Why VoIP isn’t a big deal… and why VoIP IS a big deal…

Microsoft unvieled a SMB (small-medium business) phone system…

Microsoft Unveils Small-Business Phone System Software Designed for Ease of Use: Financial News – Yahoo! Finance

This is a fantastic illustration of why VoIP is not – and IS – a big deal.

Let me be clear… I am a huge proponent of VoIP and the capabilities is enables. What I am not is believer of the doctrine that VoIP is a killer application (ala email). Here is why:

VoIP adoption has occurred primarily in what I’ll refer to as the first phase of a three phase adoption pattern.

VoIP has arrived in the SMB (and to some degree consumer space) with a resounding thud. The simple fact of the matter is that small businesses and consumers could not care less how their voice is transmitted from point a to point b. They just don’t care. What they care about is how much it costs. This is phase one – cost driven adoption.

Phase 1: The commoditization of voice communications.

Phase 1 is in full swing. Consumers and SMB’s (and enterprises, government telcos (BT), etc) that choose to tackle VoIP conversions do so to save money. Period, end of conversation. VoIP is not solving important problems that can not be solved with legacy telecom solutions, it is not enabling game changing functional advances.

This is why SMB adoption has been lackluster. If you combine a pure lowest cost play (commoditization) and perceived (and real) complexity issues with aggressive cost cutting by fixed line telcos the cost benefit to a SMB with limited IT budget and support just isn’t there.

We’ve seen tremendous strides by VoIP providers to mitigate the complexity issues – and frankly further lower the cost of their services (acceleration of commoditization). These strides have propelled adoption in certain demographics, but have yet to drive the tipping point effect.

We are now beginning to see the emergence of phase two – as evidenced by Microsoft’s announcement. This is the power of the bundle – do more, get more, by combining voice with what you already do.

Phase 2: The power of the bundle.

The bundle is about combining things you need into an “all in one” solution which – while not delivering entirely innovative functionality – introduces it at a price point and degree of simplicity which was unobtainable using legacy technology.

Examples of the bundle are everywhere you look – from ADP integrating hosted telephony with their car dealership solutions, to Microsoft’s just announced Small Business Phone System. From the vendor’s perspective the bundle is about two things:

1) Increasing adoption rate.

2) Increasing “wallet share” or the amount of money spent by each customer.

The bundle will generate significant movement in the SMB sector. When SMB’s perceive that the market has moved from a pure cost play (VoIP is cheap) to the bundle’s value play – VoIP is cheap and things you couldn’t do before are now within your reach – significant movement will occur.

The important thing about the power of the bundle is that it is not particularly innovative – in the same way email as a post mail replacement was not innovative – it is still a commodity play. What the bundle does that is important is open the door to innovation by creating a platform for the imagining and creation of entirely new ways to use voice in an application context.

Phase 3: Voice Application Innovation.

Voice Application Innovation is about re-thinking voice communications. It is about all the “what if’s”. What if I could use voice to communicate with my customers when they value it? What if voice were an active part of my workflow? What if my set top box was my video phone?

These innovations will be the killer applications for VoIP.

This phase is the phase which will make VoIP mainstream. The innovation in this phase will move VoIP – really voice applications – from a why to a why not? From why do I need it to how can I not have it. It will transform voice communication in the same way email transformed written communication, the way blogs and wikis are transforming journalism and knowledge documentation.

You can feel free to take issue with any part of this… after all I’m attempting to predict the future…

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