Every year, Software Advice speaks with hundreds of small-business buyers (those with $50 million or less in annual revenue) looking for VoIP phone systems and services. These interactions provide us with valuable insights as to what smaller organizations want and need from IP communications—a market more frequently analyzed from an enterprise perspective.
To better understand these needs and preferences, we studied a random sample of our interactions with small-business buyers to learn the top VoIP SMB buyer trends of 2015.
Many of the small businesses that contact us are already using VoIP.
Some buyers, however, are currently relying on traditional voice services such as analog service (also known as Plain Old Telephone Service, or POTS) and Primary Rate Interface (PRI) service, an older form of digital voice service that can also transmit multimedia data in addition to audio data.
Our findings can assist other small organizations seeking VoIP-based phone systems.
- More buyers already use VoIP service (36 percent of our sample) than any other type of voice service (POTS usage is at 24 percent, and PRI usage is at 11 percent).
- A combined 29 percent of buyers are either using a cloud PBX or on-premise IP PBX, while only 15 percent still rely on some kind of legacy PBX system.
- Twenty-one percent of buyers want a system that forwards calls to mobile devices, while 25 percent seek a system with voicemail.
- The need for scalability is the top reason for evaluating new VoIP systems, cited by 15 percent of our overall sample and 22 percent of buyers who only have cellular service.
- End-of-life system problems (cited by 52 percent) is the top reason buyers with legacy PBXs are now evaluating VoIP systems instead of POTS- or PRI-compatible systems.
VoIP SMB Buyer Trends
Since 2000, the evolution of VoIP technology has been driven by the organizational needs of the enterprise. This trend is most obvious in the market for unified communications (UC) software, which makes multiple channels of communication (e.g., voice, video, chat, text) accessible from within a single application interface.
While UC is obviously valuable for small and large businesses alike, UC systems can be prohibitively expensive.
Instead of opting for one of these systems, most small businesses can get by with an on-premise Internet Protocol Private Branch Exchange (IP PBX) or a cloud PBX: phone systems designed for use with VoIP service. In fact, there are many such systems currently on the market that are specifically tailored to the needs of smaller organizations.
According to the FCC, 15 percent of all American businesses have now adopted VoIP. Our findings indicate that many small businesses are eager to jump on the bandwagon: Many of the buyers in our sample already have extensive experience with VoIP systems and associated network services, such as SIP trunking.
That said, many small businesses currently rely on legacy PBX systems: office phone systems designed for use with the traditional phone network (known as the public switched telephone network, or PSTN).
These buyers are used to traditional voice service offerings, such as analog POTS, delivered over copper wires, and digital PRI service, which is delivered over T1 lines.
The buyers in our sample currently use a variety of telephony technologies, and experience a range of corresponding benefits and drawbacks. The new systems and functionalities they seek reflect these experiences as well as their diverse business needs. This report can serve as a guide for other small businesses looking to switch to or upgrade a VoIP system.
Buyers Use Cloud PBXs or On-Premise IP PBXs Over Legacy PBXs
Traditional voice services such as POTS and PRI are slowly dying as businesses replace them with VoIP and LTE (Long-Term Evolution; a kind of wireless data network used with mobile devices) alternatives.
Indeed, slightly more buyers in our sample currently rely on VoIP than on POTS or PRI services. This shift in service type seems to have also driven the adoption of cloud PBX and on-premise IP PBX systems.
Prospective Buyers’ Current Voice Service Types
Prospective Buyers’ Current Phone Systems
Prospective Buyers’ Current Phone Types
The combined adoption rate for cloud PBX and on-premise IP PBX systems is 29 percent, which is nearly double that for legacy PBX systems (used by 15 percent). This shows that the switch to VoIP has already occurred for many small businesses: Instead of evaluating VoIP systems for the first time, these buyers are replacing existing ones.
Another interesting trend is that the adoption rate of cloud PBX systems has essentially matched that of more traditional on-premise systems. A cloud PBX system is a suite of PBX applications hosted remotely, on the service provider’s servers, while an on-premise system is hosted on-site, on the business’s own servers.
In a cloud-based system, employees can access applications such as voicemail and call recording from anywhere via the Internet, using devices such as IP phones, desktop PCs, smartphones and so on.
Cloud-based models are often attractive to smaller businesses with limited time and IT resources, since service providers handle maintenance, support and updates to the phone system. These models also tend to come with lower upfront costs than on-premise systems do.
That said, some buyers seek on-premise solutions because they want the ability to manage and customize systems themselves.
One such buyer observes that “the fact that we can’t access really anything in the system on our own is kind of frustrating. We have to call [the provider] to make any changes.”
Finally, some buyers are seeking “phoneless” deployments that work with employees’ existing mobile devices, rather than with IP desk phones. Given that no hardware needs to be purchased, such deployments can result in substantial cost-savings for businesses.
These may be especially attractive to businesses that already rely on cellphones, but don’t have a PBX system in place (8 percent of our sample).
Auto Attendants & Call Queuing Applications Are Critical
When it comes to the applications buyers need in their new phone systems, those related to answering and routing calls are most critical. The following chart shows the applications that must be included in a PBX suite for buyers to even consider a purchase:
Required Phone System Applications
Auto attendants are still the top PBX application, which isn’t surprising, given their ability to stand in for actual front desk staff. For example, one buyer explains that they’re looking “to eliminate our receptionist so that if someone were to call in, he or she’d get a nice recording of who we are, and a user-friendly menu that’s easy to work with.”
Businesses are also interested in automated call distribution (ACD): a more advanced call-routing application than the basic extension-based routing of PBX systems.
Instead of routing callers directly to the extension they dial, ACD parks incoming calls in a queue until they can be automatically routed to agents based on their availability, skill level, the caller’s time spent waiting and other factors. Nearly one-third of our sample views the absence of ACD as a deal-breaker.
Mobile and desktop applications, known as “softphone applications,” are generally necessary in order to use smartphones, laptops and desktop computers as true PBX extensions.
One-fourth of our sample are only willing to consider systems that offer such applications. Indeed, softphone applications are so important in the eyes of some buyers that poorly designed apps are the primary motivation for switching providers.
For instance, one buyer says he’s looking for a new provider because he “hated [his last provider’s] desktop app. I couldn’t train two of our support people on how to use it. It’s not complicated, but these aren’t technical people.”
Buyers Seek Flexible Call Forwarding—Especially to Mobile
Digging deeper, we examined the additional PBX capabilities and applications buyers want beyond the essential applications listed above. The soaring popularity of mobile devices over the past decade is reflected by the demand among our sample for business phone systems with mobile-related functionality.
Top-Requested Phone System Functionality￼
Buyers view call forwarding as the most critical PBX functionality. Indeed, more request call forwarding (29 percent) than even voicemail (25 percent)—a staple of small-business communications, and the most requested functionality in our 2014 VoIP BuyerView report.
Most of the buyers who request call forwarding say they want to send calls to mobile devices. Another 21 percent of our sample seek PBX systems with mobile compatibility.
Some businesses also value call reporting (7 percent) and monitoring (6 percent) functionality, which are commonly used by call centers. Call reports display logged information about inbound and outbound calls, including phone numbers and call length.
Call centers increasingly want this information in real time, along with the ability to monitor calls without agents’ knowledge. Many of the buyers in our sample who are already using cloud-based phone systems specifically request call reporting in the form of visual displays known as “dashboards.”
For instance, one caller complains that his current cloud PBX provider “has no dashboards to date, so in order for me to get metrics on my phone calls, they actually suggested that I download the daily phone activity into an Excel spreadsheet and manipulate it.”
Other businesses are interested in integrating VoIP software with other kinds of business software (6 percent). Of these buyers, three-quarters specifically want integrations with customer relationship management (CRM) systems, which help businesses store, organize and analyze data related to customer interactions.
As we’ve explained before, call centers often integrate phone systems with CRM systems so agents can instantly view customer data during a call.
Many Buyers Want to Update Aging Systems
In last year’s BuyerView report, the most frequently cited reason for buyers’ purchases was the need for a more reliable phone system. The interactions we studied for this year’s report, however, reveal other purchase drivers:
Top Reasons for Evaluating New VoIP Systems
Interestingly, budget, call-quality and uptime issues are relatively insignificant compared to other purchase drivers—which suggests that most buyers looking for VoIP systems receive reliable service with satisfactory audio quality at a decent price.
Instead, the highest percentages of buyers seek new phone systems because they need a more scalable solution to accommodate growth (15 percent), or need to replace an aging system (14 percent).
Another interesting trend is the need for a centralized phone-system setup (cited by 7 percent). Some of these buyers work at organizations with multiple locations that each have their own PBX system.
These multi-vendor setups can create problems, such as expensive per-minute rates and lack of routing functionality for calls between locations. Other buyers work at organizations that are opening new locations, and want to replace existing systems with a new one that will be deployed uniformly across the company.
When we further analyze our results by cross-referencing buyers’ top reasons for seeking new systems with their current voice service and phone system types, we get an even more detailed picture:
By Current Phone System Type: Top Reasons for Evaluating New VoIP
By Current Voice Service Type: Top Reasons for Evaluating New VoIP Systems
The vast majority of buyers seeking to replace aging systems are using legacy PBX systems with PRI (52 percent) and/or POTS service (36 percent). More interestingly, 19 percent of the buyers in our sample report difficulties with aging on-premise IP PBX systems.
First-generation IP PBX systems from the early 2000s generally don’t have the dramatic problems that plague aging legacy PBXs from the late ’80s and ’90s (which lack support, qualified technicians, replacement parts etc.).
That said, some buyers still complain that their older on-premise IP PBX systems don’t offer the functionality of newer ones, and that they’re more challenging to use.
For instance, one buyer with an on-premise IP PBX purchased in 2005 complains, “We have an auto-attendant, but it’s difficult to use. We have remote checking of voicemail, too, but it’s difficult to use and program.”
Another interesting trend is that buyers with VoIP service have fewer issues with call routing than buyers with PRI, POTS or cellular service. This finding suggests that businesses requiring flexible call routing should explore VoIP technology.
Finally, businesses relying on cellular service run into difficulties scaling their systems more frequently than other groups in our sample. This is likely because only 1 percent use a “virtual number system,” which adds a business line to users’ personal mobile devices.
We can thus conclude that the other respondents with cellular service don’t have a unified phone system, but rather, just a collection of employees’ personal devices.
Many SMBs Save by Provisioning Fewer Lines Than Employees
In the context of SIP trunking, a “line” doesn’t refer to a physical phone line as it does in analog telephony. Rather, the number of “lines” on a SIP trunk refers to the number of simultaneous phone calls that the trunk can support.
Here’s an example: Under SIP trunking, if a business has 2,000 employees who use the phone a few times a year, but only five of those employees are ever simultaneously using the phone, it would only need five lines for all of its 2,000 employees.
With a POTS setup, on the other hand, the business would in fact need 2,000 physical lines. With PRI service, the business would need at least 87 T1 lines, since each line includes 23 channels that can serve discrete employee extensions. SIP trunking’s flexible capacity is one of the major reasons why it’s cheaper than traditional voice services.
A significant percentage of the small businesses in our sample are taking advantage of this characteristic of SIP trunking:
Simultaneous Calling Capacity, by Number of Employees
A combined 18 percent of the organizations with 20 to 50 employees in our sample are using nine or fewer lines, or less than one line for every two employees. In other words, VoIP systems are clearly helping some small businesses to get away from the expensive “one line per employee” or “one channel per employee” setups necessary for traditional voice services, such as POTS and PRI.
By cutting down on their total number of lines, these businesses are also saving significantly on their monthly phone bills.
On the other hand, we can see that some businesses are still provisioning roughly one line per employee. This may result from confusion about how VoIP technology works.
For instance, when asked how many lines she would need for her new VoIP system, one buyer responded: “To be truthful, I don’t know how it works—all of this is new to me.”
As such, first-time buyers should educate themselves about the basic technology behind SIP trunking to better understand how to reduce their telecommunications budget. To get started, take a look at Parts I and II of our research on the benefits of SIP trunking.
Our analysis of buyer interactions reveals the following trends prospective buyers should consider when selecting a small-business phone system:
⇒ Cloud system adoption is becoming more widespread. The adoption rate for cloud systems among small businesses is nearly even with those for on-premise IP PBX systems and legacy PBX systems. Many buyers move to the cloud to save money and avoid the hassle of updating and maintaining their phone systems themselves, though some buyers prefer to manage their own systems and opt for on-premise solutions.
⇒ Many buyers demand flexible call forwarding and mobile support. The explosion in mobile device popularity has led to a demand for flexible call forwarding and functionality that allows employees to use mobile devices as PBX extensions. Some small businesses are even opting for mobile-centric deployments that eliminate desk phones altogether.
⇒ Call centers want to track performance with call reporting and monitoring. Call reporting and monitoring are some of the most important PBX applications in the eyes of our buyers, particularly those from call centers. These applications are primarily used to track employee performance. Some buyers specifically request call reports in a visually appealing “dashboard” format.
⇒ Scalability is key for small businesses. The top reason for evaluating new software among buyers in our sample is scalability. Small businesses that are totally dependent on cellular service run into particularly severe issues when scaling their systems. This is one reason why we see such a demand for VoIP systems that are compatible with mobile devices.
⇒ VoIP is helping buyers reduce their overall number of lines. VoIP allows businesses to provision lines more flexibly, because services are priced according to the average number of employees simultaneously on the phone, as opposed to the total number of employees. Small businesses with 20 to 49 employees are making particularly good use of this cost-saving characteristic of VoIP technology.
All of the buyers in our sample work at organizations with less than 50 employees. A number of the buyers with whom we spoke are self-employed:
By Number of Employees: Prospective Buyer Size
By Number of Phones: Prospective Buyer Size
Prospective Buyers by Industry
Our advisors regularly speak with buyers who contact Software Advice seeking new business VoIP software and services. The data used to create this report was collected by our advisors during those interactions for business purposes rather than for market research. We randomly selected 212 interactions with small-business buyers (from companies with annual revenues of $50 million or less) from the United States during August 2014 to March 2015 to analyze for this report.
These findings exclusively represent those buyers who contacted Software Advice for guidance on software selection, and may not be indicative of the market as a whole. Expert commentary solely represents the views of the individual. Chart values are rounded to the nearest whole number.
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