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Voice, Data & Internet Service News Business Decision Makers
March 2008, Number Three

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The 3 Flavors of Business Voip
Who Buys Them & Why

Overview   House VoIP   Hosted VoIP   Hybrid VoIP   Migration to VoIP   Vendors  How to Price it Out (quote Checklist)   About/Contact



Small and medium-sized business (SMB) owners have been hearing about VoIP for at least five years but most believe (or want to believe) that VoIP is not yet ready for prime time. They remember trying out Vonage at home and thinking "It's to squeaky & there's too much delay!" But in the back of their minds they suspect that things have changed and they should at least find out who's doing what with business VoIP. Things have changed. Over the past eighteen months or so three variations or "flavors" of VoIP have emerged, each targeting a specific type of business. 

These 3 Flavors of Business VoIP are "House", "Hosted" and "Hybrid". House VoIP is for those long term stable businesses that are ready to move up to the next logical level of phone service and can buy a whole new phone system. Hosted VoIP is generally for those businesses that are new or are opening new branches and don't want to invest in a long term phone equipment lease. Hybrid VoIP is for those businesses that want to continue to use their current non-VoIP phone systems but want the benefits they can get from the VoIP "dial tone".


"House" VoIP (AKA IP-PBX)

As suggested above,  House VoIP is what most businesses would buy first if they had a very stable business, they new what they needed their for system to do over the long run, long-term commitments are not a problem and they wanted to "do VoIP right the first time".  As the picture here suggests, House VoIP is just like their current phone system in that every employee has a normal business phone sitting on their desk and and there's a PBX or phone box "in their house" somewhere - usually the phone closet.

By having an in-house VoIP phone solution where the Internet protocol (IP) PBX (private branch exchange) equipment is on the premises, business owners have direct control and ownership of all the "piece parts" needed to take advantage of all the cool things VoIP phone service is said to offer businesses. Since all new phone equipment is generally needed for the House VoIP solution though, short term cash savings is rarely one of the immediate benefits of of the IP-PBX "forklift phone solution" (forklift out the old phone system & forklift in the new).

(An important note here is that once a business invests in a House VoIP solution by bringing an IP-PBX in-house, they can become the phone company for virtually all their remote offices and home offices by being able to provide "Hosted VoIP" to them as will be discussed in the next section.)

So how does a business owner know if House VoIP is the way to go? The decision process would be similar to replacing a leased vehicle where the lease had just expired. If the business needed the new leased vehicle to do the same long term job functions as the old vehicle and no future vehicle capability changes need to be accommodated during the future term of the new lease then the obvious solution would be to simply lease new equipment for a long term. In this analogy, an owner of a stable business might simply lease a hybrid car - same basic function as a gasoline car but with an accommodation for the ever increasing cost of fuel. Now looking back at the phone system choice, the same business owner would buy a House VoIP solution - same basic long term lease but with an accommodation for being able to take advantage of current and future technological efficiencies.

The same business owner though might by unsure about his or her need for a vehicle in the future though. If the business environment is changing or the future functional requirements of the company vehicle are not clearly visible, the owner might opt to simply rent a service vehicle in the short term. While a rental costs more in the short run the business owner avoids the long term cost associated with being stuck with a long term lease for equipment no suited to a changing business environment.


"Hosted VoIP" (AKA Pay-As-You-Go)

Hosted VoIP is like renting a car instead of leasing one. It cost more in the short run but you preserve long run flexibility if you really don't know what you need for the long run and/or the short run is all you need to focus on.

As the image to the right suggests, with Hosted VoIP your get the cool business phones and all the cool stuff VoIP phone service give you but you get to skip the part where you have to own an IP-PBX (and have an IT or phone person program it and pay for software license upgrades, yada, yada, yada).

What you don't get out of though is having to buy the cool phones, known as IP phones that cost in the neighborhood of under $200 each (for ones you'll be sorry you bought) to over $400 each for ones that make you feel as cool as you want to feel after "going VoIP".

There's still an IP-PBX making all your phones do the groovy VoIP things but the IP-PBX is not housed at your house but at your Hosted VoIP providers house around the block or half-way around the world. After buying all the IP phones you need (one for each employee just as you have to do with House VoIP), instead of paying monthly lease payments for an IP-PBX that makes you IP phones work, you pay a monthly license fee to your Hosted VoIP provider for each and every IP phone they are making work. This monthly "seat" charge runs anywhere from a low of $15 a month (pay a little to get very little) to about $50 a month (now you got everything you need).

(An important item of note here is that in addition to "some phone company", the Hosted VoIP service provider can be a businesses corporate office that has an IP-PBX. As noted above, once a business has an in-house IP-PBX, they can become the Hosted VoIP provider for all their remote offices and employee home offices.)

While House VoIP is good for stable companies that have most of their employees working in brick & mortar offices, Hosted VoIP is ideal for "virtual businesses" where most employees are either working out of small remote offices, a home office or are always on the move. 

In many ways, Hosted VoIP is pretty much the same as the "Centrex" dial tone that was first introduced by the local Ma Bell phone companies in the early 1990's. As many may recall, after the breakup of AT&T, the seven local phone companies were barred from selling business phone system equipment. The local phone companies saw not being able to sell PBX's as a huge market disadvantage. To skirt this challenge they invented Centrex dial tone and told businesses that all they needed was Centrex and a simple phone as there was no longer a need to buy and maintain an expensive on-premise PBX.

While few stable "silo-type" businesses adapted the non-PBX Centrex dial tone solution over the long run, it was adapted by many of the same types of businesses that are adapting Hosted VoIP today - hospitals, governments, schools and other "campus-type" spread out business environments.


Hybrid VoIP (AKA "OK but I'm not buying any new phones!")

Because many businesses are perfectly content with their existing phone systems and are only interested in VoIP if it can actually lower their overall phone, data and Internet bills, the VoIP phone companies have invented Hybrid VoIP.

A Hybrid VoIP solution brings VoIP dial tone to the customer's existing non-VoIP phone system and uses an "integrated access device" (AKA "black box") to convert the VoIP dial tone back to something the existing phone system can use. In most cases the resulting equipment setup in the customer's phone room looks almost the same as the equipment setup they get with a normal non-VoIP T1. So what's the bid deal?

The big deal is what it takes to bring non-VoIP dial tone to a business - a big monopoly-type local phone company with lots of money and big customer phone bills. In many parts of the US, because of the huge costs associated with bringing in the old-fashioned (and expensive) non-VoIP dial tone, the only competitive options many businesses have are those being offered by the new Hybrid VoIP phone service providers. Bringing dial-tone to a business over a VoIP T1 is much less capital intensive than bringing in the same dial tone over the older technology. (This is why while many monopoly local phone companies are fighting to keep VoIP competitors out they're migrating many business customers to the VoIP dial-tone technology themselves - to save money.)

For many businesses then, because of the option of Hybrid VoIP, the choice to switch to using VoIP technology over what they have now will be as intimate as the choice to choose to buy their office paper clips from Staples or Office Depot - "Who cares, whatever's cheapest and works best. Let's move on!"


The Business Migration to VoIP

Just as sure as analogue television is being completely phased out due to digital television in 2009, with few exceptions, for the vast majority of businesses, VoIP dial tone will eventually phase out non-VoIP dial tone. the question business owners need to ask themselves is not If they'll switch to VoIP but when, how and under whose terms?

Most businesses will start with Hybrid VoIP. They'll order it the next time they have to renew their existing voice and/or data/Internet T1s. Once they have the new VoIP dial tone plugged into their old phone system then they'll eventually swap out their old phone system to an IP-PBX phone system to take advantage of all the cool, groovy VoIP things the dial tone (they already have with the Hybrid VoIP) can do above just save them money.

As mentioned above, only rich companies with a sudden strong business need for one of the new VoIP features will forklift out a working PBX in the middle of a lease and bring in a new IP-PBX. Buying a new IP-PBX out of the gate will be the norm though for new startup, classic companies like doctor's offices, real estate offices and the like.

Like Centrex almost two decades ago, Hosted VoIP will likely always be a bonze medalist in the VoIP favorite flavor race. There are just too many compelling reasons for companies to go directly from Hybrid to House to stay to long or fool around with Hybrid. Bringing the integrated Hybrid VoIP solution remote and home offices though will be one of the primary reasons many businesses buy IP-PBXs and choose to go right into the House VoIP solution.


How to Price it Out (quote Checklist) - Pricing VoIP out is the same as pricing out a regular phone system. The person creating the quote will need the following five pieces of information.

1. Locations - The physical service addresses of all locations the business has. Also needed is a working Bell phone number at the business. Usually a fax number will suffice.

2. Phones - How may phones or "stations" will be needed at the diferent location broken down into three categories - "spare" (the phone by the fax machine or in the lunch room), "worker-bee" (for the regular folk) and, "executive" (for the owners, VPs, etc.).

3. Talk Paths - An estimate as to the total number of people on the phone on an office to "out of office" call. this number will closely approximate the current number of voice phone lines the business has in each location.

4. Current Phone System - A description as to what kind of phone system(s) does the business have now & what the owners like or dislike about it. also include how old it is & how much is still owed on it if it's still being leased.

5. Data Network/Internet Access - A description of What kind of data network each location has, how each location accesses the Internet and what kind of in-house or contract human resources each location can call on to work on or upgrade their data network & Internet access services.


About/Contact - “Telecom Survival Guide News” is written for the network service clients and prospective clients of ATEL Communications, Inc. To discuss the specifics of this newsletter and how they impact your business or to license or distribute "Telecom Survival Guide" content, please contact ATEL broker & consultant Dan Baldwin at 858-646-4655 or Dan@ATELbroker.com.



Dan Baldwin,
Telecom Broker & Consultant

To license or distribute "Telecom Survival Guide" content please contact Dan Baldwin at 858-646-4655 or Dan@ATELbroker.com.


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TSG Issue Archive

Number 3 - The 3 Flavors of Business VoIP
Who Buys Them & Why March

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Find Them, Eliminate Them & Get Your Money Back!
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