Over the past few months we’ve discussed many of the benefits of launching a hosted PBX product, and some of the steps you might take to get started. But perhaps the most important question is: what happens next?
Suppose we take the plunge, build a product, and execute well… what impact will it have on our business?
For this article I’ve interviewed several key leaders at service providers that have successfully deployed hosted PBX, so you can learn from their stories. Allow me to introduce (drum roll please):
- Ray Napoletano, VP Sales from Reinvent Telecom
- Brent Baker, Director Network Services from Powernet
- Roger Seelaender, Manager UCaaS Engineering from AireSpring
Note that I conducted these interviews individually via email, and have combined their answers together into a more conversational format – so there’s a little artistic license in the presentation / ordering below to make it all easier to read.
Q. Could you tell me a little about the situation you were in before launching a hosted PBX product, and what prompted you to launch something new?
Brent: We’re a little different from most of your audience, in that we were primarily a long distance phone company. We recognized that LD had peaked and we needed to find another voice service to sell. We don’t own any physical plant so VoIP services gave us a path to market as an OTT provider.
Ray: We have an ILEC business, but we needed to find a way to replace lost ILEC revenue as a result of subsidy reductions and a loss of residential landlines. UCaaS was an easy way to leverage our existing network and technology to grow a new revenue stream.
Roger: We already had a very strong SIP Trunking business via SBCs, adding a hosted platform really allowed us to grow – to expand the business to a national service provider for UCaaS solutions.
Q. Did you have any concerns about heading in this direction?
Roger: Sure, buying a soft switch is a huge investment for a small service provider. It took a few years of constant development and redesign to get the platform to where it became a profitable business.
Ray: Yes. One was regulatory. We wanted to sell outside of our ILEC service area, and so we ended up forming a new CLEC to allow us to do that. We also had technical concerns about how we would provide numbers outside our own area, and how we would support our customers if they weren’t local on our network.
Q. How has the hosted business turned out for you?
Brent: I think it has turned out OK. We have about 5000 seats on the service so far. This level of success has more to do with HPBX being one of many things that Powernet does, rather than than the total focus.
Roger: It turned out great. I can’t share the specific numbers, but since I came onboard in 2016 we have tripled our hosted deployments. The systems have been in place since 2013.
Andrew: What do you see as your differentiation – what makes you special versus any other service provider?
Roger: Airespring has the agility at the National and International level to very quickly design, develop, and deploy UCaaS Hosted Solutions. We don’t take months to deploy, we take weeks. There are no tiers to work with Airespring, the person who answers the customer’s call, is the person who resolved the trouble.
Ray: For Reinvent it has been a huge success, both in revenue and profit. In addition we now have a full suite of UCaaS services including Hosted Contact Center and collaboration which have proven to be very important not only to our new CLEC customers but also to our ILEC base. Our UCaaS revenue has grown tremendously and in 2019 will be greater than our ILEC revenue. In fact even our ILEC business is growing due to new development and new customers, but the UCaaS is the high growth part of the business.
Q. What was the hardest thing about adding this new product to your business?
Ray: Understanding the complexities of IP based communications and all the elements to design, provision and support it on a national footprint.
Roger: Knowledge of a Metaswitch HPBX solution. AireSpring in the beginning did not have a repeatable design that is supportable. A lot of a-la-carte builds.
Brent: The hardest change was getting ourselves set up to install and manage a customer phone system. With LD services there is a lot less pre-sales technical work. With Hosted PBX you have to spend more time understanding what the customer needs with a phone system. You also have to decide how you want to handle customer networking. We initially decided to stay out of the IP network, but that was a bad decision. We spent so much time fixing customer networks that we finally decided we were going to sell networking along with the HPBX product.
Q. Is there anything you’d have done differently with hindsight?
Brent: We’d have launched our managed networking and IT service practice at the same time as the Hosted PBX product. We also did not follow Metaswitch’s recommendations on creating basic, standard and premium seats initially. We should have done that as well.
Ray: We should have placed more emphasis on product development and documentation in the early days.
Andrew: That’s an interesting point. It seems like expectations in the industry are constantly evolving – and features like collaboration have really come to the fore recently which just weren’t a big deal 7 or 8 years ago.
Andrew: Roger, what about you? Any changes you made that particularly helped the business to grow?
Roger: Once we properly designed HPBX offerings with Persistent Profiles, Classes of Services, Metaview Web Templates and Import/Export files, SOAP, WebAPI, etc, the business was able to take off and grow quickly.
Q. How do you expect the business to perform and/or change over the next 3-5 years?
Brent: Hosted services of all kinds are going to continue to grow.
Roger: I expect the UCaaS business to grow hugely. We are expanding into areas that will move us from SMB with up a few hundred lines now into deployments with several thousands. Having recently added Accession Meeting and Webinar and having shown it at several trade shows has ignited a lot of excitement in our channel manager teams.
Andrew: Thank you all for contributing to this discussion.
It’s interesting to see people approaching this from a variety of angles, but even with these differences we see some themes emerging – around IP challenges, product enhancements and efficient operations.
One final note: Our interviewees were understandably reticent to share numbers, but if you’re looking to grow your revenue through Hosted PBX it’s worth doing some back-of-the-envelope math to assess the potential benefit – based on the number of hosted PBX seats you think you could eventually sell in your area.
The key variables for revenue are monthly-recurring-revenue (MRR) per hosted seat, and number of hosted seats sold.
| Seats @ $25/mo | Monthly Revenue | Annual Revenue |
| 500 | $12.5K | $150K |
| 1,000 | $25K | $300K |
| 5,000 | $125K | $1.5M |
| 20,000 | $500K | $6M |
Note: I picked $25 as a rough guess for MRR – in practice you’re going to have multiple tiers and different customers will pay different amounts, and even within the same business different seats will be on different tiers, so don’t take this to be anything other than a ballpark number.
Anyway, I hope you found this interesting. If you’re considering launching or expanding your hosted PBX offering please check out our Hosted PBX services to see how we could help you.
