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Hosted VoIP targets SMBs

Hosted VoIP options are attracting the attention of more than just SMBs looking to save on their communications budget. Larger telecoms are beginning to look at the revenue growth opportunities in a market once dominated by smaller, independent service providers.

Hosted VoIP service providers are focusing in on small and midsized businesses (SMBs) as recent trends indicate that the smaller and more entrepreneurial businesses are more likely to utilize the cost-effective hosted options than build an IP network in-house. AMI-Partners' recently published Telecom/IP communications report documents these latest trends.

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Originally envisioned by startups themselves, hosted VoIP is now serving the market that first developed it and successfully competing against the traditional telecoms that are just starting to take an interest in offering hosted service to SMBs.

"The small, nimble companies are the prime innovators and trendsetters -- the ones that will evolve VoIP from a low-cost alternative to PSTN telephony into a unified communications solution with functions and features integrated into virtually all aspects of SMB operations," said Sanjeev Aggrawal, vice president, SMB IT Infrastructure Solutions at AMI-Partners.

One of the major problems facing most SMBs is the very fact of their smaller size and smaller reach. To inspire more confidence in their abilities among potential clients, many SMBs are exploring the possibilities that hosted VoIP and unified communications can offer. By using these services, many SMBs find they can project the appearance of being larger and more effective without needing to bring in more staff to handle their networks. Moreover, hosted service providers typically offer their options in bundled service packages that are priced on a per-month basis, allowing SMBs to better manage their operational expenditures.

The AMI-Partners report also found that as more SMBs recognize the cost-savings benefits of hosted VoIP service, there is increasing interest from the larger service providers in marketing hosted services to SMBs. In particular, the report documented that North American SMB hosted VoIP market spending is anticipated to be at $1.56 billion by 2010, up from $164.9 million in 2005.

"Though the market is expected to reach $1.5 billion in 2010, that will still only represent 7% to 8% of the market," Aggrawal said.

With such potential for revenue growth among service providers, telecoms that have typically marketed to larger enterprises are beginning to look at the market segment represented by companies with five to 50 employees.

On the smaller side, for example, is M5, an independent service provider catering to the SMB market. M5 anticipates doubling its revenue this year and will surpass the combined revenues from its first fives years of operation.

Most telecoms are not marketing VoIP services aggressively to the SMBs because of fears of cannibalizing their customer base and revenues. But as the market grows and adoption rates increase, leading telecom service providers will become more aggressive in marketing VoIP to SMBs, Aggrawal believes.

"While the independent service providers are more focused on SMBs, as the opportunities for growth increase, larger telecoms -- such as AT&T -- will look to get into the market," he said. "Vendors will find that those who offer more service-based options will be more successful."

Related links:
Ask the expert: Implementing an IP phone system in a SMB

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