Surviving the Recession: Business Services

As telecom carriers look to tailor their residential consumer offerings for an increasingly budget-conscious mass market, they may find an even less forgiving environment among business customers forced to cut costs drastically amid the economic downturn.

“The residential consumer market is likely to be more resistant to cuts than the business market, which will look for ways to cut costs,” said Robert Rosenberg, president of Insight Research. “Right now American businesses are in a lockdown; no money is being spent on anything. I think if you had the greatest solution in the world, there’s not going to be a buyer out there for it.”

That may be overstating it somewhat. But certainly service providers will have to adjust their strategies to accommodate changes made by a panicked business world. Purchases of new systems and services may be put on hold indefinitely. Enterprises that were already broadly deploying new systems or applications across their entire organization might curtail that expansion, at least temporarily, to focus the new apps only where they’re needed most, said Michele Pelino, senior analyst with Forrester Research. “It’ll be more taking things in a piece-by-piece process as opposed to writing the check to make it happen across the whole organization.”

In particular, the economic downturn may forestall many businesses’ migration to IP telephony, since the move is viewed by many as a “pricey upgrade” with a “tenuous” economic justification, said David Passmore, research director at the Burton Group. “If you’re a large company, your cost is already so low with circuit-switched telephony, once you’re down to below 2 cents a minute, the cost savings you get by going to IP telephony aren’t that great. Probably the biggest benefit are moves, adds and changes -- you can unplug an Ethernet phone, walk across the building and plug it in somewhere else. But that’s harder to quantify. What they gain on moves, adds and changes doesn’t necessarily pay for the cost of all those Ethernet phones on everybody’s desk and the need to possibly upgrade network infrastructure to have the requisite quality of service, latency and jitter needed to deliver IP service quality.”

At least one provider is already responding to these pressures. 8x8, a provider of VoIP services to small and medium-sized businesses, announced this month it was slashing monthly fees in half for its hosted PBX service for new subscribers that sign up in December. Existing customers that upgrade to the same IP phone system, which 8x8 introduced in July, get the same discounted price for one year.