When I last enquired a few weeks ago analyst firm MZA indicated that there were approximately 17.5 million PBX extensions in the UK of which around 50% are connected to the world by SIP trunks. Clearly, both the message regarding the shutdown of ISDN in 2025 and the fact that SIP offers so much more for business are hitting home.
At the same time Cavell Group were estimating that hosted telephony currently accounts for around 18-20% of the ‘PBX’ market.
Growing the market has been a steady plod for hosted and cloud-based telephony suppliers but the good news is that this market share has a firm foothold and clearly there is a large, majority, share of the market still to be addressed.
However, whilst these cloud solutions have their benefits in terms of enabling scalability, flexibility and pay as you go financing, the PBX still has its supporters amongst the channel and a user base that is frequently consumed by inertia.
Over the last few weeks we have talked to key suppliers – and there are many, to find out how they plan to overcome this inertia.
With hosted telephony approaching 20 years of availability why is the PBX still dominating the installed base in the UK?
Steve Day, Group Sales Director at Invosys, says the reason is a PBX to many businesses is a symbol of reliability.
“Having a physical system in place provides them with peace of mind and has done so for many years. This can make converting a business to IP solutions difficult. With no installed phone lines and only a virtual version of a PBX hosted in the cloud, they do not offer the same tangibility as a traditional on-site PBX does.
This is not an issue specific to just telecommunications, as of 2018 only ‘41.9% of companies have adopted some form of cloud service’.
The solution for those sceptical of fully cloud-based solutions? Hybrid systems that fuse traditional call handling technology such as the PBX with the flexibility of the cloud.”
Tim Mercer, CEO of Vapour Cloud, puts this down to his belief that businesses haven’t changed their commission structure to incentivise salespeople to sell telephony leases on this different basis.
“Salespeople will understandably sell according to how they can earn the most commission, so commission has to mirror the company’s strategy.
On the whole, businesses still have a somewhat short-sighted hunger to gain upfront financial benefit rather than a recurring revenue model. It is admittedly a bold leap to make the move from a CapEx to OpEx billing, but the long-term advantages of this type of income stream are vast.
If the enthusiasm doesn’t exist from the reseller, and the end user perceives the move will be a big headache, the market doesn’t change, irrespective of the added benefits that hosted and cloud telephony bring for organisations.”
Iain Sinnott, Head of Sales at VanillaIP says principally he thinks the inertia is down to two factors’.
“Firstly it suits the PBX resellers to keep the customer where they are because in the PBX world they are the experts, it delivers an answer and they have sunk investment in support tools/staff, spares and supplier relationships. Stepping out into the cloud exposes them to the need for retraining, places them on the same or a lesser footing with new tech resellers and invites deeper questions from clients around what is best for them. The second element is customer ignorance and that is the fault of the cloud resellers and SPs”
“It’s all down to time,” says Justin Blaine at NTA.
“I firmly believe the PBX is dominating the installed base in the UK only because it takes time to displace any legacy when new technology in any sector becomes available. Whilst we approach 20 years of Hosted it is really only in the last 5 years that connectivity has become more reliable and affordable to the SMB sector, which let’s face it, makes up the bulk of businesses in the UK.
The sweating of assets when purchasing any product within a company is of paramount importance to ensure the ROI, therefore it is only a matter of time that the natural acceleration of Hosted Telephony being deployed across the SMB and Enterprise sectors will ensue.
I am also aware that resellers are still at times bewildered as to how they can make sensible margins from Hosted Telephony compared to selling On Premise solutions, therefore they can be reticent to sell this solution compared to the upfront revenues generated by selling PBX’s.
It really is time for resellers to think about how Hosted can fit into their portfolio and generate the revenues required to maintain cashflow, this can easily be achieved by mixing recurring revenues with asset finance to alleviate financial pressures for the reseller as they move towards this new model within their businesses.”
According to John McKindland, Head of Solutions at Nimans, the PBX is very much alive and well at Nimans and beyond.
“Whilst there is continued migration to the cloud for those smaller outlets that require a basic low-cost telephony system based on an OPEX rather than CAPEX model – in many instances over the longer term a PBX remains cheaper.
Cloud has not taken over in the SMB arena and I think another key factor is that ISDN and analogue lines are still prevalent and there are still broadband connectivity issues especially in rural areas.”
Hosted telephony provides many user and reseller benefits but what would be your top pick in each case (user & reseller) and why?
Tim Mercer at Vapour Cloud, says that for the user the key word is flexibility.
“Hosted telephony offers businesses the choice as to how and where they work, with no detrimental impact on security, and organisations need only pay for what they need – it’s super-scalable.
For the reseller it is having recurring revenue without the headache – the reseller secures a long-term income stream and has to do very little for it, as we’re talking next-level technology which doesn’t require the same level of support.”
Dominic Norton, Sales Director at Spitfire, says for a reseller there is the ability to deliver a complex technology solution with minimal skills, no capital investment and therefore add value to the solution.
“For the end user they benefit from a solution that is typically very feature rich and is continually enhanced with minimal up-front investment, a simple rental per user and often short-term commitment (12 months or less).”
Xelion UK Managing Director, Dave Reynolds says for customers it is UC.
“Unified communications, or as we term it Organised Communications is a huge benefit, bringing together voice, instant messaging, sms, wallboards and much more, as a single service for users on any device. This allows more flexible working patterns and greater productivity for users.
The channel can benefit by partnering with a hosted telephony provider that offers an open platform architecture that channel partners can configure to their unique customer needs. Xelion has open RESTful APIs allowing third-party apps such as MS Exchange and Office 365 to be easily integrated seamlessly with the service.”
Iain Sinnott at VanillaIP suggests that for users there are two main wins but they cover the two biggest business expenses.
“Firstly they can optimise the productivity of each member of staff through the delivery of a tailored technology mix. Secondly they can optimise the management of their customers experience blending voice and text communications management, staff monitoring and training, flexible working options required to attract and retain the best staff and compliant recording to back up original customer discussions.”
Emily Nerland of Masergy, says that for end users, the top benefit in her mind is far and away the ease of path to upgrade – both in functionality and scale.
“Users can grow in line with the technology as it’s a natural by-product of the subscription to the service. With hosted telephony, system upgrades – some of which are critically important like security – will be added as and when they drop. The same can be said for adding or removing users. In either case, there’s no requirement for extra parts, which reduces costs and time to deploy. The end user ends up with the newest and best version regardless of when they signed up for the service. It’s essentially how we consume almost all tech today via our personal devices.”
Colin Gill, Akixi Product Manager, says his top pick for a user would be ease of flexibility.
“Done properly, at their core, both PBX and hosted telephony do the same job and, to be honest, on the whole both can work in similar ways. For example, it’s possible to pick up your handset from a PBX system and go and work from home. As long as you have the phone configured for remote working and the correct remote license for the phone on the PBX and possibly some sort of session border controller or gateway device installed at the PBX site and the inbound routing/firewalls configured for the connection. On the other hand, to do the same on most hosted systems, as we all know, just pick up the handset and take it home. As long as you have internet connectivity and a means to power the phone, away you go.”
Myles Leach, MD of NFON UK believes that for resellers the key benefit is revenue opportunities.
“As well as being incredibly easy to deploy and maintain, hosted telephony offers huge benefits in terms of building customer loyalty and enabling long-term predictable annuity revenues for minimal investment. For customers the key benefit is mobility – the ability to work from anywhere at any time. The fact is there is hardly any organisation, regardless of size or industry affiliation that is not concerned about digital transformation – and cloud communications are an essential building block of any viable digital strategy to enable staff to work flexibly.”
SOUND BYTES
How can hosted telephony resellers differentiate their offerings other than by price?
| John McKindland, Head of Solutions, Nimans | The key for a reseller is to have access to lots of different features and functionalities that an end user will require as their business continues to grow. It could be PCI compliance on call recording for example. |
| Justin Blaine NTA | Hosted has to be sold as a solution, too many resellers are trying to displace the PBX and ISDN lines by reducing the current expenditure of the customer, this is quite simply why a race to the bottom occurs! |
| Dominic Norton, Sales Director at Spitfire | Voice quality – ensuring that the solution is designed to deliver consistent end-to-end call quality. The data connectivity network used to deliver the application reliably is essential to an effective solution. |
| Dave Reynolds, Xelion UK Managing Director | By providing a hosted telephony platform that puts channel resellers in the driving seat, Xelion allows the comms provider to offer customers a service tailored to their needs, that they cannot find elsewhere. |
| Tim Mercer, CEO of Vapour Cloud | This is definitely the era of the managed service, inclusive of the telephony, networks, SIP and wrap-around customer support. |
| Emily Nerland of Masergy | Simple concepts to consider is the value-add you offer as the reseller. Is it convenience, customer experience, the extended portfolio offering and expertise or even simply the model of sale? What is your special sauce? |
| Colin Gill, Akixi Product Manager | Differentiation comes from the hosted telephony offering being one part of an overall solution – a solution which can be tailored to effectively meet a user’s needs. |
| Myles Leach, MD of NFON UK | Resellers can definitely further differentiate themselves with having the best-in-class customer service and helping to educate customers on the many benefits of shifting their voice communications to the cloud. |
| ProVu Sales Director, Craig Herrett. | The best way is to add to the product wrap and to offer other business services such as connectivity, utilities, IT Support etc. This way rather than as a pure telephony provider they could be a business support service encompassing a number of elements enabling the value to be in 'One throat to choke' for the end user. |
Ed Says…
Whoah! My initial reaction when speaking to channel suppliers was that the arguments against taking a hosted/cloud solution and the reasons given for why the PBX is so prevalent have not changed much over the last ten years. Reliability and sales commissions are legacy objections aren’t they? It might seem not but the counter sales arguments certainly have progressed.