Perhaps reflecting the state of the economy, small and medium-sized businesses (SMBs) are getting increased attention from the service providers gathered for the spring COMPTEL PLUS show here in Grapevine, Texas, near Dallas.
Managed service provider Cbeyond Inc. (CBEY), for instance, said that its continued penetration is reflected by the average of seven applications now in use per small business customer.
“We think that’s a key barometer,” said Cbeyond marketing head Steve Zimba. “The more our individual services and applications are getting adopted, the healthier our business is.”
In an afternoon panel on “Cloud Computing: Impacts on the Telecom Industry,” two of the panelists represented hosted services providers targeting the SMB market.
“We’re looking at 500 employees or less,” said Charlie Cary, business development director at XO Communications. Cary heads the company’s Concentric business unit, targeting SMBs. “Anymore than that and you’ve got IT issues, you’ve got control issues, you’re dealing with more complex layers of staffing.”
Cary said XO, which now has a sales force of around 400, targets smaller businesses because the sales cycle is usually shorter and because it’s a customer segment that has traditionally been underserved by the larger carriers. Small companies are especially attracted to hosted and cloud-based services, added Bob Bye, executive vice president at SMB provider nGenX, because they lack the resources to manage sophisticated IT and Internet-based communications services.
“They say, ‘We don’t want to deal with it,’” remarked Bye.
Cbeyond says it now has more than 42,000 customers in 11 U.S. cities, including Chicago, Miami, Dallas and Los Angeles. The company plans to roll out services in two more cities this year, including Washington, D.C. (where it’s already begun offering services) and Seattle, with an eventual goal of 25. Overall, those 25 markets comprise 1.4 million small businesses.
In reporting quarterly earnings last week, Cbeyond CEO Jim Geiger said the company expects revenue growth of 20 to 26 percent in 2009, after growing at a 25 percent rate last year.
Typically, said Zimba, Cbeyond achieves up to a 13 percent share in its target markets. “So if you’ve got a couple of hundred thousand SMBs, with an average size of 12 employees, you’re looking at a few million end users.”
Often those users require a level of customer service and engagement that the big carriers are not structured to provide.
“Why do we win [against larger providers]?” Zimba asked. “It’s because this segment gets tossed around inside the LEC. We shake hands to make a deal.”
Often these nontraditional service providers focus on giving SMBs capabilities historically reserved for large enterprises. Cbeyond’s “BeyondVoice” core bundled service, for example, comprises almost three dozen productivity applications including unified messaging, IP PBX SIP trunking, and a hosted software application called “Mobile Workforce Manager” that enables companies to more easily track and support field workers online.
“With Mobile Workforce Manager," said Zimba, "we’re going after the guys in trucks."
