SMB Converged Networks

Selling voice and data convergence to SMB

Vendors have been espousing the benefits of converged voice and data networks for many years now but are these solutions ready for the SMB market? ARN, in conjunction with Nortel and LAN Systems, brought together a select band of resellers to find out.

For the purpose of the discussion, SMB was divided into three segments - SOHO companies with less than 10 employees, small businesses with 10-150 users and mid-tier organisations with up to 250 seats. What follows is an edited transcript of the conversation.

Mic Henderson, LAN Systems (MH): Do you guys have a target market where you decide something is too big or too small?

Robert Brown, Total Computer Technology (RB): Our sweet spot is 25-150. When I started out I would cross the road for five cents but now I have cut clients off because we are only invoicing $100 a month and they take forever to pay. What's the point when we have clients that spend hundreds of thousands a year and don't query bills? But it's not just about size - it's about relationships because we don't want to be thought of as just a supplier.

Steve Clack, Nortel (SC): It's important to recognise that the SMB market is growing faster than enterprise. Any organisation that is looking to grow has to seriously consider SMB because that is where it is going to come from.

RB: It's probably under-serviced as well. Everybody wants huge clients but I can make more money on ten 50-seat clients than I can on one 500-seat client because the return on investment is quicker and the sales cycle is quicker.

Bengt Beyer-Ebbesen, VoIP (BB): There has also been a filtering down of requirements from larger clients. If you go back 2-3 years, smaller clients were not looking at the same features as those above 250 seats such as converged communications and desktop integration. Now some clients with five or six users want these features because they can see competitive advantage. We can deliver those services but it comes at a very high price if you want to do it with dedicated equipment. A better solution is delivering on a shared or managed services basis where you can drive down prices.

SC: SMB customers are facing exactly the same pain pressures as enterprise - managing a more mobile workforce, customer retention and increasing revenues from services. The trick is finding solutions that fit the SMB budget.

Richard Hutchinson, Emerging Systems (RH): There's a lot of expectation in terms of what technology can do for a business. There are now [converged communication] products that offer all the features of a large PABX at a price that is affordable to the SMB market. SSL VPN devices let people log into their network from anywhere. These are business enablers.

Michael Salama, MCR (MSa): Is it the number of seats that drives adoption of technology or the line of business? We could look at the SMB market generally and say it is less educated but there are those that are highly educated and want to integrate technology with their way of doing business. They are a much better candidate for voice and data integration.

SC: We have to look at business concerns. A company with five or six staff can benefit from converged solutions but there are others with 60 staff where 80 per cent are in a warehouse. Real estate agents are a great example because they need to be contactable all the time. If we can sell them a business benefit then size doesn't matter.

Mal Smith, CommSys (MSm): Do you know any real estate agents that want to spend money?

SC: It's about educating these guys that converged solutions are good for their business. At the moment the perception is that they can't afford it and don't need it. We have to change that.

MSm: We have a few real estate customers that all want it [a converged solution] but none of them have it because they are not prepared to pay for it. I put real estate agents in the same bucket as builders - they are a problem customer.

MH: Is identifying benefits one of the biggest difficulties of selling technology?

MSm: Many have simply never thought of allocating budget to something that could improve productivity. If you tell them they can give a number out because it will ring the desk and mobile phone at the same time they think it is fantastic but want to know who will pay for the mobile phone call.

MSa: It's all about technology targeting specific profiles. If you show the same real estate agent a smartphone that notifies him of new listings and gives him mobile access to email, it is a much easier sell. Most people don't need to know what technology is used. They just want to pick up the phone and find a dial tone. If there is no dial tone, they want somebody to kick.

Abbas Aly, Triforce (AA): Mid-range SMB has a couple of fears - one is the cost of maintenance. The hardware is fine while it is working but how much is it going to cost to fix when it is not working? The other problem we find with SMBs is that most of them are advised by 'computer experts' like their next-door neighbour or somebody they grew up with. That makes it very difficult to get information across because they get an idea we are ripping them off. They will get somebody to build a PC for them because it is a bit cheaper but what happens when it breaks and there is no warranty? Another thing in the voice space is that the first call most SMBs make when moving to a new office is to somebody like Telstra because the marketing is really strong. They will get a terrible system out of it but they believe working with Telstra is safe.

MH: Are there concerns that services are intangible and expensive or does that again come down to customer relationship?

RB: We have flexible rates. Sometimes you just cover your engineering costs because it is about the relationship. When there is a major upgrade you can recoup on that cost. It is about looking after the client end to end. We have clients that will call to tell us they need a laptop and that is the end of the conversation. They don't need a quote because they know we will charge a fair price and once you have that trust it is easier to sell solutions. That takes time and you are only as good as your last job. It is no good having sales guys closing deals if your engineers are crap. We are small enough to control that but bigger companies are running around with their heads cut off.

BB: I have seen over time that companies tend to make partnerships with companies of similar sizes because they feel comfortable. In the SMB world we talk about issues over a beer.

MSm: I think it's about risk as well. We are a small company and I am not going to take on a massive corporate because if they don't pay one month I will be sitting on the beach in a pair of thongs because I wouldn't be able to afford to fill my car with petrol.

BB: In larger customers it is departmental - you might have a good relationship with the IT manager but not with the whole company. In a smaller organisation, you know the receptionist and everybody throughout the company. We will go into companies where we only sell into the voice space and wouldn't even see the guys responsible for the data network.

MSm: This is the interesting thing about convergence - we have found that the IT manager looks after the network but the CFO looks after voice so you need to pull them both in. There are plenty of nice lunches for the IT guy while you try to get the CFO to the table.

RH: One way in is to tell the war story about how you have just done a job for somebody up the road. Suddenly they are interested.

Trent Goodall, Mobile Phone Service Centre, (TG): The biggest opportunity I have found is customers relocating.

MSm: If they are moving premises, why are you telling a customer to go to an IP handset rather than a digital handset?

TG: We haven't gone to IP handsets yet. We have been putting in converged systems with a digital handset so the customer knows they won't have to replace the whole system further down the track.

MSm: What do they want though? Why do they want convergence? What are the advantages of switching from digital to VoIP?

BB: I find it very difficult to sell on future advantages. You need to be offering tangible benefits today and future considerations can only be a small percentage of the uplift. If people don't have a need to do something now, how much can you sell them on promises for the future?

RH: There are real business benefits today in the key features. We went from a digital key system to a converged solution because we wanted to try the product before we started flogging it. It brings things like voicemail.

MSm: I will sell VoIP because people have heard of it and are willing to pay a little bit more but I feel guilty doing that because there is no really clear benefit.

MH: It's about business intelligence, skills-based routing, auto attendant. Many small businesses are run by husband and wife teams and half the management is then out of action during the school holidays. Using VoIP they can be securely connected to the system from home and there is a cost benefit to that.

MSm: We run a hosted PABX for that exact benefit. If I was going to put a converged system in there are some serious complexities around people working from home.

RB: You refresh desktops every three years but phone systems last much longer. With hybrid and IP systems it is nice to know you have a few things in your tool kit for the future.

BB: The rate of churn in the data world has been much greater than in voice. You still pick up a phone and talk to people and that doesn't change whether it's IP, digital or analogue. There are additional benefits in using digital but are these features relevant to SMB? Some of them are and some of them are not. In a five-man company you don't need corporate directory because you know everybody.

SC: What about mid-market SMB?

BB: It is a case-by-case basis because some can see benefit but others couldn't care less about IP.

SC: Organisations like law firms with 100 users are where convergence comes into its own.

BB: We have a couple of law firms in our portfolio with 20-50 users and they have the latest whiz-bang systems.

AA: VoIP has promised so much for so long but larger companies often build solutions to a budget rather than meeting customer requirements. Suddenly the system doesn't work as well as it should and that bad news is hurting the VoIP market.

BB: The first question I ask when people enquire about IP telephony is whether they are prepared to spend $1500 per user. If not, they shouldn't even consider it.

MSa: From a vendor perspective, what was the notion behind introducing this technology into the SMB market? Is it to save money in the long term or to integrate devices so there is consolidation of equipment and maintenance is more effective? If you tackle it from a business perspective, voice is voice. Data networks are the same and we are dealing with commodities. We are telling people VoIP is the best thing since sliced bread but we have never told them why.

SC: There are two ways to go as a vendor - chop down enterprise products or build new ones. Vendors typically try to develop a new portfolio of products that offer a complete solution.

MSa: It is an uphill battle to sell complete solutions when customers have the simplicity of mobile phones and email. Customers don't understand and are worried they will need an IT person in case anything goes wrong.

SC: SMB customers want business benefits but it has to be simple because they don't have an IT department. They need an edge over their competitors and any advantage they can get is worth an awful lot to them.

MSa: That is easy for a vendor to say but what is my value proposition for VoIP when I pick up the phone and cold-call a potential customer? You can't sell business benefit on the first call.

SC: You need to understand the customer's business first and foremost so it comes down to good old-fashioned selling.

MSa: The reseller channel is interested in the great unwashed but we need vendors to provide the value proposition.

BB: If you go back 10 years, a company was competing against other companies but now networks of companies are competing against other networks - a network of Ford dealers is competing against Hyundai; 21st Century against Ray White. The biggest problem you have as an individual company is communicating with your partners. That is a business benefit of converged communications. Fancy stuff like presence means you can easily check if somebody 3000km away is at his desk rather than playing telephone tag.

AA: Vendors make a broad assumption that there is an SMB market they want to target but VoIP only has benefits for certain industries. The target is not horizontal so vendors need to come up with vertical solutions.

SC: We need to talk to end-users and create demand for you guys. Some of them don't even know what convergence is.

MSm: It isn't in any of our marketing material because it doesn't mean anything.

SC: We should be working together with you on marketing campaigns that are specific to your customers.

RB: The flipside to that is that sometimes I don't like taking vendors to meetings because I am selling a solution made up of multiple vendors and you guys say things you shouldn't. I can't control that. If it is my BDM that says something he gets a clip around the ear or loses his job.

SC: I guess it is offering the tools. One of the most important things SMB resellers want from a vendor is direct lines of communication. They will buy through distribution but want interaction with the vendor.

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Head to head: Voice versus data

Converged networks are being sold by some resellers that have a background in voice and others that have traditionally earned a crust installing data networks. But which side makes the transition to convergence more easily? Two of our panellists - Robert Brown (RB) from Total Computer Technology and Mal Smith (MSm) from CommSys - debated the issue:

RB: If you are a voice guy going into IT it is difficult, in my opinion, but for IT guys going into voice it is a lot easier.

MSm: I would disagree with that. I can get an IT guy to set a converged system up but there will be some feature that doesn't work properly and we will have to go back out. To do it properly, so you are not spending money on support costs, you still need two different guys even after all these years.

RB: TCP IP and data networking is very specialised. A key system programmer knows phone systems and setting up a handset is easier than setting up a TCP IP network. IT systems are a lot more complicated with things like integration into Active Directory.

MSm: Hang on, you just compared Active Directory to ringing a phone but what about numerous auto attendants and everything else that comes with it? Comparing a laptop to a key system would be a fairer comparison - not Active Directory.

RB: From my experience, it has been easier to up-skill an IT person to learn a key system than to get a phone system guy to make the same transition.

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A question of application

Whether a reseller is coming to voice and data convergence from an IT or a voice background, LAN Systems sales manager, Leigh Howard, suggested they both need skills in another area - applications. "There has been a lot of talk about vertical markets but how many of you have just replaced a digital dial tone with an IP dial tone that adds no more value to the customer?" he asked. "Wasn't the dream of IP telephony all about integrated data applications? At the SMB level, aren't there a myriad of applications being developed that are great for a small dental practice or a school? Surely the job of the integrator is to integrate."

As an example, Howard talked about an attendance register application he saw demonstrated a couple of years ago.

"As soon as little Johnny comes into class, the teacher ticks him off on the handset," he said. "If he doesn't show up it sends an automated email to his father." The idea drew a mixed response from our panel of resellers. CommSys managing director, Mal Smith, pointed out that such partners were not easy to find because they tended to be small companies. "If a vendor gave me a brochure that listed the developers working on a particular type of software I would be calling them," he said. "That would be very handy."

But Total Computer Technology boss, Robert Brown, dismissed the concept as a lemon. "We had such bad experiences that it turned me off the idea," he said. "We have had developers in our offices and their work has fallen in a heap. If they can't do it in my office, why am I going to recommend them to a customer?"

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How do you demonstrate value?

While few people would not agree that converged network technologies are desirable, demonstrating value to potential SMB customers remains a major hurdle. Emerging Systems director, Richard Hutchinson, pointed out that the most expensive solution was not always the best fit.

"Value doesn't necessarily mean Rolls Royce. Some people are quite happy with their Holden Commodore and SMBs are highly susceptible to price," he said. "But they are aware that you get what you pay for."

The best way to prove value is through reference sites, according to MCR director, Michael Salama. "You are adding value to a business by enabling it to do something better, faster and cheaper," he said. "If you can demonstrate that, you have won the argument straight away."

But he said there were still significant entry-level barriers and questioned whether there was a clear value proposition.

VoIP senior sales executive, Bengt Beyer-Ebbesen, said it came down to selling trust. "Does technology matter? At the end of the day, you are selling the functionality customers need," he said. "What can you sell that is achievable and can you uplift the price by an amount that is justifiable?

"Have we become any better over the last 10 years at demonstrating a clear value proposition? I don't think we have."

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Is brand important?

As with all technology, there are plenty of choices for resellers when it comes to which converged network brands they offer to customers. So how important is the badge on the box?

MCR director of telecoms services, Michael Salama, said he would not risk the reputation of his company by putting a product in front of a customer unless he could put hand on heart and tell them he was able to maintain it for a long time.

But in a world where the products of leading brands are built in the same Chinese factories as unbranded boxes, Triforce director, Abbas Aly, questioned how important brand really is.

Nortel business manager at LAN Systems, Mic Henderson, said support was key. "It's not about how fast something is when it's going; it's about how fast you can get it back up when it isn't working. Stuff breaks down," he said.

For Total Computer Technology director, Robert Brown, the importance of brand varies according to the size of customer. "In the SOHO market it's about the price of the product rather than what happens if it fails. At mid-range it's about disaster recovery," he said. "Some clients are not interested in maintenance but others won't buy product without it.

"There are times when you have to quit while you are ahead and just take the product sale. There is no point arguing but when the customer gets burned you go back in and offer maintenance."