New England Network Group Inc. had been selling on-premises IP private branch exchanges to its customers since the late 1990s, but then saw margins erode in that line of business.
Reliability issues and the need to iron out problems with carriers as well as hardware suppliers dampened profitability. The more hours the Burlington, Mass., company spent troubleshooting, the less money it made.
“The vendors we worked with required a lot of intervention and support time,” said Sarah Ducharme, the managed services provider’s founder and chief executive officer. “That ate away margin.”
So, the New England Network Group tried a different vendor. The company began working with Whaleback Systems, which provides a managed Voice over Internet Protocol (VoIP) appliance. The equipment still resides on the customer’s site, but the product’s remote management capability reduces the support burden, according to Whaleback. In addition, Whaleback manages the carrier relationship. That takes more headaches off the table.
“In the long term, we’ll make money not having to spend a ton of time managing the solution once it is in place,” Ducharme explained.
Resellers and service providers such as New England Network Group turn to managed VoIP for a number of reasons. One is profitability. Margins for communications gear have experienced the same decline as the computer hardware business. In addition, the managed services approach generates recurring revenue through monthly billing for services and multi-year contracts. For end customers, managed VoIP reduces technical complexity and is a more proactive support model.
Hosted VoIP provides the channel with another alternative to traditional on-premises sales and support. In the hosted scenario, the PBX resides off-site. Resellers can partner with a hosting vendor to offer VoIP in the cloud.
The managed services VoIP opportunity
Voice resellers are among the channel companies pushing into managed VoIP.
Carousel Industries, a reseller and integrator focusing on communications, offers a VoIP monitoring service. Mark Damphousse, director of managed services at Carousel, based in Exeter, R.I., said customers need help staying on top of converged communications. Unlike closed phone systems of the past, VoIP systems may be integrated with third-party applications. Call center, video, unified messaging and mobile applications can all surround the core voice system, he noted.
Businesses are “concerned about convergence of technology and how they are going to manage it,” Damphousse said. “There is just less of a desire to maintain it on their own.”
Carousel’s services include communications network monitoring, voice quality of services and availability monitoring, alerting/notification, and patch management from a security and firmware perspective.
Azaleos Corp., a Seattle-based MSP, launched in 2005 as a managed Exchange provider. The company has since branched into unified communications and, in November, kicked off a managed Microsoft Lync Server service. Lync, the successor to Office Communications Server, provides IP PBX capability via software. Presence, instant messaging and conferencing are also part of the package.
Azaleos monitors and manages the Lync Server stack. Scott Gode, Azaleos’ vice president of marketing and product management, said the company acts as an “outsourced IT department,” for its customers. The hardware and software resides at the customer’s location or at a third-party data center.
About 70% of the RFPs and inquiries it receives involve a combination of instant messaging and conferencing, while 15% specify enterprise IP telephone, Gode said. Some businesses, he said, question whether it’s the right time to tackle a PBX replacement.
As a rule, Azaleos advises customers to wait on voice and start a unified communications rollout with instant messaging or a combination of instant messaging and conferencing. Gode said that approach is easier than taking on voice right away. Exceptions exist, however. Gode cited customers whose existing PBXes are nearing end of life as an example.
Customers should factor voice into their unified communications planning, even if they start with the other capabilities like instant messaging, Gode said. Organizations designing systems that fail to assume voice could be in for an ugly surprise later.
“By the time they try to turn on voice, they’ve got to go back and add more hardware or change the architecture of the system, which takes away from their return [on investment]” Gode said.
Weight the hosted options
Resellers and MSPs interested in moving the whole of VoIP cloud-ward can tap a growing number of hosting vendors. Intermedia Inc., an Exchange hosting company, in February debuted a hosted VoIP PBX service for its partners. The New York-based company’s channel allies sell and support the service through Intermedia’s Private Label Partner Program. Intermedia also provides hosted VoIP directly to customers.
“We are still in the early stages of [this] market, but it is taking off quickly,” said Bob Leibholz, senior vice president of sales and business development at Intermedia.
Leibholz said about 1,000 seats have been sold thus far. He cited pent up demand among partners that were selling hosted Exchange and wanted an IP telephony offering as well. He said end customers are replacing on-premises IP PBXes or legacy PBXes with the hosted service.
Carousel is developing a formal hosted VoIP offering, Damphousse said, but figuring out a financial model for hosted telephony has proven to be challenging. He said customers tend to want their own customized switch.
“When you customize a solution for each particular client, you don’t necessarily get the economies of scale where everything is consistent and easily managed,” he explained.
Leibolz said Intermedia’s hosted VoIP targets companies with five to 250 employees. For bigger companies, the need for more customization may make an on-premises or dedicated solutions more appropriate.
VoIP can lead MSPs to IP telephony
Managed and hosted VoIP give resellers a shot at branching into IP telephony. The move could prove rewarding. IP telephony refers to the use of the Internet protocol for voice communication, while VoIP describes the technologies and protocols that make that concept possible.
Melodye Mueller, vice president of strategic sales at Whaleback, said feedback from partners indicates that their initial managed VoIP contracts are four to six times more profitable than on-premises solutions. Follow-on contracts are more profitable since the sales and implementation work is already done. A typical contract period runs 48 months.
But resellers may have to revamp their support to reap those benefits.
“Traditional support models around voice have been reactive,” Damphousse said. He said providers don’t always communicate with customers or provide visibility into the voice system when problems arise. The result: frustrated clients who lack sufficient information to make good business decisions.
Damphousse said his company is trying to change that. In one example, Carousel builds dashboards for VoIP customers to provide real-time visibility into the environment.
“Customers can deal with problems, but they can’t deal with guessing,” Damphousse concluded.
John Moore is a Syracuse, N.Y.-based freelance writer, reachable at email@example.com.
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