Cheaper? Hello

Jameson Berkow, Financial Post · Tuesday, Aug. 24, 2010

The internet age has raised expectations for small businesses. Decades ago, customers were content to leave a message on a Sunday; now they expect even very small firms to be available around the clock. At the same time, these businesses are more focused on cost savings to support their bottom lines. While these goals may seem contradictory, entrepreneurs need only look to the clouds to find a readily available option to achieve both simultaneously.

Often called a ‘cloud-based’ service because it is accessed online, voice-over internet protocol, or VoIP, is more than a consumer product marketed under popular brands such as Skype or Vonage.

Lesser known services such as Fibernetics or Ring-Central offer commercial VoIP that has the
same features of a PBX-based (private branch exchange) phone system, for a fraction of the cost.

“Smaller businesses don’t get all the features of a PBX anyway because they’re generally using a poor man’s PBX, key systems are typically what smaller businesses use and they’re old and inflexible and expensive and they don’t really give much value,” says Jon Arnold, a Toronto-based independent technology analyst. He contends commercial VoIP services, or IP PBX systems, are ideal for small businesses.

“Larger businesses all tend to use PBXs because they’re large enough that they can justify the investment, most IT guys running multimilliondollar empires have a lot of vested interest in their installed system,” Mr. Arnold says, but adds “most businesses in Canada are not enterprises. Businesses with less than 100 employees may not find investing thousands of dollars in a PBX system worthwhile, he says.

Enterprise-like features such as an automated attendant, multiple extensions and follow-me functions that automatically transfer calls to a cellular phone can be expensive. Installing a PBX system from a leading provider, such as Bell or Rogers, can cost anywhere from $5,000 to $20,000, and the monthly rates tend to run into the hundreds of dollars.”Right now the bulk of capital spending [for small businesses] is geared toward saving money on the bottom line for future years,” says Ted Mallet, chief economist with the Canadian Federation of Independent Businesses. He agrees that in today’s savings focused environment, small businesses would find the idea of a more cost-effective alternative to a PBX system appealing.

rtioeJohn Stix, co-founder of Waterloo, Ont.-based Fibernetics Corp., argues his company’s IP PBX service goes beyond a mere cost reduction. He considers Fibernetics to be the only PBX telecom in Canada to date that can say: “We give you a return on your investment.”

“If you have 16 phone lines, like a car dealer [for example] and you’re paying $50 per month per line, our value proposition is that your phone lines are now free and you’ll never pay for them again,” Mr. Stix says. Fibernetics’ high-speed internet service costs businesses $89.95 a month, which includes a full-service IP PBX phone system — a deal too enticing to pass up for Ivan Valvassori, owner of Kitchener, Ont.-based commercial lighting firm Urban Lights Inc.

“We [had] four lines, six phones with Bell Canada, a cordless system with automated attendant and voice mail boxes and that sort of thing. It was always pretty archaic. I always felt the system was lacking, but to go for a full PBX would have been a significant investment.”

Even without a full PBX system, Mr. Valvassori spent about $3,000 to purchase equipment and install the Bell system in his office in addition to average monthly fees of $550. He switched to Fibernetics a little more than a year ago and says he cannot say enough good things about it. “We noticed right away, the cost savings were outstanding,” he says, noting his telecommunication costs have dropped to a flat $90 a month for internet service.

California-based RingCentral, which launched a commercial IP PBX service in Canada two weeks ago, has already found a host of Canadian businesses eager to sign up. “What we have done has been to put voice in the cloud,” says Nisha Ahluwalia, marketing director for RingCentral. “If you compare that to legacy traditional phone service or non-premise PBX phone systems it changes the game for the customer.”

For Toronto-based Skanna Security and Investigations Inc., which provides security guards for retail outlets across Ontario, replacing its $5,000 commercial phone system, which cost it about $250 a month, with a Ring-Central system has already saved it the $35,000 cost of a receptionist.

“This system has really streamlined us,” said Stacey Gray, human resources manager at Skanna. “It has saved us a lot of time and a lot of energy, and we’re able to use that money elsewhere,” she says. Skanna recently used a RingCentral system, which costs them a flat rate of $99 a month, to establish a 24-hour dispatch line for its staff of about 250.

But there are other motivations for switching to VoIP-based phones. “Cost is a big factor for sure, but it is also becoming more of a strategic issue,” Mr. Arnold says. “Small businesses are saying they need to have more capability.”

“We’ve found the malleability of [our Fibernetics system] to be so robust. The follow-me feature, the voice mail to email, it is all just so right,” Mr. Valvassori says. “I would pay more than I was paying with Bell to have the feature set I have because it is facilitating my business,” he said.

If these systems offer businesses more for less, why aren’t they more widespread? It’s a generational thing, CFIB’s Mr. Mallet says. “For people who grew up with the telephone monopolies as the only way of providing wired phone service, [VoIP] is still a tough sell,” he says, noting his aunt still calls it ‘the’ Bell or ‘the’ phone company. “You have to be convinced to move over, but more and more with the newer generation of business owners it is not a hard sell at all.”

“It is the chat, the web, the email availability that changes the way you work with your customers,” Mr. Arnold says. Then, at the risk of infringing on an Apple copyright, he summarizes, “You’re thinking differently now.”

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