase more and more from you.

SP’s are actually extremely well positioned to sell in complex, high value, high return environments. Most organisations don’t go from zero to sixty, meaning they don’t go from non-existent enterprise telephony to a Unified Communications and Collaboration environment in one single purchase. They start with a cloud-based service of some description, and as long as they feel the benefit and have a good user experience, then they will start to add to their environment; feature by feature, benefit by benefit. This means you can move away from selling on cost and sell on value. It’s about truly embracing service and only viewing a product as part of the entire offering. If SPs’ aren’t already planning to do this, they need to seriously consider how they are going to differentiate their offering to build brand loyalty and succeed in this rapidly changing market.