FierceVoIP: How did you get the idea for Fonality?
Lyman: I had purchased a start-up residential VoIP service from a friend and I realized I needed a phone system for the office. I had never priced one before, and so I was shocked to get a five-digit quote for the office staff of four. That's when I realized I was in the wrong market, and that's really how I started Fonality. I realized there was a huge opportunity in the SMB market for a better priced option than the major players were offering.
FierceVoIP: Bloggers have raised concerns in the past about the remote access you have to the IP-PBX solution. Have customers raised the same ones?
Lyman: Well it's more something we just discuss with the customer. We do have access to the end-users box, but that's a cost-saving mechanism, not a privacy invasion. Part of our value proposition is that updates and add-ons to existing systems don't require a truck roll. We can do it remotely, and save the customer a lot of money, while also ensuring the highest level of security. I mean, that's how we competed and eventually won the Dell deal. We weren't even on their radar until they realized our solution runs on a Dell box, and they looked into it and saw how much more cost-effective the Fonality solution is.
FierceVoIP: Speaking of the Dell deal, who was your biggest competitor there and in general in the VoIP space?
Lyman: I think in order it's probably Avaya, Cisco, Nortel, Shoretel and I guess down to someone like Panasonic.
FierceVoIP: Why do you think you are competitive with these companies, all of which are larger and have more legacy business?
Lyman: I think we are competitive, and will continue to be competitive for two reasons. The first, most obvious one, we just are a better value. Our systems, since they are PC based, are much cheaper to make and install. Secondly, the open source code that we built our solution over enabled a really low cost of development, which we can in turn pass to the customer. We also offer a higher degree of mobility and ease of transition to additional systems or features.
FierceVoIP: Do you have any plans to expand out of the SMB market and compete for larger accounts like Dell more often?
Lyman: We are really not comfortable working with a customer with over 500 seats at one location, and I offer this rationale. There is a deli near our office, and you go in to order, they hand you the menu; it's got like 16 pages. You can be pretty sure, that while nothing is going to be outright terrible, nothing is going to be that good either. I don't want to be that company. Our business model depends on the pricing we offer SMB's and I don't see a move out of that space anytime soon.
FierceVoIP: Well it's obviously working well for you; Fonality has demonstrated 15 consecutive quarters of growth.
Lyman: It's actually 16 now. We just got the second quarter numbers, and surprisingly enough, it was the largest percentage growth we've ever experienced at Fonality, revenues increased 31 percent.
FierceVoIP: That's impressive for a business that has already grown considerably. Do you foresee any slowdown in the growth given the present condition of the economy?
Lyman: I don't quite know, to be honest. We continue to grow and I guess I can think of two reasons why we would see continues growth in recession conditions. One, as budgets get tighter, our solution becomes more attractive. It enables people to work from home elegantly, as well as being cheaper to install and operate than traditional PBX offerings.
Second, I think more and more businesses are recognizing that the whole communications industry will be IP soon, and they are examining IP-centric offerings to cut costs and increase mobility.
FierceVoIP: Where do you see the industry, both your niche and the broader VoIP space, in the next three to five years?
Lyman: Well I think IP is the only way to go in the future. I just think "VoIP" as a term, can be misused and misunderstood, because it's really a question of "Which communications will not be IP in three to five years?" Kind of like if you asked me when the first digital camera was released, where I thought that industry was going. I think there really isn't any other way to go. Most of the big telcos even, its IP for most of a long-distance call, and it might travel the last mile on copper. And that's even getting replaced soon enough. The biggest question to me is when all the communications someone wants begin to converge; for instance, on my Blackberry, I'm texting, browsing, SMSing, all in addition to regular phone calls. I think that's where the industry is moving, total communications convergence and ease of use and access, and the mobility that IP can bring.