VoIP Is Commoditized — Or Is It?

VoIP Is Commoditized — Or Is It? Wildix Blog

Commoditization is where products become stripped away of their branding and the core features become the same. VoIP has become heavily commoditized, with virtually everyone offering the same core services. Yet there are areas of differentiation when you look closely. So let’s take a look at the root of the problem, the proliferation of countless solutions and the solution.

The Problem With VoIP

Currently, there are several thousand possible VoIP solutions on the market, thanks to the ease of setting up a basic VoIP solution based on existing open-source software. Asterisk is the basis of many of these solutions, but there is also Kamailio, Issabel, Linphone and opensips, to name a few. These open-source solutions lend themselves well to alterations and adjustments, making it possible for companies to develop their own systems fairly quickly.

Once these systems have been created, the company often markets it as a novel or unique solution, although at its heart, it’s just a PBX with few additional components.

Then there are the heavily closed systems that have broadly been developed from scratch. Some of these are with us in the Gartner Magic Quadrant, and others are not. Many acquired solutions, such as Cisco and Webex, which they then had to integrate into their existing business models. Then there are those who simply bought a solution and white-labeled it, such as NEC (Univerge Blue is white-labeled Intermedia) and countless others.

And some have gone for a mix: RingCentral, for example, has developed its own PBX (although it used to white-label Zoom Meetings) but its contact center solution is a white-labeled version of NICE InContact. Avaya white-labeled Avaya Cloud Office (currently RingCentral, although future versions may be based on Zoom), but its on-prem offerings are broadly its own.

All of this means that the very core elements of VoIP are generally the same — just like an apple or a lemon might be essentially identical across thousands of supermarkets and grocers. The ability to transmit voice as data is a commodity. But how many of these solutions are just pure VoIP?

So it gets more complicated than that.

VoIP Has Tiers

When we look closely at VoIP, there’s more differentiation than you might think in terms of offered services. This has led us to define three distinct tiers of VoIP: basic, mid-range and fully featured. That’s because the industry has become adept at adding more features to the core VoIP offering.

Basic VoIP

A basic VoIP system offers a phone system and usually chat, video and voice. It’s generally the most basic system, and it’s often differentiated by three things:

  • Price
  • Security
  • Support

Typically, a basic VoIP system is primarily about cost — it’s often among the cheapest solutions out there. It’ll offer the absolute basics, but there are often compromises in how good the security and the overall development are. They can be useful for businesses that don’t require anything more complex than some sort of link to their PBX and maybe some basic interface.

For MSPs, these systems don’t offer much other than as a value-add service (sometimes sold at a loss). They then make some money on the direct lines and other bundles they offer.

However, these basic systems come at an opportunity cost — the time, money and effort MSPs spend in learning the system, installing it and maintaining it is never repaid through installations of the system. In these cases, the MSP is often better off when installation doesn’t require the additional components, as these are rarely effective.

These systems are typically basic Asterisk, FreePBX or VitalPBX clones or may be something generated in-house. They rarely offer value to the end-user other than as a bare-bones communications solution.

Mid-Range VoIP

These start to integrate chat and video more seamlessly, but they’re still limited in their approach. They’ll include things like:

  • Document transfer
  • Decent user interface
  • Basic APIs for add-ons
  • Presence information

It’s at that point that they become closer to a unified communications solution rather than just VoIP. A basic VoIP system is useful to some, but it’s nowhere near as functional as a mid-range system.

To an MSP, the mid-range market has value, primarily because it allows customers to start experiencing remote working and build up their processes so that they can work in a hybrid/remote environment. Yet because of its limitations, they may discover they lose clients who need more practical integrations with a wider range of systems.

According to the 2024 HotelTechIndex Market Leaders Report, the average hotel alone uses 20 different pieces of software to manage everything from operations and revenue management to marketing and guest experience. They choose these from a stack of around 2,500 pieces of software — and that’s just for hotels! Numerous industries have proprietary software that they need to use.

If you have a mid-range VoIP system that cannot handle a huge range of additional solutions, you’re going to struggle to win contracts. Especially as AI is becoming more common.

Fully Featured VoIP

While a mid-range VoIP solution might offer some value, MSPs relying on them often end up losing out on major deals that would otherwise have a huge impact on their bottom lines.

What they need are fully featured VoIP solutions. The idea is that a unified communications solution should be a single pane of glass for all the tools they use — through the use of open APIs, webhooks and iframes. By integrating VoIP into end-users’ customer management databases, their booking systems, their calendars and everything else, MSPs can increase efficiency and reduce cost significantly — creating measurable value.

Some of the features of a fully featured VoIP system include:

  • Open APIs
  • Integrations with major CRMs, billing software and other systems
  • Focus on value, not on price
  • Full ecosystem, including hardware and SIP

All of these are essential features, and they help MSPs utilize a single ecosystem that works seamlessly with the various components of that system. This means that time spent learning how to install a VoIP system is well-compensated — and companies will often pay for MSPs to act as a trusted advisor on how to implement tech into their systems.

And as the need for AI grows, these open APIs are going to be increasingly important.

What This Means for MSPs

Even though growth in total revenue for MSPs in 2022 was up by 23%, 31% were unprofitable, and around 15% broke even.

There’s a huge range of reasons for this. Revenue increases often hide large costs, typically caused by vendors increasing their prices or a need for new solutions coming onto the market. Mid-range solutions have some value, but they don’t have the flexibility to drive significant cost savings that fully featured solutions do. And basic VoIP systems should never be an option for MSPs — they offer almost no real value, focusing purely on cost.

Ultimately, MSPs need high-value systems to grow their businesses. And if a vendor helps them grow through high-quality training and investment, even better. Ultimately, a quality fully featured system can still be used as a basic VoIP solution (at a reasonable price point!) — but it can be used for so much more, as well.

And that’s what MSPs need from their VoIP solution in this heavily crowded market.

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