SMBs' enthusiasm for converged communications swells

Small and medium-sized businesses in the U.S. have been slow to adoptInternet Protocol (IP) communications. But as the cost and complexity of doing business over a single IP network has dropped, SMB adoption of converged communications has taken off, according to a recent report from New York-based Access Markets International Partners, a research firm and consultancy focused on the global SMB market.

"SMBs couldn't afford some of the solutions before," AMI analyst Sanjeev Aggarwal said. "As the systems have become simpler to install and a lot more cost effective, SMBs are increasingly adopting these products."

These were sick patients, waiting for help. It didn't matter how good our services were, because we couldn't even answer the phone. Scott Gebar CIOAunt Martha's Youth Service Center Inc.

The SMB migration to IP communications is paralleled by a significant increase in the adoption of managed services as well, the report found. The evolution of the telecom industry accounts for some of the increase in SMB adoption, Aggarwal said.

"Telco and cable companies, as their voice revenue declines, are getting more and more into managed services, so they are providing IP PBX security services, backup services, Web hosting, hosted email services and so on through the network to SMBs," he said. SMBs, in turn, are looking to outsource key IT functions. "SMBS are more comfortable with the security issues, and the network is a lot more scalable than a couple of years ago."

That adds up to a lucrative market. AMI estimates the total SMB IP communications and managed services market at $30 billion for 2007 and predicts a sizzling compound average rate growth of about 15.6% out to 2010.

SMBs' embrace of the single IP network and managed services goes beyond filling the coffers of vendors, Aggarwal said, pointing to the collaboration, mobility and consequent growth and productivity the technology offers the U.S.'s smaller entrepreneurs. "You can get voicemails in your email systems, faxes in your email, phone calls forwarded to a mobile phone, so you never miss a call. You don't have to sit in your office," he said.

Serving patients most in need

The point gets no argument from Scott Gebar, CIO at Aunt Martha's Youth Service Center Inc., a nonprofit social service agency with headquarters in Chicago Heights, Ill., which turned to Cisco Systems Inc.'s Unified Communications applications to cope with growth.

SMBs go for IP telephony U.S. SMB IP PBX shipments now exceed traditional TDM PBX (including key systems) systems. IP PBX penetration among U.S. SMBs rose from 20% in 2005 to 25% in 2006. Hosted VoIP penetration, which is currently at less than 5% of U.S. SMBs, is entering a high-growth phase that will drive SMB productivity well into the next decade. Collaborative communications such as webcasting, calendaring and scheduling are being used by more than 15% of U.S. SMBs. Skype has become a convenient communication tool for quick long-distance chats, and is being used by more than 5% of U.S. SMBs. SMBs cotton up to managed services: More than 10% of U.S. SMBs use a managed firewall service. More than 15% are using managed virtual private networks. Online/off-site data storage has risen to 11% among small businesses and 15% among medium-sized businesses. Source: AMI-Partners 2006-2007 U.S. Small and Medium Business Telecom/IP Communications and Managed Services

The agency's state-licensed, federally funded community health centers, which account for 50% of the organization's revenue, have mushroomed during the past four years, from 18 to 51 locations. Aunt Martha's has 950 employees and 200 volunteers, serves 37,000 clients and has a "lean and mean" IT staff.

Large offices had their own private branch exchange (PBX) systems. Smaller offices had individual telephone lines. Long-distance calling and leased lines alone ate up $36,000 monthly, and support for the PBX systems added still more cost.

But money wasn't really the change driver -- actually, it couldn't be the main change driver at the not-for-profit, Gebar said. "They need to know how something like this is going to allow our staff to provide better service to the people coming into the centers," said Gebar, who told his story at the recent CIO Decisions Conference in Carlsbad, Calif.

The rationale became apparent, as the centers multiplied. Many of the sickest and poorest communities in the network, with the highest volumes of calls, were getting the short end of the stick, with half-time people to answer the phones, and served by data centers, three and four hours away. One such facility had 50 to 60 voicemails piled up at any time of the day, Gebar's staff found after it began monitoring call volumes.

"These were sick patients, waiting for help. It didn't matter how good our services were, because we couldn't even answer the phone," he said.

Gebar tested the Cisco Unified Communications system at a small, low-volume center, and proceeded slowly from there. The system was deployed at new centers as they opened. Aunt Martha's existing centers made the transition as their PBX leases expired. The decision to go with Cisco made sense, as Aunt Martha's was already using Cisco routers and switches. It made sense to capitalize on its Cisco network to deliver voice services, as well.

The upshot: Aunt Martha's ended up saving money. Local and long-distance costs dropped by 20%. Gebar was also able to leverage his IT staff better. "The core competency of our IT staff is IP networks, not telephony, so we had to outsource management of our PBX systems."

The migration to converged services brought an unexpected payoff, as well, to Aunt Martha's: "A lot of our funders became interested in how we were able to do that," Gebar said.

Technology marches on

Analyst Michael Speyer, who covers the SMB market at Forrester Research Inc. in Cambridge, Mass., said the migration to converged communications by SMBs is a matter of supply and demand, with the bigger part of the equation on the supply side.

 "More of the move is a push from vendors, because it opens up a whole new category which has great potential for other follow-up categories, and it makes a lot of money for the vendors and their channel partners," Speyer said.

Still, on the demand side, even the smallest businesses get that a converged platform offers some really useful functionality -- and scalability, he agrees.

"All the functionality may not always be available for them today, but the infrastructure certainly puts the foundation in place for what may come down the pike in the future," Speyer said. "And for the larger SMBs, it does simplify the whole voice/data infrastructure, because there are not two separate networks."

As for the ramifications of the market's embrace of IP communications? "Nothing more than the march of technology," Speyer said.

Let us know what you think about the story; email: Linda Tucci, Senior News Writer