Worldwide demand for hosted VoIP services is growing by leader6


By Xavier Casajoana, CEO and co-founder of VozTelecom

Residential VoIP Service                                                     Business VoIP Service

                                                                             ities; and leveraging service providers with their customer acquisition

            orldwide demand for hosted VoIP services is growing
            dramatically, creating significant opportunities; neverthe-      and retention strategies.
            less, service providers continue to struggle with the eco-            Wholesale carriers could evolve towards more specialisation of any
nomics to build and deliver these services. The telecommunications           part of the new chain, developing new business models as a response
value chain is moving towards a new model for end-customers and              to new market opportunities. Some examples are:
intermediate value aggregators. As a consequence, outsourced com-
munication platforms accelerate ROI and improve profitability for            • Network service providers (NSPs) furnish network services and
nimble service providers of all sizes, leaving them free to focus on their     hosting centres. The network will host voice and applications.
customer needs and markets.                                                  • Content delivery providers (CDPs) deliver broadband internet
                                                                               content in innovative approaches that overcome some of the
Telecommunications value chain evolution                                       throughput capabilities of the current internet.
    The telecommunications industry is evolving into a new model             • Applications service providers (ASPs) offer communications appli-
closer to the ‘internet’ and ‘content delivery’ models, where several          cations over the network to businesses and residential users on a ‘host-
intermediate value aggregators will appear and the ‘values’ of tradi-          ed model’ paradigm, like IP Centrex and multimedia messaging.
tional telecoms (the network and the vendor) will disappear as com-          • Headquarters providers (HQPs) consist of large enterprise busi-
petitive edges.                                                                nesses that have adopted wholesale-like characteristics to serve their
    In particular, carriers (with wholesale business in place) will dis-       internal constituents as well as their external suppliers and cus-
cover new opportunities in the value chain thanks to better perfor-            tomers.
mance following several years of market openness and liberalisation,         • White-label VoIP ASPs, who offer a complete and fully hosted
and declining traffic prices on international routes. The new value            turnkey-operated platform to service providers, which includes all
chain will force them to evolve into new business models or die.               the required components to develop, deploy and support communi-
    Looking at this new value chain, it can be noted that the network          cation services for end-users.
and technology are only parts of the chain (and not necessarily the
most fundamental ones), and many other competitive assets will arise.            One of the most interesting dynamics shaping up in the market
    Wholesale players in the new value chain will have to provide ser-       for hosted VoIP services has to do with wholesale versus retail models
vice providers with some parts of (or complete) required chain com-          for providing such services. The wholesale market model is emerging
ponents – including the development and deployment of differentiat-          as an effective way for carriers to get into the hosted VoIP services
ed products and services; a complete suite of applications through cus-      market quickly, until such time as they can deliver facilities-based
tomer portals, hosting, network interconnection and operational facil-       capabilities. Many different models for this are emerging, but it seems

66      BMEE
                                                                                                     In this scenario, new small entrants need
                                                                                                to realise the cost of opportunity of not mov-
                                                                                                ing quickly to capture market share in hosted
                                                                                                VoIP services. There are few dominant players
                                                                                                at the moment, so service providers with the
                                                                                                agility, speed and financial strength to prof-
                                                                                                itably offer hosted VoIP services can create a
                                                                                                leadership position in their markets.
                                                                                                     Solutions such as VozTelecom’s
                                                                                                enable service providers to offer innovative
clear that participation will include many different types and sizes of    and differentiated hosted VoIP services over a fully outsourced IT
carriers. For example, Tier 2 carriers might provide wholesale services    platform – maximising ROI and profitability with zero technology
to Tier 3 carriers. Some Tier 3 carriers might provide services to ISPs,   risk – leaving them to focus on their customer needs.
and new wholesale entrants will shake competition.                    has all the required components to develop, deliver
     Today there is a profitable strategy for service providers decision   and operate VoIP services for residential and business customers,
to ‘build’, ‘buy’ or ‘rent’ required value chain components. The hosted    offering ready-to-launch applications like IP Centrex, residential
VoIP model follows the ASP concepts and the ‘rent’ alternative helps       dial-tone or multimedia messaging soft phones. Additional innova-
service providers maximise their ROI, reduce time-to-market and            tive services can be built over the WeSIP Converged Application
manage their business with zero technology risk.                           Server, which supports industry standards APIs and protocols.
                                                                               Integrated OSS and BSS components, such as pre-paid and
Hosted VoIP market drives the challenge                                    post-paid modules, contribute supporting service provider busi-
     Hosted VoIP services, such as IP Centrex, can offer a rich feature    ness processes, while the outsourced model scales operations effi-
set to end-users. This includes not just VoIP transport and traditional    ciently enough to handle growth and maintain the needed operat-
business class features, but a full array of capabilities for multimedia   ing margins.
collaboration, desktop integration and user-defined communications
– all offered in conjunction with a communications portal that acts as
a ‘command and control’ centre to seamlessly integrate all of this func-
tionality. In addition, enterprises will be able to improve their core
business operations as these capabilities gradually become integrated
into customer-facing business processes, such as CRM and others.
     The business hosted VoIP services market will grow faster than
the residential market, and will ultimately overtake it in the number of
lines and service revenue by 2007. IDC expects revenue from business
hosted VoIP services to reach close to US$4.4 billion by 2007, com-
pared with US$3.2 billion in revenue from residential VoIP services.
In 2008, the market for residential and business hosted VoIP services
will total more than US$13.7 billion, with business hosted services
accounting for US$8 billion.

White-label hosted VoIP
     Service providers, current and new entrants, face a number of
technology, business and operational challenges in delivering hosted
VoIP services profitably, and with the speed and reliability needed to
win and keep customers. After service launch, to increase market share
they have to open new sales channels, develop differentiated services
and be responsive for customer demands. At the same time, service
providers need to improve operations margins by simplifying opera-
tions, processes and environments, reducing their dependence on spe-
cialised vendors and high-priced technical specialists, and minimising
the impact and cost of change.
     In order to provide hosted VoIP services, service providers have to
upgrade their network capabilities to be able to provision the new ser-
vices. Softswitches, media gateways and application servers are all
basic building blocs for established players, and for new entrants many
other OSS and BSS components are required to compete with prod-
uct differentiation and time-to-market strategies.

                                                                                                                                 BMEE       67

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