VoIP: Doing Well in Tough Times

Here at Enterprise VoIPplanet we’ve been noting reports of strong performance from a number of companies in one segment or another of the IP communications industry—in striking contrast to other areas of information technology.

A particular case in point is Louisville, Kentucky-based Smoothstone IP Communications, which, according to chief marketing officer James Whitemore, grew some 55 percent year-over-year in the first quarter of 2009.

“It’s been a period of continued growth for Smoothstone.” Whitemore told VoIPplanet. “We haven’t quite wrapped up Q2, but Q1 was a strong quarter, year-over-year, and quarter-over-quarter.” He went on to say that the company is on track to double its revenues over the course of the fiscal year.

What is the secret to this kind of performance in a down economy? Whitemore identified several drivers, but perhaps the most important is the down economy itself. He summarized the advantage that Smoothstone brings to the table as “a vast RoI, a vast cost saving for the customer.”

“When you walk in to a customer, you can very quickly show them how in three to six months you can take down their communications costs between 15 and 50 percent—with very little capital expenditure. It’s a really compelling argument. And it really helps speed up the sales cycle, unlike others in the technology industry where sales cycles have been elongated.”

While it is not the only factor in Smoothstone’s success, “when you get in front of a customer, the cost-cutting aspect of what we do is first and foremost the thing they’re looking for—the ability to provide a return on investment at very low cap-ex,” Whitemore stressed.

However, what Smoothstone offers is also “a technology play,” according to Whitemore. “The typical Smoothstone customer has made some limited investments in IP telephony, but have never seen that through to any kind of unified communication.” Many have an on-premise IP PBX, for example, but, generally, they haven’t built out a complete IP communications system—or even deployed SIP trunking, a Smoothstone specialty.

Moreover, the typical Smoothstone customer has between 5 and 20 business locations, Whitemore said. “In the head office they may have made an investment in a Cisco CallManager or other IP PBX, but in the branch offices, they’re still using old, outdated equipment. And one of the things that differentiates Smoothstone is that we’re able to go in and provide SIP trunking into their IP equipment, and provide fully hosted voice services right up to the desktop in other locations.”

This means, among other things, that the typical customer uses a mixture of solutions. “They’ll take SIP trunking services, TDM emulation services, and fully hosted services,” Whitemore explained.

Whats more, “We’ll do those services over our own network, over the existing network they have in place with AT&T—or whatever they have. So it’s really the flexibility element that’s really a key differentiator—to be able to go in and take a look at exactly what they’ve got and determine exactly what they need to augment and extend that—and then provide this set of tools that are then available across all of their infrastructure.”

So, not only is Smoothstone able to bring customers a big—and rapid—return on investment, it’s “upgrading their communications at the same time. Typically, it’s a whole new telecoms experience,” Whitemore remarked.

The mix of solutions is also the key to the third driver of Smoothstone’s success: up-selling customers a broad spectrum of services for which voice is only the starting point.

“The initial engagement with a customer tends to start around voice services,” Whitemore explained. “But very quickly from there moves to managed network security services, and we’ve had a lot of growth with our hosted contact center solution over the last six to twelve months. Web conferencing and voice conferencing tools are also very, very key. So, it very quickly moves from just a basic hosted voice sale to selling at least one, but in most cases two or three [other services].”

And Smoothstone has been steadily rolling out new services as long as VoIPplanet has been following the company. In addition to those Whitemore mentioned, above, Smoothstone customers can also opt for fax solutions, application optimization and management, collaboration tools, e-mail and voice-as-e-mail, and video conferencing. ” The next thing in the portfolio will be a telepresence [large-scale HD video conferencing] solution,” he said.

So, while the company’s sales are still very much ‘voice-led,’ “Once you get basic infrastructure in place, you then start layering across, really, a suite of unified communications,” Whitemore explained.

This involves a certain amount of customer education. “You can show them how to bring the contact center technology into play. They may never have thought of themselves as a contact center customer in the past, but if you show them how to use these tools for really integrating a call flow pattern and maximizing the use of resources for their entire organization, it further extends the value proposition.” Ditto for video conferencing and other communications services.

Even in the way it manages its relationship with customers helps to generate sales for Smoothstone: The company has a team of regional sales managers that handle the initial stages of a customer engagement. “But as customers come on-board, they are transitioned to an in-house account management group who is really the customer’s ongoing dialogue with Smoothstone, and that’s where a lot of the incremental sales and extension of services happen.”

Finally, the dismal state of the economy is contributing to Smoothstone’s success indirectly, in addition to the direct cost-savings benefit. VARs who, in the past, did well by selling huge, half-million or million-dollar CallManager installations, have seen that market largely dry up. In its place, they are now selling a lot of hosted services from Smoothstone (and, no doubt, some of its competitors).

“They still sell phones and switches and routers, but also take a commission on the ongoing monthly charges,” Whitemore said.

Oh, yes, Smoothstone has one more thing going for it. It’s geared up to serve the mid-size enterprise market—customers with between 200 and 10,000 seats, with the average being 1,000 to 2,000.

“If you look at that segment, it’s underserved—ignored, really—by the big carriers. And it’s underserved by the smaller regional players, who are typically focused on 50-seat deployments,” Whitemore said. So, the company pretty much has this market to itself—for the time being. They’d like to keep it that way.

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