Surprising SMB IP Survey Results Expose Large Partner Opportunity

Edward GatelyThe vast majority of SMBs have yet to adopt IP communications, representing an estimated $26 billion annual market opportunity in the United States alone.

That’s according to Edgewater Networks and Metaswitch Networks’ joint study of the SMB market for IP communications and UC. Decision makers from 1,250 SMBs, with one to 500 employees, participated in the survey.

John Macario, Edgewater’s vice president of marketing, said the study shows that channel partners have a “tremendous” opportunity to tap into this market.

“Right now, the data says that about 25 percent of companies with fewer than 20 employees purchase IP communications through a channel partner,” he said. “Nearly 50 percent of SMBs with more than 20 employees buy from a channel partner.”

Edgewater Networks' John MacarioWhile adoption rates are higher in larger organizations, up to 36 percent, adoption for smaller SMBs is less than 25 percent. Most SMBs still are using aging TDM phone systems.

The SMB market is moving to mainstream adoption quickly, with two-thirds of smaller SMBs and three-fourths of larger ones expected to purchase IP communications in the next two years, according to the study.

Decision makers said having an offer with the right economics from a service provider they trust are the key purchase drivers. Also, buyer interest in IP communications is “extremely high.”

Education is key to tapping into this market because 57 percent of companies with fewer than 20 employees reported being unfamiliar with IP communications.

Macario said channel partners can be the consultative selling arm of carriers by helping customers understand: that the economics of the offer is in line with their expectations of phone system/service costs; the provider is someone who works with companies like theirs and has a reputation for good customer service and reliability; and how IP features can be useful to their business.

“Nearly 50 percent of smaller SMBs fear that switching to IP communications will be a disruption to their business,” he said. “Channel partners can help with this.”

Adoption rates for IP communications are higher in larger companies with “more evolved” IT departments, according to the study. Many service providers prefer …

… to target larger SMBs because they are willing to accept longer sales cycles and more complex requirements in turn for larger deals.

However, more than 80 percent of all businesses in the United States have fewer than 20 employees, so the challenge for service providers is how to better penetrate the lower end of the market.

“The cable MSOs have done a great job attacking the lower end of the SMB market, especially Cox, Comcast and Bright House,” Macario said. “OTT providers like 8×8 are also doing a fantastic job of aligning their offers and value propositions with SMB purchase drivers.”

However, others “still don’t get it,” he said.

“Many are treating SMBs in the same way they treat enterprise customers by offering too many options,” Macario said. “This forces SMB decision makers to make choices they don’t really know how to make. Put yourself in the shoes of the owner of a 20-person insurance agency. He/she probably has a lot of stress when having to purchase new laptops for the business. They don’t have, and don’t want to have, the technical expertise to make IP communications choices. They want the service provider to give them something that works, is easy to use, doesn’t cost a lot and provides value to their business.”

As for SMBs that already have switched to IP, more than one-fourth bought their service from an OTT provider, yet only 11 percent of non-adopters considered OTT as potential providers.

Companies that have made the switch to IP are “very satisfied” with their new communications services and the companies who provided them, according to the study. More than 90 percent of respondents said they would recommend IP communications and their service provider to their business peers.

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