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In this Industry Buzz podcast, the UCStrategies UC Experts debate the adoption of Unified Communications (UC) in the small and medium business (SMB) market.
The expert panel includes Jim Burton, David Yedwab, Nancy Jamison, Lisa Pierce, Marty Parker, Blair Pleasant, Dave Michels, Jon Arnold, Don Van Doren, Steve Leaden, Michael Finneran, and Art Rosenberg.
UCStrategies encourages your comments on this podcast. Please see the "Comments" section at the bottom of this page to contribute.
Jim Burton: Welcome to UCStrategies Industry Buzz. This is Jim Burton and as usual I’m joined by the UCStrategies expert team, and today’s topic is UC for SMB. It’s a very important topic because clearly small companies of any size—whether it’s that small one-, two-, three-person operation, all the way up to whatever your definition of SMB may be—but let’s just use 250 as that number. They all need some of the same capabilities that large enterprises need. The question is, how are those products and services being delivered, and who’s going to be delivering those? We know in Microsoft’s case that they really don’t, today, offer solutions for that small enterprise customer when it comes to UC. We also know they have roadmaps for providing that in a hosted basis in the future, so that’s going to be an important part of SMB in the future, is how hosted will fit into that, or how cloud services will fit into that.
We also know that they are much more agile at making technology acquisition decisions because they just don’t have a big installed base of things. So finding a company that may rely on using cellphones as the only means of communications is not particularly out of the question for that group. So why don’t we get started? We’re trying something new today in that we haven’t talked about this in advance. We usually have a lot of interesting comments as we’re preparing for it, and thought today we’d just try to see what happens and what comes out of it. So I’m just opening the floor up for whomever would like to go next.
David Yedwab: I think one of the major distinctions is whether a small and medium business considers itself a small and medium business or a small and medium enterprise. And the distinction that I try to make about those two is whether the small business or small enterprise has an IT department in-house or whether they outsource everything. And if they outsource everything, obviously, UC is going to be part of that outsource, or whether they try to do things internally. And I think that’s a big decision maker and a big differentiator about how a small business is going to go about implementing UC. And I’ll certainly add more to that later if it makes sense.
Nancy Jamison: I absolutely agree because if it’s a small business, which could be just a few people versus a small business enterprise, or whatever you want to call it. There are alternatives to use; so it may not make any sense—you can use a conferencing facility, you can IM, you can use stuff that’s readily available, and then the need to look at UC from a more formal standpoint may not make sense. So I think that size does matter in this case. So does anyone want to add on to that?
Lisa Pierce: Yes, a couple things, number one—I was going to phrase it as "buy" or "lease," but certainly one of the issues with many small businesses, whether or not they are SMEs, is how it is that they acquire technology, and does the method that they’ve used in the past replicate to the UC world, in fact, to the home networking world that we’re now facing. In many cases it is significantly better for both the purposes of keeping staffing levels in control and also avoiding capital expense to look at services-based options, but when you look at customer interest downmarket for cloud-based solutions, they aren’t aware of them yet. And when we talk about things like Jim mentioned earlier, cellular-based solutions in these United States, there are no cloud-based cellular services for business customers yet that are—I’ll phrase it—“multi-tenant.”
Marty Parker: Well, if I could chime in here to say that this may be a case where our description of UC as “communications integrated to optimize business processes” will actually come true even more specifically than in large enterprises. We see that small businesses are quite willing to use tools such as salesforce.com. We probably all have friends in the real estate industry, and those people are working off of very specific software packages—often hosted software packages—that their brokers provide. The multiple listing services, for example, are typically like that. And when you look at the communications that people do in small businesses, they are often very linked to business transaction. So a real estate broker wanting to follow up, or real estate agent wanting to follow up on leads that came into the website, he’s going to want to click to communicate back to that person, not have to redial it into their cell phone. So we may see things like Microsoft Business Dynamics and those kinds of products really being packaged to capture the communications market as an increment to the business applications and people will stop buying communications as a separate product in our near future. You might say, “Well, what about the phone?” Well, these business products will be apps on the phone: iPhones, Droids, etc. So I think we’ll see a shift to business applications driving communications and small businesses more than we imagine.
Blair Pleasant: I think that’s very optimistic, Marty. Ideally, I’d love to see that, but most of the SMBs I talk to, they’re nowhere near that. I mean, they’re still trying to get a handle around “what’s collaboration?—I don’t need collaboration, I can just go look at the cubicle next to me and collaborate with somebody.”
So I think for them to really understand the value of what UC is all about, it’s still going to take a lot of education and a lot of trying to understand what their real business challenges are, and getting them to see how UC can help. Most of the SMBs I talk to are just like, “yeah, it sounds great, and all this UC I’ve been hearing about sounds terrific, but I just don’t see it really applying to my company.”
Marty Parker: Well, that's my point—I think that they won’t be sold-to as buying UC. They’re going to be sold-to at the industry conferences or at their franchisors’ conferences where it’s called, “hey, we now have comm built into this stuff.”
I’m seeing it with insurance companies, with their agents and that sort of thing. I just think that in SMB, we may see communications disappear as a separate purchase. Therefore, they won’t have to think about where it fits in their business because it will get designed into the franchise program, the insurance program, whatever. But we’ll see. I agree, I’m always an optimist—you know that, Blair.
Dave Michels: Marty, you just used the phrase “whether they’re going to be sold-to”—what I’m seeing a lot with the smaller businesses is they’re not being sold and they’re just adopting this stuff. And I think that’s why we’re seeing such phenomenal traction from companies like Google and Skype. They want presence, but they don’t want presence within their organization as much as they want it to other companies because they’re small companies. They’re dealing with the outside world much more, where the larger company has most of their communications internal. And you get in a Skype network, you get onto the Google network, you’ve got presence, you’ve got click-to-dial, you’ve got desktop video, you’ve got some phenomenal collaboration techniques to be able to share documents and co-edit documents, and there’s a pretty strong adoption rate in those services. And a lot of the CPE makers offer this, but they offer it with multiple servers. And even if you virtualize them it’s still multiple servers to manage and maintain. I have seen a handful of small business UC solutions that do it all with one server—video, presence, instant messaging, and voice of course. And I see them getting reasonable traction, but I think there’s more of a real grass roots effort that people just want to solve their problem. And they can solve their problem fairly easily on their own.
Jim Burton: Pam, I heard you were trying to get in, and Jon Arnold. So, Pam, why don’t you go first—ladies first. And then, Jon, you can follow up after Pam.
Pam Avila: Thanks a lot, Jim. I just wanted to kind of tag on to what Blair was saying, but then Dave had some interesting things, too, that I want to tag on to, and that is that we’re kind of putting the cart before the horse. Why are small and medium companies even looking at unified communications solutions? And I think you hit the nail on the head when you said they’re not looking at UC, they’re looking at various tools that help their business in a way that’s a little bit different than you typically see in the larger enterprise. But the important thing to remember is that for the SME or the SMB, those tools, whatever we call them—those tools are important to them in an even greater way than they are to the enterprise because today in our world where brick-and-mortar is no longer that critical, where a small company can look as big as a large company, they need to be current with technology so that they can look like they’re a big enterprise.
Jon Arnold: Thanks, Pam. I’m nodding my head to everything I’m hearing so far, and I just want to say everybody’s right. I think that this is part of the complexity of this market because it is so big and diverse. There are many different ways to define who’s buying this and how they’re buying it. And I think they’re all valid. I totally agree with Dave’s point. I think the SME guys who are willing to try new technology and are willing to put some faith in the cloud, are going to figure it out on their own terms and pick the pieces that work for them. I just came from Metaswitch’s analyst event and customer event last week, and they served more like the tier 3, so quite small businesses, and they are in a much more primitive stage. They are really just trying to get their heads around VoIP, and so for them, UC, even though they have offerings, it’s a pretty tough sell. So I agree with the earlier points; we still need a lot of education in the market. But there are different segments that are going to adopt this in different ways just because there’s so many types of SMEs and SMBs out there. I still think that a lot of it is going to come from a need-driven basis like Dave is saying, and I don’t know if they really think about it as UC, but it’s actually doing that. They have different names for it because I think they’re really going along the lines of what are the problems they have to sell. And if UC fits the bill then that’s what it does, but they may think of it as something else.
Don Van Doren: One point I had is, to what degree do we feel the offerings of some of the major vendors that are offering premise solutions and now migrating into offering those kinds of hosted solutions where that’s going to be of interest not only to, say, locations or enterprise customers, but also moving into the SMB market—Cisco with their activities, IBM, Microsoft, Avaya—will some of the hosted things that they’re doing be appealing to the SMB marketplace? Any thoughts on that?
Dave Michels: I have a thought on that Don, and the issue there is the channel. It’s so much the key to this. The small businesses don’t know where to go, other than to the local reseller that they trust. Was it last year, or was it two years ago, Microsoft came out with the Response Point Solution: “we’ve got a great voice solution for small business”—that didn’t last; it was discontinued. The different carriers have experimented, especially the hosted carriers, hosted voice have come and gone in some very turbulent times. And I think they are, as a defense mechanism, turning to their local VARs for a lot of this stuff. And that’s where it’s a big challenge for these CPE makers—is getting a consistent channel. And so you might have a great experience in Chicago and you want to do it at your branch office in Denver or something and you’ve got a totally different experience going on. And that kind of consistencies in the channel is really the challenge that the CPE makers are having to overcome.
Steve Leaden: I agree Dave. I’m also finding that in piecemeal format, people in the SMB market are picking up features within the UC set, but to Pam’s point earlier, they’re calling it individual tools. They like the idea of people working virtually or remotely. They like the idea of a follow-me feature to my cell phone and that can be simple call forwarding, but I think that to the larger venue it plays to a UC strategy. The idea of videoconferencing, and unified messaging in their inbox, again, they might have looked at it as individual tools in the SMB space, but in the larger venue they are doing something else in the order of magnitude of videoconferencing.
So in SMB space in particular, I find everything is driven by cost. And the acceptance of the user community in that particular area is always driven by, “hey you know if it’s price pointed right, I’ll accept it.” So we’re finally, I think, at this stage where I think we’re going to see very large acceptance going forward. From Marty’s earlier point, simply because were finding that there’s been a 20 percent reduction of UC as well as voice-over-IP within the last 24 months meaning that if you just bought voice over IP as a standalone 24 months ago UC would effectively now cost you almost no money delta compared with those costs 24 months ago today, so that’s an interesting change that’s happened.
The other point being that someone mentioned earlier about the idea of federated where we can tie into clients, customers, with that larger kind of reach. I think that that’s a very important point. Also met with one of the one manufacturers last week, they had explained that within the last 18 months, their managed services sales were up 300 percent. So we’re seeing very clearly the idea of hosted services and managed services provided by the vendor committee meaning little to no capital is also part of the acceptance of these changes. And again, of course, we’ve got now these common licensing themes where one license can be for basic phone usage, for basic UC presence, and other types of clients as well as call centers. It all depends upon who the manufacturer is, but all these, I think, things that are going on in the market makes it almost the perfect storm for a high SMB acceptance going forward.
Blair Pleasant: Steve, you brought up two really good points. One is cost and the other is managed services, which is different from hosted. But I think in addition to cost, the other thing that SMBs really need is simplicity because they have the big IT departments so they really need a solution that’s easy to implement and manage and maintain. And that’s where I think managed services is really going to play an important role. And a lot of the vendors now are definitely stepping up to offer more in that area, but I think in addition to cost, again, it’s simplicity that the SMBs really need. And you see a lot of the solutions are still pretty complex and they’re not simple enough for SMBs to really take care of on a long-term basis. So I think managed services in addition to hosted is really going to play a key role.
Jim Burton: One of the biggest problems I’ve seen over the years with SMB is, how do you reach them? I’ve been involved in a number of startups who had great product but failed because they just didn’t have a distribution model that could get the product to the SMB customer. And I think that is one of the biggest challenges that anybody faces in this market is, how do you reach those folks? So I have a question for all of you. Do you think that the fact that people are starting to see that UC is starting to help have a positive impact with some of the enterprises, and in addition to that, that the internet, the ability to go search this information, is just going to make it a little bit easier for vendors to reach that market of SMB customers who—as I’ve said before—is just very, very hard to reach?
David Yedwab: Jim, let me semi-respond to that by saying let’s return to the channel issue again. It’s how do we service and support those small business customers? And I believe the answer is, history sort of tells us. To a large degree, at least where voice is included, the telephony service providers have got a real big play. Of course one thing all small businesses need as soon as they start is a phone number, and the ability to be contacted. UC is contacts. And managing it multi-modally is real important, so how would we get to them and the role that service providers are going to play in the small business space, I think, is another very important issue.
Michael Finneran: We’ve all seen an awful lot of uptake in mobility in small business mostly because they don’t have the same overarching control from an IT department. Corporate IT departments love to dictate: “you’ll only have Blackberry devices; these are the only applications you can download.” In SMB you don’t have all those impediments, and as a result we see a lot faster uptake in terms of new types of handsets, cloud-based solutions, services like Google Voice. In the absence of those adoption hurdles, some of the enhancements that are having a difficult time getting in large businesses are becoming commonplace in small business. Of course, it assumes a small business that has the benefit of tech savvy employees. In any event, the same way consumer requirements are leapfrogging what we’re doing in enterprise mobility, we’re definitely seeing the same thing with small business.
Art Rosenberg: Number one, it seems that the smaller the organization, the SME level or bigger ones, the less people, then the individual users become more important. They become more mobile, they’re more dependent on being able to stay in contact with the other few people remaining that they’ve got to make contact with. They can’t just pick anyone who’s around; they have lots and lots and lots of people. So they have to really make their communications very efficient. So you see, it’s very important for the small organizations.
Number two, so after you see, “yeah, that’s good, everybody can use it,” the question is, who’s going to install it, maintain it, keep it running, and that’s something that unfortunately IT and inside a small organization—in fact, IT inside a big organization—can’t even keep up with (the new technologies that are coming out). And as a result, we should be able to see more and more hosted, and to some extent, managed installations rather than traditional CPE. Because after all, the end user couldn’t care less where the technology is, they just want to use it.
So the question is, who’s going to control mobility especially in terms of the devices, in terms of the network accessibility, and so on? Well, someone has to take the responsibility because they’re going to pay for it, and on this it’s something obviously that’s got to be negotiated in terms of priorities and so on. But step one is to find out what you really need, and then based on what you need, use your priorities as to what you’re really going to do first and what you’re going to do last.
Dave Michels: I mentioned earlier that Google services, and the way that I discovered the Google services was watching my kids do homework. And it was kind of humbling one night to watch my kids—discover my kids doing a group project with about five or six kids, in real time, using all Web tools. I think they were using Skype for chatting—for voice chat and they were sharing—everybody was in a shared document and editing it. And I was watching these guys at work and just realizing that there are a lot of enterprises that can’t do this. And the way that they were doing it, the way they were working, and the way that they considered it so natural, I think that we’re seeing—I think that kind of expectation and capability is working its way into the SMBs a lot quicker than people realize.
Jim Burton: Very good point. Any other comments before we wrap it up today? Well if not, thank you all. I look forward to see you here again next week. Take care, everybody.
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