Larry Lisser
Larry Lisser is a seasoned startup leader with a passion for commercializing emerging communications companies. Larry helps voice and collaboration...
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Larry Lisser | April 11, 2011 |


Race to Zero Begets Race to Cloud: Same Old Players, Much Bigger Prize

Race to Zero Begets Race to Cloud: Same Old Players, Much Bigger Prize These three are but a tiny sample of the many incumbent telecom providers adding--or planning to add--much higher value services to their portfolio.

These three are but a tiny sample of the many incumbent telecom providers adding--or planning to add--much higher value services to their portfolio.

Only twice in my career was I ever responsible for selling or marketing pure-play, usage-based communications services (ie. minutes or transport of some kind.) Once back in Canada, selling mobile subscriptions when you still needed an Intel chip to decode the various calling plans. And then again when I first moved to the Bay Area 15 years ago, selling enterprise long distance and voice-over-frame relay (how’s that for a flashback.). Coincidence perhaps, but I can’t think of two jobs I enjoyed less.

I'm an application guy. I like communication offerings that afford you the creative latitude of positioning or tailoring the service for particular audiences, unlike usage based services, which prompt price-driven marketing exercises. People probably tend to be good at, or like one over the other. Yet of late in our industry, business leaders across the land are tackling the transition from price-based to value-based packaging.

Indeed The Race to Zero, a term used affectionately to describe the fast-approaching end to generations of usage-based packaging like that of landline or mobile voice minutes, has pretty much run its course. Some have survived, like Skype, although its minutes' revenue growth is at the expense of others who did not. And let's not forget the last true bastion of high margin minutes--the dreaded roaming minute. But when compared to 20 years ago, this is race is toast.

Ultimately the end of one hotly contested race, has given birth to another--The Race to the Cloud--with many of the very same players vying for early leads. Inevitable really, considering the many strategic technology and go-to-market assets these telco-friendly players bring to the table. Some evidence of this accelerating phenomenon:

1. Channel Partners Show (spring edition)
I attended last month's installment in Las Vegas. A show that was once dominated by booths of transport services (CLECs of all sizes, DID providers, Origination/Termination), started a shift towards "cloud" content last fall. And this year's did not disappoint: Excellent show, lots of energy, and yes tons of cloud talk.

There was not an aisle I walked down nor a breakout session I entered that didn’t reek of cloud. At every corner, vendors hailed their hosted PBX solution as better than the next, all vying for the loyalty--and customer access--the agent and VAR communities have to offer.

This shift is not insignificant when we consider the "channel" in Channel Partners refers mostly to the very long-standing and widespread Agent and telecom VAR communities. While these groups have played an important role in our industry for years, bringing transport related services and CPE solutions to market, it is not one uniformly known for selling complex or productivity-focused applications to its customers.

This seems poised to change, at least for the VAR community and I hope for some of the agent one. It is not obvious; notwithstanding the deep relationships these channel partners have nurtured with their customer base, selling transport and selling cloud-based workplace applications requires different skills and often speaks to a different buyer.

2. InPhonex adds Rich Hosted PBX services
InPhonex, a name long synonymous with international telco services like bundled residential LD, DID's, SIP Trunking and termination, announced a significant addition to their product offering through a OEM relationship with innovative application provider Ringio. Ringio develops and markets advanced call routing applications that add rich context to voice calls by elegantly integrating the CRM and social network data. InPhonex, in search of new growth areas and opportunities to leverage incumbent infrastructure and its pervasive channel, launched Televate as an initial push into customer management and productivity application selling.

Notwithstanding the Race to Zero, I’m told that InPhonex’s residential VoIP business is extremely healthy. Still, I commend them for jumping in early in cloud services; it will surely take time to educate its channel and amend its brand to succeed in the application arena.

3. Bandwidth adds Mobile Cloud Solutions has long been a fast growing provider of network-based telecom services, both at the wholesale and retail levels. But now they too are leveraging their back-end strength, and channel-reach, to tap into the SMB's growing appetite for hosted voice and mobile applications. Last year they launched PhoneBooth, a funky (I mean that in a good way) virtual PBX presented as a robust alternative to Google Voice. And more recently they launched PhoneBoothMobile, which takes this one very big step further. The offer repackages end-to-end mobile phone services (voice, data and handsets) along with the advanced call management solutions in the cloud. One of the first full turnkeys I've seen.

These three are but a tiny sample of the many incumbent telecom providers adding--or planning to add--much higher value services to their portfolio (CBeyond's new cloud outfit also comes to mind). While their infrastructure and technology strengths make these moves somewhat natural, the go-to-market issues are a different ballgame. In many cases, sales people and even the type of channel may require wholesale changes to succeed. And ultimately, it may require targeting specific market segments as offers become quickly commoditized. Either way, this Race to the Cloud promises to be more fun than the one to Zero.


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