Hosted VoIP Industry Trends

By Stan Baldwin
Updated: February 18, 2011

Early VoIP conversations were the purview of hackers and “heavies”. The hackers (hobbyists) hooked up a couple PCs across the internet using identical hardware and software on each end and carried on chatting as best they could, much in the manner of ham radio operators of an earlier time. The heavies (large, technically sophisticated organizations) were able to build very effective proprietary systems that reduced their dependence on PSTN and delivered features not available from traditional wire lines. Skype has become the de facto tool for individuals, and the denizens of the corporate environment can chose from a wide range of options which are feature rich yet capital intensive. Neither of these solutions meet both the functional needs and financial constraints of the great middle ground, small and medium size businesses.

Besides the substantial amount of cash required for state-of-the-art hardware and high-capacity connections, the expertise to put a system together and keep it that way 24/7 is, as my mathematician friends like to say, “Non-trivial”. The PSTN system pointed the way for many tech-savvy entrepreneurs; build a fully functional VoIP structure with an attending hoard of clever folks to keep it running and sell pieces of the resulting capacity to organizations unable or unwilling to do it themselves. Hosted VoIP was a “no-brainer” (to quote an investor acquaintance).

A cursory search of the 'net turned up more than 50 companies offering hosted VoIP services, most sporting impressive lists of optional features such as video conferencing and “presence” capabilities. The fundamental benefit of using these services is to gain access to the features and benefits enjoyed by the big companies, at a price that fits in a much smaller budget. Productivity gains are expected to at least match the costs of hiring a VoIP provider and usually produce a return several times the value of the investment. When the support staff of the hosting company can take over some of the responsibilities of premises staff, savings further increase. If, as advertised, reliability and disaster recovery are better than before, the story just gets better.

Where is hosted VoIP headed?

The easy answer is to see where the premise systems go. Some of the needs of large organizations will not directly translate for smaller operations, but most will. For instance, as larger players find new ways to make use of the “cloud”, those services and tools will be offered by VoIP hosts. For the moment, most providers are able to deliver high quality communications in many markets, but the penetration still has a long way to go. Ease of establishment, operation and maintenance will improve in both basic and subtle ways. Quality of Service, already good, will continue to improve, even as new demands on bandwidth make the task more difficult.

Some of the specialized players in this space are: Apptix, Packet8, Cox Communications, Pandora Networks, Velocity VoIP, and CallTower. The established communications cadre such as AT&T, Verizon, Vonage, CableVision and Sprint are also mixing it up with the entrepreneurs. Expect frenzied competition to drive pricing, quality and innovation for years to come.

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