The Telephony Bear Pit

To some, telephony may seem a bit ‘old hat’ these days as there are so many other mechanisms to communicate with your colleagues and customers.

The truth of the matter is that voice is still at the centre of the communications conversation for many businesses looking to upgrade their systems. The hosted voice market in the UK has been rapidly growing over the last five years as businesses look to consume their telephony differently and take advantage of the flexible benefits hosted can offer. However, in a ridiculously competitive market partners are coming up against several challenges. In this article David Dungay spoke to some key market players to find out more.

As with any fiercely competitive market, price can often be the determining factor in who wins. The problem we are seeing is that selling on price alone isn’t just damaging to a partner, who is operating on skinny margins at best anyway, but also the rest of the market who inevitably has to adjust their own proposition to compete. The result, a commoditised market. The vendors are continually trying to educate partners to focus on the benefits rather than the price but are they managing to shift their mindset?

Alex Tempest, Director of Partners, TalkTalk Business, commented “The channel is of course price-conscious, however, for this market value is more important than price alone. While some services may be offered at a lower price point, they might miss features such as mobile enablement and team collaboration, which, because of the rapidly changing workplace, customers increasingly place at the top of their shopping list.

Still, it is important to recognise that for some customers, price is still key. Many companies continue to look closely at cost, as well as security and how intuitive the platforms are to use. We feel that we strike the right balance and those organisations that simply race to the bottom without delivering added value will be among the first to be consolidated or exit the market completely.”

Steve Glaister, Sales Director at Invosys, said “I’ve always been taught that you should never sell on price – however, when you can, it makes the job a whole lot easier. The reality is 9 times out of 10 a user will be looking at the cost. If you are selling hosted as a commodity, the pence per minute cost per concurrent user or seat will become a major point.

If you can move it to a solution sell and save the company costs on labour, recruitment and other resources, then small differences in rates such as the cost of calls to mobile will be knocked to insignificance.

The priority after that is ensuring that the service works first time, every time. If there is downtime then all the cost savings in the world become worthless, as the business is not able to function.” Paul Gibbs, Sales Director, TelcoSwitch “The price in the market is being driven down by partners pitching the same product with little scope for differentiation. So end users may get five quotes all pitching the Horizon product with one at £12.99 per seat and one at £17.99 and for all the service wrap and spin in the world the end user just tends to pick the cheapest! So this in itself drives commoditisation and is frankly one of the key factors in the race to the bottom.”

Channel Challenges

The hosted market has experienced its fair share of challenges over the years. For those partners moving from traditional on-premise models they have had to transform their own business models and embark on a business journey fraught with difficulties. For years we also had connectivity issues which hampered the growth of the market. Many channel companies have successfully made this transition and are enjoying a more connected Britain and the opportunities that brings to sell hosted solutions. So what challenges still remain?

Chris Cooper, Sales Director, Cloud Infrastructure and Services, at Nuvias Group commented, “The main issues facing partners today tend to be operational and include challenges with porting, billing and on-boarding of customers. With connectivity now better than ever before and continuing to see improvements year-on-year, the adoption of Hosted Voice is on the rise right across the market. We are seeing new channel players entering the market, drawn by the promise of new revenue streams and attractive margins. Among others, this is particularly true for IT support companies, who already have a trusted relationship with end customers and consider voice to be a complementary addition to their existing service offering, as well as being a great way to increase ARPU. Starting out with a trusted customer relationship has obvious advantages, but the evolution to ‘UC service offering’ from an ‘IT support offering’ requires operational changes within a company that bring their own challenges. Not least of these is the time-sensitive nature of voice services, before even considering video, that need to be consumable in a seamless, user-friendly way right from launch.”

"For me, differentiation is essential to success in Hosted channel sales. Partners who invest time in learning 3rd party bolt on services like Akixi can very easily and effectively differentiate from competition even when up against others selling Horizon. Over recent months we have been advised by more than one partner that Akixi has made the difference as to whether or not the customer would proceed."

Mike Rogerson,

BDM at Akixi

Alex Tempest added, “Unified Communications is a concern because it is more than just telephony, and requires more from Partners than previous solutions might have. UC now needs to be contextual communication, integrating voice, messaging, work groups and file sharing with existing cloud tools that businesses use. Organisations might also be running multiple previous installations of UC tools and so Partners may be asked to run a hybrid model, which requires knowledge and skill. There is also the fact that, since there are so many solutions and providers, the customer might be confused about what the best one is for them. Some may even have been ‘burned’ in the past. That is why it’s important for Partners to use their expertise to offer the right tools that meet the multiple demands of the business simultaneously.”

Robinder Koura, Head of Channel Sales – EMEA, RingCentral commented, “Surveys have often stated issues like security or reliability as major concerns around cloud and hosted services but these objections have become less prominent in recent years. A major challenge for resellers selling into the mid-market is overcoming the fear that going full cloud will dramatically impact how IT departments operate potentially forcing them to change job roles or procedures. This cultural change aspect is still quite powerful but can be overcome with education and training.”

Gibbs continued, “One of the biggest concerns and challenges that hosted partners face is the demand for richer functionality and integration with the end user’s CRM estate. The end user doesn’t expect to give away some of their more traditional PBX functions when upgrading to hosted as the word upgrade becomes a point for discussion! So we have seen resellers trying to find a platform that offers this core functionality as a given while also offering a rich integration with CRM. By integrating and writing into platforms such as SalesForce or Dynamics it gives the end user what they want while also allowing partners to differentiate and retain margin against their opposition.”

Tim Brooks,

Managing Director of Pragma

"The next 12 months are going to be an extremely exciting time for the world of Hosted and Cloud Telephony. We have already seen a change in both resellers and consumers buying patterns and rather than opting for the cheapest solution in the market, people are now more concerned with features, integration and platform resiliency.

One of the major concerns for partners is the sheer amount of competition in the market place. Making sure you have a feature rich platform with integration into CRM systems and other applications like Skype for Business is a must if you want to compete into today’s market.

Making sure the right connectivity is in place at a customer’s site is still paramount to the success of any cloud telephony service. This has become less of an issue over the last few years through the introduction of high speed and fibre broadband. The connectivity in and out of the provider’s data centre should also be a consideration when choosing a provider. At Pragma, we have observed an increased interest in our Ericsson-LG iPECS Cloud hybrid technology for sites where resilience is paramount. This allows users to utilise both cloud and on-premise solutions with automatic failover to the on-premise solution in the event of an internet outage."

Differentiation is Key

Although we seem to have a wide variety of hosted providers in the UK (over 90 at my last count) it was always going to be inevitable that a top tier of providers would emerge as winners in this space. This has now created a situation, when partners pitch for business they can often be up against other partners with the same solutions. Standing out from the crowd is tricky in this situation and we are even hearing partners sacrificing margin just to win deals to hopefully make it up again throughout the lifetime of that customer.

Glaister said “The biggest concern for resellers is establishing exactly what product they are selling and then trying to differentiate their version from a competitor in a marketplace that is full of similar products. I have been in a situation when I saw 4 tenders for one company - and 3 looked identical, bar a different logo on the back page. The customer chose one of those 3 - and opted for the cheapest. There was no obvious USP, meaning the product had become merely a commodity.

It’s essential that resellers give end users a valid reason to use their version over a competitor when selling similar products, or go one better and pitch a different product which will suit the customer’s needs.”

I’ve always been taught that you should never sell on price – however, when you can, it makes the job a whole lot easier. The reality is 9 times

out of 10 a user will be looking

at the cost.

Steve Glaister,

Sales Director at Invosys.

James Bushel, Head of Product Lines at Gamma said, “Channel partners who are really able to stand out from the crowd are those who really understand their customer base and invest the time to understand the challenges that their customers face. They focus on providing overall solutions to specific problems rather than simply pushing out product to their base. However, with hosted services, and the way they are provided with end-user GUIs, there is an opportunity for the channel partner to impose their brand on the service they sell and provide a level of differentiation this way. This is why Gamma is launching a white-label option later this year for Horizon, which will enable our channel partners to leverage the brand value they have built up for their business over the years.”

Head of Nine Wholesale, Adam Cathcart commented, “The ubiquity of Horizon has attracted a lot of comment in the Channel, with resellers struggling to create a differentiated proposition and often sacrificing margin to win deals. It is surprising that given the Channel has made a virtue out of differentiating and adding value to service provider propositions for many years, this is proving to be such an issue, but it may reflect a lack of vendor support for partners who are seeking ideas about how to best position Horizon and conduct effective marketing?”

Should partners look to develop a multivendor strategy in order to differentiate?

Justin Blaine, Channel Sales Manager at NTA, commented “I believe it is very practical and very important for resellers to have 2 providers of Hosted Telephony. In the PBX world, not one manufacturer was a perfect fit for all customers and likewise the hosted world is no different. Vendors have different offerings, different pricing models and in some cases very different features some of which can be chargeable so it makes it easier to provide the end customer with the best solution which is what they do and have done over the years when deciding what PBX to sell.”

“Partners should be strategically comparing vendors of hosted telephony not only in features but also looking at what the infrastructure is like behind the service itself.

“The platform itself and its feature set should be also widely benchmarked against other providers, what handsets can be connected, what softphones and mobile apps, no 2 customers are the same so it’s important not to be pushed into selling what the vendor wants you to sell. NTA unlike others will also undertake bespoke work for a resellers customer if certain features are required that are unique to their business or vertical with defined timescales and an agreed roadmap to produce and deliver what is required.”

Glaister added, “Its horses for courses. It is often prudent to have two suppliers as it can be the only way to keep your suppliers honest. Giving a choice allows the channel to pick the best option and it really is not a one size fits all. Listen to the customer’s needs. We are at the first round of hosted to hosted deals where end users will be moving to their second hosted provider. Not being an ISDN line is no longer good enough, as that cost saving as already been eliminated.”

On multi-vendors, Cooper said “It’s possible, but depending on the operational tolerance of the reseller, may not always be totally practical. As the UC offering being sought by end users becomes increasingly about video and collaboration as well as voice, it would seem to be more straightforward to work with a provider that’s able to fully assess the nature of the customer challenges being faced or problems that need to be solved and is able to design, enable and deploy an end-to-end solution that meets those requirements.”

Great Expectations

There is undoubtedly much still to come from the hosted market, especially as we start to see the emergence of CPaaS (Communications Platform as a Service) starting to gain traction. There is also an interesting dynamic going on within the collaboration space with companies like Slack, and now Facebook with its new Channel offering Workplaces. The phrase “collaboration is the new voice” has also rung out from various corners of the market, I’m currently sceptical of the validity of these comments as I have yet to be convinced collaboration brings more efficiencies than voice.

What can we expect from the hosted market?

Cathcart says, “The nature of your (partners) competition will be different. Market entrants form the IT and SI sectors will mean that your customers are being approached by the incumbent providers in these spaces, who will be placing a different spin on how to upgrade and integrate their voice communications. You need to be ready for that challenge, so enjoying the support of a provider who can equip you to success will be vital.”

ISP VIEW

Paul Heritage-Redpath, Product Manager, Entanet

"We would argue that connectivity has never hampered deals; instead it hampers retention. Businesses are sold hosted services based on the benefits to their business and when their experience is not as positive as their experience of fixed line telephony or is held back by their limited connectivity, they’re hardly likely to sign on the dotted line again.

Our recommendation to our partners is that if voice is key to a customer’s business (and we believe it normally is), EFM should be the starting point. It’s true that voice calls don’t use much bandwidth and it’s true that you can put a small business on a DSL and it will make calls, but that’s not the same as ISDN where it will absolutely, all-day every day, regardless of what else you’re doing, make calls. For micro businesses FTTC - with a higher capacity and therefore a lower propensity to fail - works; we caution against positioning it as a direct replacement for ISDN because there is the possibility of it retraining in life, or being taken down for Openreach network rearrangement. "

Ed Says…

Choose your vendors with great care. Do what is right for your business and your ambitions as a partner. The ‘Price-war’ problem isn’t going to go away overnight so you need to make sure you spend time on your educational pitch to customers so they are out of the ‘go for the cheapest’ mentality before you wow them with your portfolio.