8x8 Makes SMB an Integral Part of VoIP Profit

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In early September 2007, I met over the phone with Joan Citelli, the Director of PR and Huw Rees the VP of Marketing for the NASDAQ-traded hosted VoIP company, 8x8, Inc. Originally, this was to have taken place in person at Voicecon San Francisco, but for a variety of reasons it was agreed to have our introduction and discussion afterwards by phone. 

8x8 (pronounced 'eight-by-eight') is the company, while the service is called Packet8. Originally founded in 1987 with a mission to address opportunities in semiconductors for video conferencing, the company eventually brought to market a suite of video phones, going public in 1997 and by 2002 had begun their focus on being a VoIP service provider. Today, the company has 68 patents, recorded revenues of  $53 million in fiscal 2007 (year ending March 31), and is growing 20% over the previous year's quarter (ended June 30).

Although originally centering its VoIP business on residential services, the company has made serving the needs of small business using hosted IP PBX functionality an impressive component of their success. In three years of service, Packet8's simple offering of the Virtual Office ($49/month/user) has managed to accumulate 8,000 business customers. Together with an Internet-sales model - inside sales with online ordering for customer growth, retail channels including relationships with Pitney Bowes and Office Depot which provides local inventory for customers.

Key features of Virtual Office includes voicemail, find me follow me and a recently released contact center that complements chat, email and fax queuing services. The contact center also supports integration with popular CRM services such as Salesforce.com, NetSuite and includes features for agent login/out, break support, call recording, agent monitoring, queue reporting and of course ACD. Leveraging SIP trunking with gateway services provided by partners such as Global Crossing and Level3, the service includes both E911 compliant and nomadic support. As users sign in, they are prompted to provide details of location.

Each phone comes with a gateway that plugs into the Ethernet network. This way analog phones, of 8x8 design are able to deliver service, but at a much lower bill of material cost point than other hosted service providers.  

A softphone is available based on the Counterpath OEM product, which is treated as its own extension which simplifies many of the challenges of being nomadic.  

Clearly, 8x8's balancing of VoIP for business with VoIP for consumers provides the kind of service mix that really sets the leadership tone for VoIP service providers. Sure, the business market is a tough domain, but with the right offering and even with direct online sales, it doesn't deliver the paper thin margins as consumer competitors (Vonage, SunRocket for example) have learned the hard way and don't seem to be able to survive on.

8x8 delivers a strong package for small businesses. The powerful features of their service are terrific, but as Microsoft enters the IP PBX domain and expands their offerings to include hosted services (why not? they do hosted services for conferencing and IM) 8x8 needs to position around quality of voice, which will become the mechanism to differentiate oneself in the market. This is challenging for service providers that don't own the network, but not impossible. Taking steps to equip the help desk and even users with the tools to troubleshoot common quality problems can only be a good thing.