Parsing the SMB IP telephony space

Over the past three months, I've spent quality time with executives from ADTRAN, Allworx and Digium. All three companies sell IP telephony solutions for the small to medium-sized business (SMB) space. All three use VARs and channel partners to move their products to the end user. And that's about all they have in common.

Can they all be successful in a downturned market? Are they specialized enough so that all three can survive and (preferably) continue to grow?

The good news is that buyers are more price sensitive, so they're asking more questions about total cost of ownership and what they best value for the money is. As more companies steadily migrate out of key systems bought around Y2K, IP is the only way to go - for future-proofing if no other reason.

On the other side of the coin, many traditional telco-based VARs are still gaining experience with the brave new world of IP. And everyone is having to go out and sort through which VARs and channel partners are the most effective.

Having just come from Huntsville, Alabama (I'll have a couple of slide shows up at FierceTelecom [1] later today or tomorrow) and being wooed by good Southern Hospitality, I have a nice warm glow about ADTRAN. As the Millenials started Kindergarden, my comrades and I in the ISP industry were buying ADTRAN T1 CSU/DSUs to plug everyone into the leased-line, copper-bound Internet.

There are a lot of good people tucked away in the shadow of the Marshall Space Flight Center. The Dudes know Telco. And IP. And how to make money - nearly $500 million last year, while steadily paying cash dividends. They've got good, solid technology, free firmware upgrades, rock solid technical support, and five-year warranties on most of their products. You'll hear more over in the next day or two over at FierceTelecom about my visit to Huntsville.

Allworx does only one thing and does it well - a full IP-PBX system. They have a cadre of engineers in house and the backing of a CLEC that did about $2 billion dollars in business last year. The company has "only" been around for a decade and cleans up when it comes to third-party head-to-head comparisons with other offerings. Parent CLEC PAETEC is planning to leverage the combination of Allworx hardware with monthly billable services for its resellers.

Digium is the most youthful of the three, but has been luring away ADTRAN executives at a respectable clip over the past year. Of the three, Digium has the best story when it comes to customization and the "data VARs." Asterisk can be easily customized for many different flavors of applications and for different vertical markets. In the strange world of "coop-etition," you may find an ADTRAN switch or router gear side-by-side with a Digium Switchvox IP-PBX.

The problem here is that there is no single "right" solution that fits all possible scenarios. Each company has its own strengths as well as its own overlaps upon the turf of the others.  Throw in hosting as another alternative and my head starts to hurt really bad.

- Doug [2]