They're all big guns taking aim at little ships. The battle to win small- to medium-sized business customers for new Voice over Internet Protocol (VoIP) services has begun in earnest, said the attendees at an OCRI conference last week.
Nortel Networks, Bell Canada, Telus and the like are positioning themselves to sell to a substantial market that can now afford to adopt VoIP voice services and do so without first abandoning their traditional telecommunications system.
According to Synergy U.S.-based Synergy Research Group, which focuses on network technology, the overall business market for VOIP equipment, including phones, hardware and software, grew 78 per cent to US$3.07 billion in 2004. For this year it is expected to rise to US$4.42 billion. By 2009, the forecast is US$11 billion.
At a conference last Wednesday organized by the Ottawa Centre for Research and Innovation (OCRI) and hosted by the City of Ottawa, keynote speaker Don Smith, CEO of Mitel Networks, said his small business audience was part of the fastest growing segment of the VoIP market.
"Our estimation is that 40 per cent of the market is businesses with 50 or less users. We recently reentered that space and we see it clearly as a growth market for us."
Mr. Smith said the revenue potential is enormous now that the technology has been validated by Mitel's larger customers.
"We have great product solutions and relationships with our customers and we're already represented in the United States as Sprint i4, so we're aligned with Sprint there."
He said a positive aspect for customers thinking of evolving their communications systems is that they don't have to dispose of their current desktop equipment. Instead, they can save money, increase customer loyalty and leverage their revenue streams with IP telephony.
"These applications are rapidly moving from being the icing on the cake to the meat in the sandwich for businesses large and small."
Proving Mr. Smith's point last Wednesday was Telecom Ottawa. COO Dave Dobbin announced that the Hydro Ottawa spinoff has teamed up with Toronto-based OneConnect to launch a new suite of IP multimedia telephone services to customers in Ottawa and Eastern Ontario.
"Our service, launched today, gives you one phone number for everything. There is one central point for your phone, e-mail, voice mail all at the same time," Mr. Dobbin said at the conference. "Imagine how many calls a car salesman misses, for example, while he's with other customers. What if he could get those calls, on his desk phone, his home phone, his cell phone, and through his e-mail? All the phones would ring at the same time and the call is routed to the first line that is picked up. Would he double his sales or do even better by not missing a single call?"
Bottom line, it's about turning IP telephone service into a tool that businesses of all sizes can use to improve profits, Mr. Dobbin said.
Nortel district sales manager Robert Medina agreed that small businesses are the future for vendors of VoIP systems.
"That is definitely a growing piece of business. Over the troubled times we've experienced the past few years, we've targeted large businesses to make sure they're happy. Now, small and medium businesses are beginning to grow for us. For Nortel, the strategy has been to leverage the existing equipment and use existing sets before evolving into a full VoIP system as the business itself grows."
While the big players angle for small business, analysts who are watching the development of the industry say competitive pressures will chip away at profitability. Aggressive price discounting, while good for the customer, is expected to erode the bottom line at the three top equipment suppliers – Nortel, Cisco Systems and Avaya.
Synergy has charted mid-single-digit price declines for VoIP technology in recent years and expects this to continue for the next 12 to 18 months as greater customer demand fosters greater competitive pressures.
By Scott Taylor
scott.taylor@transcontinental.ca
