This $22B Business is Ripe for Disruption!

If I would tell you that the Telephone Industry is about to be disrupted, you would probably think that I am off my rocker, right?

We have seen so much disruption in the last 10 years, VoIP, Skype, Vonage, Whatsapp, Viber etc. etc. It is hard to believe that there is still something is still waiting for change.

Well there is! Stay with me for 2 minutes and I will explain. Almost all businesses have some kind of Switchboard aka as a PBX, Phone System, IVR, or Auto Attendant. In fact there are around 62 million active phone extensions in businesses in the USA alone.

For years businesses have installed a system on their premises. Companies like Panasonic, Tadiran, Avaya, Nortel and LG made tons from selling and servicing these systems.

Then, along came “The Cloud” and companies were told you can now save on your CAPEX, there is no need to buy a box for your phone system anymore. We will put a box in The Cloud for you and you can connect your phones to our box over the internet. Now it is the turn of companies like RingCentral, 8X8, Vonage Business and others to make tons charging businesses $30 a month (and up) per extension for their phone service. RingCentral (NYSE: RNG) is trading at crazy multiples and the landrush is on with new service providers joining the fray every day.

But, there is a catch. These “Cloud” phone companies do not innovate. They put the switchboard boxes in the cloud, but they are still complicated to use and service providers still employ large support staffs. Moreover the cost of customer acquisition is sky high and RingCentral the current leading player is losing over $30m a year.

So what will happen next? Lets look at a few points –

The majority of businesses are still on old “on premise” legacy systems. The “new” cloud systems are complicated to use. Gross Margins (before support expenses) are obscenely high.

The time is ripe for someone to come along and build a phone system for small businesses that is easy to setup, easy to maintain and costs less than the existing solutions.

Stay Tuned. Disruption is coming.

Project REBOOT: IP Telephony is exciting again!

When we look back at IP Telephony (or what was called in the ole days – VoIP), we can discern three unique stages. Stage I – the invention and introduction of VoIP services by the likes of Vocaltec, Deltathree etc. Stage II – the launch of Hosted Services by companies like Vonage, Packet 8, Ring Central and of course yours truly. Stage III – is just starting and is truly exciting.

We can define Stage I by calling it the “Pipes Era”, replacing legacy telecom pipes with shiny new VoIP pipes that transport the bits and bytes of our voice from one side of the world to the other at very low cost. Stage II – has become known as the “Cloud Era” where new providers took legacy phone systems and trucked them over to “The Cloud”.

Ok, so we replaced the pipes and removed the boxes from our offices. Bottom line we are talking costs savings and some convenience, but where is the innovation?? Well it is almost here! Continue reading