Five Best Practices for Hosted Services

Hosted communications services for SMBs have been a big trend in 2011, and for good reason. I’ve been following this space closely for some time, and SMBs are now catching up with what the vendors and providers have on offer. The bigger picture drivers are covered extensively and regularly here on Focus.com, and I’ve contributed my share of analysis in earlier Briefs as well as the ongoing stream of questions posed to/by the Focus community.

This Focus Brief is built around recent events with New York-based M5 Networks, one of the leading – and longest standing – providers catering to SMBs. They celebrated their 10^th anniversary last spring, and in November 2010 they announced their acquisition of Chicago-based Geckotech. This marks an important stage in M5’s growth, which has positive implications for SMBs.

I got a closer look at what the future holds this week, when I attended the formal launch of the acquisition, and spent time with key executives of both companies. With that preamble, this Brief examines five best practices that SMBs should come to expect when evaluating VoIP/IP communications service providers.

Best Practice #1 - Quality is Job 1

Before considering hosted services, you first must make a decision about using VoIP. Some businesses will replace their legacy service entirely with VoIP, and others will only deploy it selectively. In either case, the expectation is carrier-grade quality – no business would move to VoIP and accept reduced quality, especially for customer-facing communications.

Fair enough, but the reality is that not all VoIP providers are created equal. Like anything else, you get what you pay for. There is no shortage of over-the-top (OTT) providers, who generally compete on price, much like the long distance discounters do. These providers piggyback on the networks of other operators, and with a low cost base, they can be aggressive on price to win business. The rub here is that they cannot control Quality of Service (QoS), making their offering a small step up from the “best efforts” label that has been associated with VoIP from its early days.

M5 has long understood this, and recognize that many businesses are willing to pay more than OTT to get carrier-grade quality, but still be spending less than they were before on legacy service. The ideal customer for M5 has recently invested in an MPLS network, primarily to support data needs. VoIP is not bandwidth intensive, so MPLS can easily support it, and can truly optimize its performance. In these cases, the business comes out ahead in two ways; first, they lower their telecom spend but get superior performance and value in return, and second, VoIP helps leverage their investment in MPLS.

In terms of identifying best practices among successful VoIP providers, it all starts with quality, and M5 is a great example of an operator that has built their entire business around this building block.

Best Practice #2 - Service Reliability and Security

All hosted providers rely heavily on data centers for many aspects of their business. First and foremost is reliability, which is another characteristic of carrier-grade service. Again, OTT providers cannot ensure 24/7 uptime, and for many businesses this is not good enough. A key benefit of hosted service is the uptime that comes from the inherent stability of a data center environment, not to mention PSTN failover backup in the event of a network-wide outage. The same holds for security and the provider’s ability manage your service in a manner that protects your network and data appropriately. These are key expectations that you should address with any prospective VoIP provider.

With a 10 year track record, M5 has established themselves in these areas, and with Geckotech, they have taken another step forward. Previously, M5 had two data centers, but both were in Manhattan. Supporting a second data center is standard practice for creating redundancy, but having both in the same geographic area is not ideal. Geckotech brings their data center in Chicago, and that provides a truer form of redundancy.

This benefits SMBs in a few ways. First, this level of reliability ensures not just everyday uptime, but also business continuity under adverse conditions. Anyone living on the Eastern Seaboard right now knows exactly what that means. Furthermore, having data centers in two major markets makes it easier for M5 to support businesses with a wide geographic footprint.  This is another important differentiator, as many hosted providers only have a local footprint, and cannot scale effectively if your business expands into new regions.

Best Practice #3 - the PBX or Key System is Not Your Friend

Typical M5 customers have old, costly phone systems that are more of a liability than an asset. Hosted services offer a better way, especially for businesses that do not or cannot manage their IT operations. M5 and Geckotech have both been successful by presenting a different - and better value proposition for businesses that need to get more than what their telecom systems can give them.

I could expound at length about this concept, and will just distill the essence here. For businesses that only want to reduce their telecom costs but maintain the status quo, M5 is not for you. This is really a transaction-based mentality to telecom and misses the point as to what VoIP is all about. If you remain emotionally – or even financially – attached to your phone system, then you probably aren’t ready for VoIP, and are certainly not ready for an industry leader like M5.

Businesses who have learned to think differently – and more broadly – about VoIP will see that operators like M5 are providing a service, not a product. Hosted VoIP is an Opex decision, not a Capex investment. When you embrace VoIP – and hosted in particular – the focus is really about the service, not the phones on the desk. A big part of M5’s success has come from presenting themselves as an alternative to businesses that have come to this conclusion and are ready for an alternative.

Best Practice #4 - Service and Support is Your Best Friend

M5 – or any good hosted provider – will not sell you another PBX, so you won’t be making another capital expense. Being a hosted provider, their focus is not the phone system, but rather the services being provided – and used by your employees. As such, they are in the business of meeting the needs of people, not hardware. M5 has long distinguished itself as being customer-centric, and I have seen this first hand dealing with support staff at both companies, as well as speaking with and interviewing their customers.

I can also tell you that some of M5’s recent hires in customer support have come out of the consumer products sector. I’m not certain if this is a deliberate strategy, but clearly, that sector understands the importance of customer service, so that mindset and culture is built-in when these people come to work for M5. There is no recipe for best practices, and M5 is hardly the only company out there borrowing a page from the playbook of other companies with industry-leading capabilities.

The bottom line here is that customer support is critical, not just for working with IT to make the service work properly, but also to help employees – end users – understand the core capabilities to help them get the most out of VoIP. M5 has certainly hard-wired that into their culture, and SMBs should ask hard questions about customer support capabilities when evaluating hosted providers.

Best Practice #5 - the Value is in the Apps

In some ways, I’m saving the best for last. I’ve commented about how VoIP is more than just telephony, and for SMBs to get full value from hosted, they should be thinking about applications. VoIP definitely has value for better telephony at lower cost, but that’s really just the starting point. SMBs should be thinking about VoIP and hosted as tools to help make their business better, and that goes well beyond telephony.

SMBs don’t have to adopt the full range of hosted services, but they really should be thinking about the new things these capabilities can provide. Just as the Apps Store concept has been a runaway success for all the smart phones in the consumer world, hosted VoIP can do the same for SMBs. M5 has had this focus from the beginning, and are a market leader in providing applications that are built around real-world business problems.

A good example is how their service integrates with Salesforce.com, and I got a nice demonstration at last week’s launch event. The marrying of telephony with business applications is where the real value of hosted services lies, and in my view, M5 is a great example of best practices here. For SMBs looking to evaluate the bigger picture benefit of working with a hosted provider, this is a key competency to consider.

Best practices come in many forms, and M5 is a timely example of one for hosted services. There are many worthy hosted providers out there, and M5 embodies many of the attributes that make for a market leader. For SMBs considering VoIP and/or hosted services, I hope this Brief gives you a useful yardstick against which to measure potential providers.