The end of its reseller relationship with Level 3 Communications has been a good thing for SBC Communications, enabling the incumbent to take adapt its VoIP service to meet broader needs and interests, says Brian Buffington, executive director marketing of managed services for SBC Operations Inc., who spoke with xchange at SUPERCOMM this week.
SBC had launched its Hosted IP Communication Service (HIPCS) service for SMBs in 2004 first as a resale of Level 3's (3)Tone hosted PBX service. When Level 3 decided to exit that business, SBC moved ahead quickly with its plan to operate its own infrastructure.
“Resale was the right thing to do to get into the market quickly, but we are a big networking company and we like to control our own product,” Buffington says. “Plus, our technology folks wanted our own network.”
Buffington says SBC now has a system in place that includes the Siemens AG softswitch and the Sylantro Systems Corp. feature server. Notre Dame University was the company’s first big customer for its own product, a site that continues to be a launching point for new services.
The company’s large business in managed IP PBX has been an advantage, Buffington says. “It is a blessing because our salespeople understand VoIP and are used to selling IP PBXs with PRIs.” He adds, “Clearly we would much rather sell a hosted solution because it gives us a long-term relationship rather than selling a VoIP PBX with a trunk service where we could be replaced.”
Similar to other service providers in the hosted PBX market, SBC sees its sweet spot as the small business segment with 25 to 200 stations that uses a T1 or multiple T1s for connectivity. But the company is trying to extend the services to larger customers, at the same time adding new approaches and features that adapt hosted PBX for that market.
A number of large customers using Centrex or operating contact centers want to try hosted PBX but also want it to be interoperable with their existing services. The Sylantro feature server has call center capabilities “but not an industrial-strength call center,” Buffington notes. “Our most important and valuable Centrex customers have large call centers and are interested in putting in our hosted product, but they want to put a toe in the water and not leap in with both feet.”
To that end, SBC is “in beta mode” at Notre Dame with a system that shares voice mail, four-digit dialing and call forwarding across the legacy system and the stations using the hosted PBX service.
“We found selling IP PBXs that some customers want to trial HIPCS in satellite locations,” Buffington says. “Also, even though the company’s Centrex IP service [a traditional Centrex extended with VoIP trunking] had not done particularly well in the market, it planted a seed with Centrex customers of a new IP service that was totally interoperable,” Buffington says. “So when we introduced the HIPCS service, the assumption was that it would do the same thing. When we came in, they asked, ‘Can I keep our four-digit dial plans, and can I call forward?’ and the answer was a no,” but SBC is rectifying that situation with the new features.
The market attitude toward the hosted PBX service mirrors the company’s experience with IP PBX: Customers want to move cautiously into VoIP. “We just introduced the Nortel [Networks Inc.] BCM 50 to the small business market. However, most of our initial sales have been TDM. So they are buying it because it is a hybrid PBX, but they don’t want to take the leap yet. And many Centrex customers are not risk takers in jumping into new technology,” Buffington observes. “Centrex it is tried and true.”
SBC has not yet seen the phenomenon where owners of TDM PBXs want to use hosted PBX to augment, not replace, their current equipment, “but we have had our own product only three months and it takes six weeks to provision. So most of our success in medium-sized businesses is with those who might be single-location businesses.” Also, SBC priced the service as low as $39.95 per month per seat with unlimited local and long-distance, he said, to make the appeal as broad as possible – not just for businesses with multiple locations that were trying to save on long-distance costs.
To get that kind of price, customers also have to buy broadband access from SBC; the service includes dynamic use of bandwidth for voice or data as needed.
Hosted PBX has been a tough sale at times because of the conservatism of the small business market it is aimed at. SBC is using a total cost of ownership approach, Buffington says, comparing HIPCS with a Cisco Systems Inc. AVVID system “so they can understand exactly what the monthly expenses are.”
SBC is now selling the service mostly with its own direct sales force, he says, but is looking to develop new channel relationships for resale in coming months.
