VoIP too big a 'pain' for small businesses

VoIP has a lot to offer small businesses, but the market isn't quite ready to serve their needs. Experts say that will change with time.

Adoption of Voice over Internet Protocol (VoIP) by small businesses remains much lower than among medium and large businesses, but not for lack of interest.

"I talk to a lot of small business owners," said Michael Megalli, a partner with Group 1066, a New York-based strategic marketing firm. "They all want it, but the pain of getting it is too great."

Megalli said small businesses have to deal with too many technologies and too many vendors to cobble together a VoIP system.

VoIP is not mature. It's not idiot-proof.
Lisa Pierce
vice presidentForrester Research Inc.
"Because you have to deal with so many vendors to get VoIP set up, there are so many potential points of failure," he said. "A blame game starts. You get into a situation that when you do have a problem, it makes it a much more difficult problem to fix."

Megalli said the immaturity of the VoIP market is unfortunate because small businesses tend to be early adopters.

"Small business people tend to be technology optimists," Megalli said. "They tend to believe a digital solution is better than an analog solution. These are companies that have built distribution, marketing and sales online. They've used mobile telephony and data, laptops and mobile computing to great effect. It's helped them grow and compete in a way they wouldn't be able to without that technology. I think [VoIP] is definitely the right way to go, but no one is getting it right [for small businesses] in terms of sales and delivery."

Experts agree that VoIP technology offers small businesses a lot of advantages, including cost savings. But the market for small businesses is still too immature.

"SMBs definitely haven't been adopting the technology like enterprises, mainly because the technology is complex. Anything that's complex is going to be difficult for these small companies," said Gary Chen, an analyst at Boston-based The Yankee Group. "There are so many pieces to it -- the phones, software, the network, the Internet connection. Troubleshooting all that to get it to work smoothly could be an issue. It is extremely time consuming for these small companies."

Lisa Pierce, a vice president at Forrester Research Inc. in Cambridge, Mass., said small businesses have very few IT resources. They might have one person in-house who takes care of the company's computers. Add VoIP to the equation, and many small businesses will struggle to manage the technology.

"VoIP is not mature," Pierce said. "It's not idiot-proof. They need someone to take care of it for them."

Pierce said VoIP vendors will need to concentrate on managed services and bundle voice with other services such as Internet connections in order to serve small businesses. And they can't serve up an in-house box that the customer will have to maintain.

"These companies, the smaller they are the more interest they have in having an outsourced solution," she said. "If they're going to hire someone, they're going to hire someone that can help them expand their businesses. That willingness to rely on an expert means a solution provider could come in with both a WAN and a LAN solution for VoIP."

Recent survey research by Pierce showed that small and medium-sized businesses (SMBs) are 2.5 to three times more interested than enterprises in managed IP telephony and managed site-to-site or interoffice VoIP services.

And that interest increases as the companies get smaller, according to 608 SMBs that responded to Pierce's research. Thirty percent of companies with six to 99 employees told Forrester they are very interested in managed VoIP. Among companies with 100 to 499 employees, that interest dips to 25%. And among companies with 500 to 999 employees it dips further, to 18%.

Forrester also found that adoption rates shrink with the size of companies surveyed. When asked about replacing a traditional private branch exchange (PBX) system with an IP PBX system, 25% of companies with 500 to 999 employees said they had already done so. Companies with 100 to 499 employees reported a lower adoption rate of 18%. Just 7% of companies with 6 to 99 employees had done this.

Pierce said vendors just aren't aiming down-market.

"Vendors are primarily focusing their energies on the larger part of the market, where customers have more money and more resources to spend on this," she said. "There are some companies trying to deal with down-market companies. But for the amount of effort required, you need to get a fairly nice contract size to make it worthwhile."

Chen said the VoIP industry is also struggling to get its message across to small businesses.

More on VoIP
VoIP outsourcing: Save money and gain flexibility

Is VoIP the right choice for SMBs?
"Even assuming they [small businesses] can get everything in place and working, I think a lot of the overall benefits of VoIP haven't been conveyed. Small and medium business owners aren't convinced it's something they really need."

Chen said small businesses can definitely reap cost savings. Many small businesses are distributed, with several small offices or home offices and employees who travel a lot. These companies can save on communications with VoIP. There are also productivity gains associated with unified messaging and integration with customer relationship management and other technologies.

As the market matures and vendors improve their value proposition for small businesses, more companies will make the switch.

"Adoption is going to slowly and steadily increase, but it's not going to be an overnight revolution," Chen said.

"I think over time, as general supplier experience matures, standards mature and the ability to predict performance evolves, we're going to have a much wider range of choices on the services side," Pierce said. "There will be a variety of packages of services for small businesses to acquire."

Let us know what you think about the story; email: Shamus McGillicuddy, News Writer

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