In 2018, IP telephony is predicted to outsell traditional phone systems, and by 2025, BT reckons it will no longer supply ISDN lines at all. So what opportunity does hosted voice over IP (VoIP) present to IT resellers? Dominic Sacco asks Cloud Telephones sales director Paul Gibson, chairman Henry Matthews and MD John Carter to find out…
Henry, you have recently invested a ‘significant’ sum into Cloud Telephones. What’s your vision?
Henry Matthews: I see a great opportunity – I call it the new world. Technology is changing. Things are changing from analogue to digital. Five years ago we didn’t have smartphones on this scale – look at where we are today.
It’s no different with what’s happening with telephony. That is going to change dramatically; your life will change with telephony in the next four to five years. If you think about it, you used to have the old dial-up telephone, and then digital, now it’s voice over IP technology, which is more cost-effective.
John Carter: All the companies that are selling traditional phone systems are making a fortune out of traditional pence per minute calls. But we reckon it could save companies 30 to 40 per cent just by switching to hosted VoIP. All you need is a telephone line or fibre coming to the premises.
Why did telecoms provider DMSL create the Cloud Telephones brand, and why should IT resellers care about the shifting telephony sector?
John Carter: DMSL has been a BT partner for 14 years now. About three or four years ago, partners were saying: “Yeah we like this but we want to add telephony onto it.” But with BT you couldn’t. So we said we needed to do this under a different brand: Cloud Telephones. We’ve run that for about two years and it’s been growing and growing. The IT resellers are now moving over into this ‘plug your phone into your server’ type approach, due to a lack of profit from a PC and a screen. It’s become more of a service model.
Tell us more about this business model – what kind of margins can resellers expect to make?
Paul Gibson: It’s a monthly rental model. An end user business would pay anything from £12 to £15 per seat for hosted voice over IP (VoIP), and for that you get a full enterprise switchboard with all the facilities.
From a reseller point of view, what you get is a recurring income for the life of the customer. Don’t worry about billing it, sourcing the supplies or all the technology. We’ll do that – we’re a virtual distributor.
In terms of margins, we do a 50/50 split. If a product costs £200 and the reseller sells it for £400, there’s £200 worth of margin which we split 50/50, so there’s £100 for the reseller and £100 for us. If you look at margins on hardware – two, three, four or five per cent – and compare it to this… for example, say you’re earning £1,000 per commission per month on recurring services, that’s £12,000 worth of contracted income coming in each year. There is really good pound note margin opportunity.
When will we get to the point where a business or home doesn’t have a traditional phone line?
Paul Gibson: The tipping point is expected to be 2018, when the sales of IP telephony will outsell traditional phone systems. And by 2025, BT has forecast it will withdraw and no longer supply ISDN lines. It will just be fibre and through IP or through Wi-Fi.
Telephone numbers will go. So if you’re a business buying a telephone system now, the forecast end of life is only ten years away. And this is the great opportunity for IT resellers to take the message to their customers: Why would you buy an outdated phone system? It’s like buying a black and white TV when you know colour TVs are also around.
What if I’m a business and want to use voice over IP but keep my existing landline number?
Paul Gibson: You can attach a number. For example, I can twin my phone so I get office calls put through to my mobile. So now, anywhere in the world where I’ve got 3G, 4G or preferably Wi-Fi, I can actually make an office call through my office switchboard from my mobile and it’s not going to cost me. Also, if a small business based elsewhere wants to attract clients in North London, because it’s not tied to the local exchange, we can give them a North London number. So in a way, local numbers are going to die.