Infonetics: Ranking the top 4 hosted VoIP providers

The hosted VoIP market is quickly becoming a dog-eat-dog world, in some cases literally, as larger VoIP service providers continue to swallow up smaller providers, mainly through acquisitions. It's an environment that has companies scrambling to stay competitive as new technologies roll off the line.

So it's interesting to note that Infonetics Research, in its latest ranking of top VoIP providers, established one of its most important criteria as how well the more than 100 companies currently providing VoIP services in North America can stay on their feet in the shifting sands of the business VoIP market--a market that reached $49.8 billion in 2010 and saw revenues jump 143 percent for SIP trunking alone last year.

The research firm's latest report, VoIP and UC Services and Subscribers, included the 2011 North America Business VoIP Services Leadership Scorecard which, in addition to listing the top 10 business VoIP providers in the region, ranked the top hosted VoIP services providers.

As in any market, size matters. Infonetics looked at hosted VoIP providers' installed base--the number of active units, be they subscribers or seats, to determine where they placed in the rankings, explained Directing Analyst of VoIP and IMS for Infonetics Diane Myers.

"I was getting good information from the providers but it was all under nondisclosure, so I couldn't talk about market shares. ... So we created this scorecard to be able to measure things in a quantitative manner without actually doing market shares," Myers said. "To hit the top 10, we base it on the installed base. So the top 10 have the largest base of customers."

In addition to installed base, the research firm's top determining factor in whether a VoIP service provider made its 2011 scorecard included the following: a company's financial stability, its market strategy, its commitment to service development and the quality of its service and support.

These factors, rated on a scale of one to five, added up to determine whether a provider made the list or not. They're important in looking at long-term stability of VoIP service providers, Myers said.

"I have to see the ability for these service providers to execute," said Myers. "When we start talking about large and medium enterprises, this is why we have financial stability in our scorecard. [The reason] is that, for many, they really want to know they're going with a viable, more mature service provider."

The scorecard rankings are especially interesting considering the wave of consolidation that is breaking over the hosted VoIP space. The past 18 months has seen large operators like Comcast snapping up managed VoIP service providers like New Global Telecom, as well as smaller providers fleshing out their cloud-friendly portfolios by acquiring hosted VoIP companies.

So, who are the top providers of managed VoIP services in North America, according to Infonetics Research? Four companies made the list this year. Read on as we briefly profile each service provider.

The Providers

New Global Telecom (NGT) 

Founded: 1996
Location: Golden, Colo.
Market: Managed VoIP services to medium to large enterprises, wholesale VoIP
Customer base: 100,000 VoIP seats

Acquired by Comcast in Feb. 2010, NGT became the largest provider of wholesale and trunk-based VoIP solutions in the U.S. and ranked at the top of Infonetics' scorecard for the second time in a row, passing Verizon Business in terms of installed base. NGT went through a few gyrations over its 14-year history, starting out as a wholesaler for customers like AT&T and Telecom New Zealand and providing back-end softswitching. Then it began doing partitioning for Broadsoft and then testing the retail waters before swinging back into wholesale VoIP. Already well-established in this segment--at the time of the sale NGT had more than 100,000 VoIP seats under management according to a TMCNet post, NGT's move into the Comcast fold puts it on good financial footing to stay around a good while--while giving Comcast an inroad to the managed voice services market.

Verizon Business

Founded: 1983
Location: New York City
Market: Large and medium business, government agencies. Offers SLAs for managed network and VoIP customers.
Revenues (entire business segment): $3.8 billion

As part of Tier 1 incumbent Verizon Communications, Verizon Business has a decided advantage in growing its managed VoIP services thanks to an established customer base (the company says it provides business voice services to 98 percent of Fortune 500 companies) and a solid focus on medium to large enterprises. Verizon Business ramped up its hosted VoIP offering in the early part of 2010, teaming with Cisco for telepresence services and certifying its IP trunking technology to interoperate with Microsoft's Office Communications Server R2 unified communications (UC) platform. Verizon Business deploys and supports Cisco UC solutions as part of its managed services offering.

8x8

Founded: 1987
History: Originally named Integrated Information Technology (IIT), the company developed multimedia semiconductors and software for the telecom industry.
Location: Sunnyvale, Calif.
Market:  Small to medium sized businesses
Installed base: 24,385 business customers
Revenues (FY 2011): $70 million

Taking its name from the number of video pixels used as the building blocks of many image compression and video transformation functions, 8x8's shift from chip manufacturer to VoIP service provider reflects the wide swings seen throughout the wireline industry from the late 1990s forward. After a name change and a 1997 listing on the Nasdaq, 8x8 began offering consumer VoIP service under the Packet8 brand in 2002 and by 2007 was listed as the top hosted VoIP provider by AMI Partners.

Smoothstone

Founded: 2000
Location: Louisville, Ky.
Market: Enterprise customers
Employees: 100

For the past decade, Smoothstone's hosted IP communications business has focused singularly on enterprises. That clear focus was definitely an attraction for West Corporation, a voice and data solutions provider that announced in April it would acquire Smoothstone for approximately $120 million--a deal expected to close at the end of the second quarter. "By leveraging Smoothstone's unique solution portfolio and the benefits of the cloud-based services delivery model, our clients will be able to focus on business initiatives that help drive their competitive advantage rather than on evolving IT infrastructure," West's Todd Straube said in the news release announcing the acquisition. Which is a fancy way of saying that West Corp. is thrilled to be adding Smoothstone's well-developed hosted VoIP platform to its expanding unified communications portfolio.