The "hosted VoIP" and "unified communications" categories have been around for awhile but they've always lacked a decent public sales CEO that telecom agents and channel partners could easily identify with. No more. TA is happy to introduce what we thing is the "easiest-to-sell" hosted VoIP and unified communications vendor SimpleSignal through an "agent's interview" with SimpleSignal's CEO and founder Dave Gilbert.
I've know Dave for several years and have actually sold SimpleSignal SIP trunks and hosted VoIP seats. Not only is Dave an owner of a redundant, carrier grade VoIP soft switch, Dave is an "IP sherpa" of sorts who knows (and is friends with) almost everyone of his peers and competitors. If you want to know who's selling what in IP telephony and why, Dave knows the answer.
So to get some hosted VoIP, SIP trunk and unified communication application "answers" ourselves. I spoke with Dave for just over an hour to ask him just about every "agent question" I could think of so I could figure out how to get into the IP sales fast lane and avoid getting run over by my IP selling competitors.
If you're ready to learn more about "the VoIP vendor" that's partnering with some big-name master agents that have already been around the VoIP block once or twice, find some time to listen the the following interview or read the transcript. TA's invested quite a bit of time hyper linking the transcript to give you plenty of background information about what the "IP sherpa" is talking about.
Click here to download the 60 minute MP3 audio interview and listen to in on your next commute.
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The hyper linked transcript appears below the following interview questions. Click here to download a PDF of the transcript with hyper links.
How SimpleSignal Makes it Easy for Agents to Sell Hosted VoIP
An Agent’s Conversation with Dave Gilbert, CEO of SimpleSignal
Interview Questions:
1. In order of priority, what are the main services that you want channel partners to distribute for SimpleSignal?
2. Which end-user target markets are most attracted to your services?
3. What type of channel partners are having the most success selling your services?
4. Who are your primary competitors for both end users and channel partners?
5. How are your services better than your main competitors for both end users and channel partners?
6. What is the geography of your marketplace? Is there a real on-net or off-net, or can you truly do anywhere?
7. Does your channel partner program have different commitment levels?
8. Do you have retail and wholesale distribution channels that partners might find themselves competing against?
9. Do you run retail pricing or agent commission spiff programs that make a significant difference?
10. Any significant program or product changes coming up in the next year or so?
11. Crystal Ball Question. What would you be doing if you were us?
12. Last Question. Can you tell us what we need to know about SimpleSignal? Who owns it? How long has it been around? And, how big is it?
Dan Baldwin: Hello, this is Dan Baldwin, and today we are talking to Dave Gilbert, CEO of SimpleSignal, a unified communications company. Dave, thanks for talking to TA today.
Dave Gilbert: Yes, thank you for allowing me the time. It's great.
DB: Question Number 1, in order of priority, what are the main services that you want channel partners to distribute for SimpleSignal?
DG: I think as a unified communications company, the key thing is that we look at this as an overall solution, and not just look at it as a transaction. So, therefore, you first of all have to understand your customer, and then we can bring to that one of many, let's call it 350, features that we have available on our Broadsoft switch.
And so because of that, it can get to be kind of confusing, and even that question is a little bit vague in the sense that there are so many things we can apply. For instance, it might be in some situation voicemail to e-mail. Or another situation maybe it's device unification. They have all these devices to check, their home phone, their office phone, their cell phone, and none of that is unified.
1:07 So, maybe it's pulling together all of those devices and making them work as a single kind if solution for them, and those kind of things can happen through the duty of IP telephony, and most specifically unified communication.
DB: When it comes to what are the agents selling that they're going to earn commission off of, it’s what the customer gets billed for on a monthly basis, and we're talking hosted seats, right?
DG: Oh, yes, I forgot. Yes, that’s right. So, the agents are all about the money, and I recognize that. The agents are coin operated. So, to speak to that
, yes, I think that we need to look at things like the spiffs that we are offering on certain things, call recording for instance. Sometimes we'll push that heavily, and we use that to try to open up a vertical, let’s call it the legal vertical.
2:06 So, agents would need to be aware of what it is that we're offering from month to month or quarter to quarter. Those kinds of things kick in. Like right now there is a big spiff on SIP Trunking. We've used SIP trunking as a migratory path toward hosted. We want to get more of that going, so we are throwing a $20 per trunk spiff on for the last quarter of the year.
So, it's that kind of thing that we do from time to time, change it up. So, the best way to find out about that is to either contact me, or one of our sales reps, and go into detail about that and see if it fits with the opportunities that the agent has going on at the moment. (Agents contact Simple Signal’s Sales VP Michael Sterl at michael@simplesignal.com or 303.242.8614),
DB: So, as far as the “pain points” that our members are listening for, if they say, “Well, I've got this phone system. I’ve only owned it for 3 years. I have 2 more years left on the lease.” You can do something for them with the SIP trunks and the integrated access device and get them on a migration path to VoIP and unified communications?
3:08 DG: Yes, absolutely. That's the kind of customer that we're looking for right now.
DB : Perfect. So, if they are ready to junk their existing phone system though, and they want to go straight into hosted VoIP, you can do that and bring a new handset. Would you use Polycom on the desk?
DG: Yes, primarily we look to bring Polycom handsets in. They work very well, and we support them very well. We still have Polycom handsets that have been in the field for 5 years with no issues. And so, we are very convinced of them being a solid handset in everyday use. So, we like that, but every once in a while a customer will insist on a Cisco phone or some other kind of phone, and we will look to accommodate that as well.
3:56 DB: So, when it comes to blocking and tackling, what are we selling here, is hosted VoIP, SIP trunks. Then when you get the more enlightened customer that wants to drink the “KoolAid” and solve all their problems, then you start talking about unified communications and what are their applications, what trouble are they having with their applications, and then how can unified communications solve those problems.
DG: Well, it's not that they want to drink the hosted VoIP KoolAid, it's that they have a real business problem that we can bring our technology into to solve. So, they possibly never thought in terms of allowing communications to affect the work flow, to affect how easy it is to do business once they get these pieces put together. A primary example that's real fundamental would be “simultaneous ring”.
The fact that they would never have to miss a call again, no matter where they are, is big news to them. Or maybe it's voice to text, so that they can read their e-mail, not just have to laboriously listen to them. Now they can push their e-mail as a text to any assistant, to any co-worker, and things get moving much more quickly and much more clearly as a result of bringing in some of these cool new features (unified communications/business applications) that we bring to the table.
5:18 So, that's what we mean by unifying their communications, because communication is not just about one-way audio anymore. Think about all the different ways that we communicate, text, e-mail, IM (“instant messaging”), the list goes on. Those kinds of things need to be incorporated all in one solution – that’s “unified communications”.
One man asked me, "Hey, what's the most important thing about unified communication? What's the feature that defines that?" I think it's IM, which is kind of interesting, and part of that is because I was talking to a man who said, "I haven't left a voicemail for a co-worker in years because IM is so much more effective. And, I don't go to their voicemail because I IM them first, ‘are you available?’ That way, I know that call is going to get picked up.” So, it's kind of interesting stuff when you start making it all work together.
DB: Right. So, when you talk about IM and presence, (presence as in, “Is that person available to help right now?”), unified communications and presence, it all wraps up into one.
6:19 DG: Yes, it does. And that's the unifying nature of unified communications.
DB: Now, going back to, when I first got in the business in 1990 working for Pacific Bell, they hired me to go out and sell pure Centrex where you have the university environment, the campus environment. But, when I started actually making my quota, I think maybe 10 or 20% of my total sales was I was selling “pure Centrex” (the way Centrex was designed to be sold), and the other 80% was just (trunking the dial tone lines going into) PBXs with Centrex , which wasn't exactly what (the phone companies selling Centrex) had in mind.
When it comes to all the deals that you do in a quarter, what percentage are you meeting the customer's dream of migrating them into UC as supposed to simply, “Well, I need these handsets to work,” and throwing in some SIP trunks or some hosted VoIP because their phone system crashed?
7:14 DG: Yes, I mean realistically it’s still a business about creating one-way communication at a lower price. That's what most businesses want at the outset, is “Can you save me money?” So, the answer to that is “yes”. We can always, it seems, save a customer money. It's just a question of how much.
So, the way we do that is by either consolidating their bill so that it's a bucket of minutes and basically unlimited (calling), and that can save them money. Maybe it's that they have multiple offices, and it’s through toll bypass (where their multiple offices can call each other for free). In other words, they're not having to pay 5 cents a minute going somewhere.
Instead, they're going to only pay 1 cent a minute, or in many cases if they’re on net, it's free. So, if a person has an office in LA, New York and Paris, France, those can all be connected free all day long, as long as they're on net.
We have customers who send a phone out to a vendor and that way, because they’re talking to that vendor a lot for instance, those calls become free. So, there are a lot of examples of how we can save a customer money, and that's a primary driving factor in all of our businesses.
8:35 But then beyond that, we might close a deal simply because of something we can do. Let's call it a feature, or a solution (or an “application”). One of the examples for us is that a large music company wanted to go entirely soft phones, and they were having some trouble locating somebody who could just do that.
They didn't want to put any hardware on the desk anywhere, and we've got a great ability to create a unified nature with soft phones and how they tie in to their cell phones, making them completely mobile. So, that solution carried the day.
So there are lots of examples of how an agent might want to sell SimpleSignal's solutions.
DB: Question Number 2, which end-user target markets are most attracted to your services?
DG: Do you mean like which vertical?
DB: Verticals and seat sizes (number of employees needing a business phone on their desk)?
9:35 DG: Okay. We do our primary target to be somewhere between 5 and 50 employees. That encompasses roughly 80% of America's businesses. So, that's a pretty wide number. Specifically, there are verticals that seem to be especially hot, let’s call it. Multi-location is one of those general areas, but specifically restaurants.
So, they have like 2 phones in each hamburger stand, but they want to tie them all together on one network and get that bill to go to one place. That really helps them, and then again toll bypass between them is a big deal. So, putting together 300 stores is not a hard thing for us to make happen. We've done that many times. So, one of the verticals is that multi-location restaurant thing.
10:33 The other way that we look at this is, our feature that allows us to accommodate verticals like car dealerships, and the legal side of things. We have a lot of lawyers for some reason, which is a little bit scary. But that's kind of reflective of the feature set (“business phone applications”) that they really enjoy. Things like call accounting, or call recording, and those kinds of things, so that they can look back into their month and bill out accordingly. So that kind of stuff is a big deal.
And then the small call centers are picking up like crazy too, because people want that virtual call center. In other words, their call agents don't go to a piece of real estate to report to work. They’re working most likely out of their homes in rural areas, and they can tie together hundreds of these agents using our technology. So those are few ideas.
11:31 DB: Question Number 3. What type of channel partners are having the most success selling your services? Are they interconnects that are seeing the light and adding hosted VoIP to their equipment solutions? Or is it the classic network service distributors? Or is it a little bit of everybody?
DG: It's a little bit of everybody, and the reason for that is because in every conversation it seems as though the customer wants to talk about what's happening with hosted. So, if they’re selling bandwidth for instance, it's very easy for that customer to ask, “Hey, I've heard I can put my telephone system over the Internet. Can you help me with that?” That seems to be common in channel partner’s discussions.
When they’re trying to sell them a premise space, let’s call it a Mitel or a Cisco system, oftentimes the customer will say, “Do you have an offer that looks like this? I've heard about this thing called hosted,” or “I've heard about the ability to put a single phone over the Internet,” etc., but it appears in talking to the general partners that nowadays most everybody wants to talk about a hosted solution along with the other things that might be offered.
12:46 So, that's very encouraging to us, and as a result of that we have seen our sales more than double in 2010, and we're expecting another great year in 2011.
DB: So, we’re not facing the problem anymore where a lot of business owners equate a hosted VoIP (phone solution) to Vonage-type quality (that will make them unhappy). Now they’re just assuming that it works, and they want to know how it compares to whatever else their looking for.
DG: Well, as crappy as Vonage is, and let’s call it Packet8 at the same time, they have done a tremendous job in educating the marketplace. So, I will be indebted to them forever for helping us get the word out.
But, when people really want to try to take a step up in quality, then they have to come to a service provider like SimpleSignal that provides that. And it's not just riding over the open Internet. We always put a class of service, and we put the right equipment on the premise (on the customer’s desk), so that we can deliver a very high quality of VoIP, not just phones over the net.
13:53 DB: Question Number 4. Speaking of competitors, who are your primary competitors for both end users and channel partners?
DG: Do I want to go in to that?
DB: Well, our audience certainly wants you to.
DG: Yes, that's right. So, one of the privileges that I have is to come into an alliance with 7 other people that I view as peers. These are people that we collaborate a lot with in the spirit of “co-opetition”. So we have a group called the CCA. It's the Cloud Communication Alliance, and you can look that up on the web.
They are some of my most respected competitors. Companies like Altiva, that we've done a lot of peering with around video, because we'd like to be able to get our users to talk to Altiva users for free and to not knock down HD voice. Because whenever HD is put over the PSTN (“public switched telephone network”), it knocks down the quality. They can’t experience it.
15:00 But, when you’re talking “on-net” (both calling parties use the same or phone company or a company in the CCA), it is amazing the difference. So the dream would be that we could peer with all of these other providers and keep our users talking HD, which would create rabid fans. Altiva and Simplesignal started making this happen. About 3 months ago Telesphere jumped in with us, and our users can now talk to Telesphere users in the same kind of way, and we expect that throughout 2011 to really see this kick in.
We’re very excited about the peering that goes on among our competitors, primarily Broadsoft switches. We believe that Broadsoft provides the quality in the feature set and the constant innovative development that allows us to stay ahead of the open source guys, and provide a much better quality of service as a result of that.
So, I would definitely say that the primary competitors that I face, that I would like to talk about, are my Broadsoft competitors. However, you have companies like FreedomVoice and companies like Jive that have created decent solutions over open source, and in some situations they might actually have something for our customer that we don't. So, I have to sort of tip my hat to those guys as well.
16:22 DB: Question Number 5. How are your services better than your main competitors for both end users and channel partners? But, what we are really asking about is, what are the different hosted VoIP boxes that the providers fall in to? You have Broadsoft, non-Broadsoft. You have BYOB or MPLS only. Seat size.
I mean, because I guess you kind of almost fit it in the box first before you can compare it to the other competitors in that box. Do you see yourself in like the Broadsoft, under 50 seat, BYOB (“bring your own broadband” as in any broadband Internet connection will work) box? Do you consider yourself to be a BYOB player, or does it really depend on the customer’s network?
DG: Yes, we would consider ourselves to be a BYOB player, with the caveat that we can control the LAN and we can control what's happening on the open Internet. So, over the years we've gotten better and better at that, partially because the equipment that we use in both places, both in our NOC (“network operations center”) and on the customer’s premise, has allowed us to carry a QoS (“quality of service”) that really has upgraded over the years.
17:42 So, although we are BYOB, when given the option we will always put a class of service on there, let's call it MPLS. So, now with New Edge’s offer of MPLS over DSL, it's more affordable than ever, even for that small, very small business, let's call it 5 seats, that we can bring in to them now quality that would rival something that we would put in for a 50 employee business.
And so because of that, it gets more and more exciting, and the ease of deployment picks up for us. And, the ease of gaining a customer, because a lot of times customers are tied up with their bandwidth. So, if we were to say no, the only way we can deliver this is that we have to bring in the T1s, then that would be a problem for most of these customers. It would slow the sale cycle.
So, in order to speed that up, a lot of times we will come in and we will test. We will find out if we can use their bandwidth or if there are some improvements we can make in the local LAN, then that allows us to come in and speed that sales cycle and take that customer quickly on behalf of the agent. So, those are the kind of things we can do.
18:58 DB: OK, now we’re going to stick it to you. Let's say that you put yourself in a BYOB box except when you can talk to them about upgrading to MPLS. Now let's say the deal is between SimpleSignal, which is Broadsoft, and then another Broadsoft provider, and then two non-Broadsoft providers. Let’s say FreedomVoice and Nuvio both non-Broadsoft and Altiva.
Now, how would you specifically say without bad mouthing them, “Well, here's how we're better,” okay, and you've mentioned your NOC. You've mentioned your network. How do I talk about the NOC and the network to show propective customers how SimpleSignal is better?
19:44 DG: In the world of ubiquity, the way that it's lining up for right now and the changeover, everybody coming to the ILEC (“independent local exchange carrier”) for service, it gets very interesting, and differentiation becomes a very big part of what we do. So to us, we are really much more focused about the applications than my other competitors. So by that I mean, integration into the software that people use every day, let's call it Outlook.
So now if you’re working in Outlook you can click to call out, there are screen pops coming in. That's got a certain kind of coolness to it, and more than that it's about being effective all day long.
The other thing that we do is that we're fairly advanced in the area of fixed mobile convergence. What that really means is the way that your desk phone or your PBX works alongside of your cell phone and makes you mobile and able to work from anywhere, anytime.
20:45 So, sitting down and creating a solution that has that kind of reach is actually rare in the marketplace, and we view ourselves as differentiated around SIP trunking, hosted, and then most importantly voice applications, that are constantly being developed by our developers and by 3rd party developers to get better every single day. So, that's one point of differentiation that we would camp out on.
The other one is that we work really hard at is educating our channel partners. It's not just, go out there and try to sell us, and give us a call when you get a lead. It's really about helping them understand go to market. It's about co-branding sale sheets so that it has their logo on it as well as our logo on it, so that we work together as a team and a partner.
21:37 And it’s constant webinars. It's staying engaged with that channel partner to help them understand how to sell us specifically. We think that's what's going to bring us out of the bag when it comes to a channel partner actually walking into an opportunity and saying, “Who will I choose to bring in to this customer, and why do I choose them?”
DB: You've talked about the application integration as a point of differentiation. You’ve talked about the quality. Those are certainly important. You’ve talked about working closely with the channel partner being channel friendly.
But, there's been a lot of rumor and innuendo recently about some of the smaller hosted VoIP providers, whether or not they’re going to continue on or have to merge because they've run out of money. How does a channel partner or an end user decide? How do they measure whether or not the small hosted VoIP company they're looking at is going to stay in business? Is there some way to tell?
22:43 DG: Yes, that is one of the most difficult things for a channel partner to try to figure out, because they're going to get a lot of FUD (“fear, uncertainty and doubt”). Very few of us are releasing financials so that they can see clearly, and there are a lot of reasons for us not to do that.
But one of the ways that you might be able to find that out is to ask, “How long you've been doing this? Is this a new thing for you? What kind of money have you put into your infrastructure? Is this a couple of servers and a data center somewhere that you’re running all of this technology through?”
In SimpleSignal’s situation for instance, we have worked hard to create a redundant system that is geographically separated by a large amount of geography. So, we are in constant fail-over position between Denver, Colorado and Irvine, California. That gives us a great opportunity to stay up 24/7 all year long and deliver five 9’s reliability. So, that's one of the things.
23:50 The other thing is how big is the customer base? How resilient is it? Let’s say that that company gets in trouble financially. How much time do they have to get out of that problem before everything starts spinning out of control, and not paying their vendors, and getting shut off, etc.? So, the larger the corporation, the better chance they have for survival.
The other thing that's kind of an interesting thing among Broadsoft switches is that we have sort of this pact that if somebody does get in trouble, we can take their customer base over quickly so that none of those customers ever go down, because our technologies are aligned in such a way that that allows for that quick transition if somebody get sideways. And that's happened a couple of times, and we’ve been successful at absorbing those service providers in a very quick timeframe.
And we think that that adds even further durability to that customer base and security for the agents, because those agent contracts then get transferred over to the enterprise that's taking them over. So, those kinds of things add to that. I'm sure that's a big fear out there.
25:05 DB: Right. Well, now that we've singled out Broadsoft, there's a general impression out there that if you go with a Broadsoft backbone hosted provider, you’re going to be paying more because of all the Broadsoft license fees.
For our audience who is unfamiliar with what Broadsoft is bringing to the party, can you give us a quick tutorial of the difference between Broadsoft, and non-Broadsoft? What's really the difference out there, and how does it matter? You've already talked about there's almost a fraternity of Broadsoft providers, and it seems like all the biggest players are Broadsoft, but what more do we need to know about that?
DG: Well, there's a reason for that, and that is that Broadsoft has made the investment to create a soft switch that is far and away the best as far as quality of service, as far as reliability, as far as the ability to scale. So, of the largest providers in the world, let's call them the 10 largest providers, Broadsoft is a vendor to 8 of those 10, and the other two are coming this direction through the Broadsoft acquisition of Sylantro and Tekelec.
26:23 So, that's an interesting development that happened a couple of years ago, and is still kind of sorting itself out. But really, there are very few other reliable ways to go when it comes to IP telephony, but it's expensive. No doubt about it.
So, some guys have decided that they could put together an Asterisk solution and try to scale on that. Most tend to fail in the 5,000 to 10,000 sub range. They can't scale it out faster than that without a huge amount of trouble because they have to create redundant clusters all over the place, and it's not a SIP stack that scales very well.
There are a few guys who have cracked that code and seemingly are scaling beyond the 10,000 mark. We’ll see how they do as they pick it up. But, there have been several very public failures. For one, it’s not hard to guess, but Bandwidth.com tried to do it with Phonebooth , and any of the agents that have experienced Phonebooth understand what I'm talking about.
27:26 So for that reason, we've enjoyed being able to grow unfettered by the technology. But instead, as Broadsoft begins to developed and pour more money into its development, that allows us new features, that allows us further stability, and we're able to scale the results of that. But, that comes with a price. We have to pay not only for the licenses when we initially buy them, but we have very onerous maintenance requirements of us.
But, that maintenance money then goes into further development and strengthens the overall switch. So, we believe we have a pretty good partner in Broadsoft, even though it can be expensive and, therefore, result in a little bit higher, as compared to an open source, per user rate.
28:24 But, at SimpleSignal, we have effectively brought that down to stay competitive. We don't feel that we’re outside too far of where the open source guys are. And, in exchange for that, we can offer them a better overall solution.
DB: Is there a standard premium that you’re paying because it’s Broadsoft as opposed to non-Broadsoft? Is it a 10% premium, a 50% premium?
DG: You mean out in the field?
DB: Yes, at the seat price.
DG: You know, that would be good feedback for the agents to give to us as they compare us. I don't feel like there's that much of a difference. For instance, maybe an open source guy is going to deliver at $20 a month. And for the same kind of feature set, we are going to be maybe $25 a month, sometimes $30 a month depending on where and how we're delivering that.
So, we're fairly close when it comes right down to it. And, that's significantly lower than what a customer usually has been paying when they have been service by the ILEC. So, that's how it works.
29:32 DB: So, there is a premium, but you sail through that by saying, “You’re part of the Broadsoft fraternity, and you don't really have to worry about your provider going down”. Not that they're going to go down, but if they do go down, they're easily picked up by another Broadsoft provider.
DG: Well, that brings up another point, and that is that in order for somebody to become a Broadsoft switch, you've got to get through a certain kind of vetting financially before Broadsoft is going to make the investment in you by bringing in these servers and the whole soft switch setup.
It's typically about a $2 million dollar process at the outset, and then scales from there. We've got about $6 million in our network right now. So, the stuff gets fairly expensive. It's not a bunch of college kids that have thrown up some servers somewhere and decided that they’re now a VoIP company.
This is really class 5 enterprise level service that we're talking about. So, does that answer the question a little bit?
DB: It does.
DG: Okay.
30:37 DB: Question Number 6. What is the geography of your marketplace? Is there a real on-net or off-net, or can you truly do anywhere?
DG: Yes, I believe that we can truly do anywhere where there's adequate bandwidth and a cooperative IT (“information technology”) team. So, we would consider ourselves not to have a (specific geographically limiting) footprint. We are currently in 42 states, and the reason we are not in all of them it's just because we don't have channel partners to carry us there.
So, our hope is that we’ll find some channel partners, maybe somebody who’s an Eskimo can help us get into Alaska, which by the way is a very difficult geography because it is very protected by the locals. So, we are looking to expand just about anywhere in the world. We are also in 4 foreign countries, and we run a base in Iraq called Camp Striker, which is kind of an interesting story.
31:33 Beyond that, we are also servicing two satellite networks and are finding ourselves in some very interesting places. For instance, there's a scientist that is running experiments on the Amazon, in a very remote area of the Amazon. And so, he's been limited to just being able to communicate with friends and family over e-mail. When we brought him the opportunity to talk to his friends and family, it was like tears. He was so excited that he could have contact like that with the world. So, that's kind of a fun story.
So, yes, virtually we can carry our technology to any point on the earth.
DB: But some people perceive you as being more geographic even though you’re hosted VoIP. For example Telesphere is all over the Western States. And Smoothstone, they are all over the middle part of the country. Is it just because that's where their sales talent is? I mean, you say you have location network facilities in Colorado and Southern California, but that doesn't define you geographically?
32:46 DG: No, it certainly does not. Not with our partners like, for instance, XO or New Edge. They’re allowing us to get this far beyond the concentrations that we currently have around Denver and Southern California. So, we're expanding quickly into these other areas, being carried there by channel partners and our inter-connectivity with XO and New Edge.
DB: So, does that geography (where you're defined by actual sales talent) suggest that hosted VoIP does still need to be sold face-to-face as opposed to, I know there's a lot of hosted VoIP players all over the internet where you can't get away from their pop-up ads. Are they fairing better because they're selling over the internet, as opposed to face-to-face?
33:38 DG: You know, that is a great question for the industry. We are limited via our distribution methods. And so, we theoretically could sell our technology over a soft phone. You can sign up for it and have it be completely automated. You wouldn’t even have to touch a human, much more like Google Voice for instance.
That can go viral because it doesn't need the face-to-face. If all you're looking for is audio, one-to-one, then Google Voice and the rest of those are great solutions. But, if you're trying to build a unified communication business solution, that is a face-to-face deal. Somebody has to be on the other side thinking through call flow, and work flow, and how communications gets into all of that.
There needs to be somebody willing to crawl under desks and plug in phones, and that kind of hard work that's necessary in order to deploy a unified communications solution.
So for now, where we are in terms of the migratory process, it has to be face-to-face selling. A collaborative sale. Again, not a transaction, but more of a solution that we're creating that demands face-to-face.
35:03 Now, that face-to-face can also be over the telephone. It can be on a shared desktop like GoTo Meeting or Webex. We've been very successful at deploying in that way, or selling in that way as well. But, for the most part, people like to talk to whoever it is that is running their communications.
DB: Now, let’s say that you did a hundred deals over the past quarter. Of those hundred deals, how many of them are the customer plugging in their own phones and lighting them up themselves, as opposed to having someone physically show up with the phone and like you said, crawling under the desk and plugging it into the LAN themselves?
DG: Okay, so let’s say a hundred deals. I'm going to say maybe one of those hundred is a customer on their side plugging in. Most of it is their IT person. So, whether that's an outsourced IT guy that comes in and fixes their computers when they crash, those are the people that we're trying to interface with because they understand the LAN (“local area network”). They understand the LAN hookup. They know whether that DMARC has been extended, and if it hasn't how to do that.
36:15 So, those are the guys that we talk to primarily at the customer site. So, in the installation process our guys in our NOC are talking to those guys in their IT. Now, we enjoy working with the larger corporation simply because that IT know-how is typically far more advanced and, therefore, much easier to work with when things inevitably get sideways on install. So again, we like to have somebody that has some voice experience, or at least is well acquainted with that customer’s LAN.
DB: Now, of those hundred deals where 99 deals are being installed by an IT guy, what percentage of those IT guys are the agent that sold the deal as opposed to a network services agent, who then has to turn around and hussle up the IT guy?
DG: Probably only about 20 percent of those are the actual agent. My guess is that it's probably 80/20, and 20 being the agent that sells it. Most often, the agent is a telecom agent or somebody who is selling bandwidth to the customer who enjoys that trusted adviser position in some way, but not necessarily would he be the IT guy.
37:34 DB: So, then the network service person will either talk to the customer's IT guy to see if they have what it takes to plug in the phones, or then bring someone else in.
DG: Yes, and we have agents throughout the country that we call in in this situation so that a customer can be taken care of reliably, because these are guys we've worked with in the past and have trust in that they know what to do.
DB : Question Number 7. Does your channel partner program have different commitment levels? Do you do the master agent route where you just want to sign up master agents? Or do you pretty much take on anybody?
DG: You know, that's a good question. We prefer working with master agents simply because again, that expertise is much higher. They know what they're looking for, and they know when to use us. So, that's the fun part about working with a master agent. Plus, we now have access to all of their subagents which makes it a much wider swath of people for us to connect with.
38:40 But, if a guy is going to come in and just bring us one deal or two deals, he can sign a direct agent agreement with us. We'll support him and just see where that guy goes. So, we're not necessarily tying guys into commits, but we would give special and more favorable pricing to those who are willing to commit to a certain level of business throughout the year.
DB: Do you see master agents actually jumping on the hosted VoIP, or UC (“unified communications”) bandwagon in a big way? I've talked to a lot of master agents that are trying to get their subs selling hosted and UC, but the industry don't seem to have a “Hosted VoIP Master Agent” yet.
DG: That is correct. We're starting to see that change rapidly though. At the beginning part of this week, you and I were in Washington, DC, at a channel partners show, and I felt it for the first time in 5 years. I've seen now what this tipping point looks like.
We're talking to people who normally didn't want to talk to us. We're being brought into conversations by our friends now that we've had time to develop these sort of friendships.
39:50 And as a result of that, we're picking up like crazy on the agent channel. We’ve been about 95 percent agent or channel partner related as far as go to market. I can see that probably moving closer to 100 percent over the next 6 to 12 months. And the reason for that is because we're becoming so busy servicing channel partners that there is no need for us to go direct.
And we would much rather have that person who is carrying us into these deals as the trusted adviser, rather than trying to get into it cold. So, that's been kind of an exciting change, and we're starting to feel it this week, and we expect it to continue strongly into 2011.
DB: Question Number 8, do you have retail and wholesale distribution channels that partners might find themselves competing against? I know you have Michael Sterl (as your VP of sales). I guess if he lands ass-backwards into a direct deal, he can close it himself. Do you have wholesalers that are wholesaling SimpleSignal?
DG: We do. We have wholesalers that are white labeling us so you would never know it's SimpleSignal. It's whatever that wholesaler's name is. But, we are the switch behind them, and that is available.
41:07 We've started that way from day one and have grown fairly quickly as a result of our willingness to white label for these guys who have full back offices and a sales staff. There is a certain kind of qualification that a person has to have to be a wholesaler, and there are volume commits, etc.
DB: Not be a crook being the number 1, right?
DG: That is number 1, that they pay their bill. But on the other hand, we are very excited about that agent channel carrying us into some very interesting opportunities, and that has sort of proved itself over the last couple of years.
But again, I think that we're seeing a shift, a sea change, that's developing all around us now with the customer base asking for us. Businesses are beginning to trust us like never before, as they trust other pieces of the cloud. Let's call it storage, or applications, or Google itself.
42:12 DB: Right. Talking about wholesale partners, if there's a hundred hosted VoIP providers that all are going after a hundred seats or less, what percentage of them are network based? What percentage of them are just sales houses where they don't have their own network? They're just wholesaling someone else like SimpleSignal. Can you tell, and does it make a difference?
DG: Yes. That's a very interesting question. We have a large wholesaler that came back to us. They happened to have offices in our data center. And so, they would walk customers down to our cages and say, " See those servers. Okay, that's our switch." And they would lead the customer to believe that that was indeed their switch, when really it was ours.
Now, I'm not saying that most of our wholesalers are that disreputable, but they are not usually forthcoming around the idea that they don't actually have facilities. That instead what they have is that they are a marketing machine that really is not maintaining or developing a soft switch.
43:26 So, I think that with some more penetrating questions on the part of the channel partner, eventually that will come out. And so, I think it's very important that a channel partner stay with somebody who actually owns and operates a switch, rather than is a subagent to an agent if you will.
DB: Right. Of a thousand seats being sold this month by the smaller hosted VoIP Broadsoft providers, what percentage of them are being sold by a company that has their own network?
DG: I would not know how to even answer that question. Honestly, I never really looked at the stats but again, I think what I would come back to is that a channel partner needs to understand what is best for him. I'm not disparaging our (wholesale) customers. I want to be clear about that as well.
Just because they are a wholesaler doesn’t make them bad, because in many ways the channel partner might find themselves better supported by that entity than they would by direct connection with somebody who is running their own switch.
44:34 So, I think we have to be careful about this, because it really comes down to the relationship the channel partners have with that company. Do they feel supported? Do they feel educated? Do they feel like they can get an answer while they're in the field in front of a customer? It's those kinds of things that make the difference as far as going upstream.
DB: So it’s not significantly different than the resellers in the hardwire environment where they are adding in some other value, they're repackaging a bunch of different solutions, and if that make sense, then it make sense.
DG: Yeah, yeah. Absolutely.
DB: Question Number 9. Do you run retail pricing or agent commission spiff programs that make a significant difference? Or is this sort of an environment where this is the price and it sells itself?
DB: No. No. This stuff does not sell itself. And, spiffs are like what we talked about earlier, an important part of the agent culture. And so, we cater to that and are constantly listening to our agents about what we should offer a spiff on next. So, if we want to put some concentration in an area, the way to do that is to offer a spiff, and that's what we do.
45:51 DB: Now, the hosted seat is the hosted seat that it comes with so many features. Is there much money to be made on selling extra applications? Are there add-ons that will significantly increase the margin of a seat?
DG: Yes. One of those would be call recording. A lot of times your call recording can be equal to whatever that seat cost is, and so they have effectively doubled their ARPU and, therefore, their commissions as a result of selling those things.
Another one would be voice to text. Another one would be conferencing. So, as we go down the list we can show a channel partner how they can double or triple their ARPU (“average revenue per user”) enterprise just by taking on these other things.
DB: Question Number 10. Any significant program or product changes coming up in the next year or so?
DG: Yes. We are constantly developing new and exciting ways to use the communications, the feature set that we offer. And so, without tipping the hat too much to this, I can tell you that one of the places that we've seen significant traction is around video.
47:04 We came out of the Channel Partners (Conference) six months ago with this idea that video needs to be more than just point to point. It needs to be point to multi-point. So, the large rooms, let's call them the $100,000 video conference room, is sort of going away when we can add that same sort of functionality to the desktop using something like a Polycom VVX.
So, now when you're on a VVX you can see these little Hollywood Squares of all the people that are in the conference. The one who is speaking, his square is larger than the rest, and it's a very cool thing. We put a Polycom RMX bridge inside of our core and are able to deploy that technology.
Now where this goes is, we want to make it more than just Polycom phone to Polycom phone. We want to get it so that we can bring in a Tandberg, or a LifeSize, or Skype , Skype integration. Our engineers are actively working on that every single day.
48:07 So these are the kinds of things that are coming up, we think in 2011, that will help the channel partner open new verticals and give some customers that have not been excited about switching, to come over as a result of that.
DB: You mentioned previously HD voice, high-definition voice. What do we need to know about that? Is that really a market differentiator? Or is that just something that helps the sales pitch go better?
DG: No, it's a gimmick. It doesn't really work. I'm just kidding you. No, it is dramatic. Okay, so one of the ways that we win deals is, and this is risky by the way because you're carrying in a phone, and you’re going to plug it in to their LAN, and you’re going to hope that that firewall port is open or that there's enough bandwidth available to make this sound good.
But, 90 percent of the time it works. You plug in that (Polycom) 550, let's say. That's an HD phone. And then we call one of us on our network and show them what this sounds like. People are thinking that VoIP is sort of this trashy sound that they've heard maybe over Vonage.
49:15 So, what we want to do is help them to see that no, the QoS is so good that this is high fidelity. That this is better than they've ever heard, like the guy is in the same room with them, and truly that's what HD voice does. It sells amazingly because people go, “Wow, I had no idea that it was that good.” So we hear this all the time. And so, that is that puppy dog close where you put that bone on the desk and they won't let you take it away.
DB: And, if you're doing it over a BYOB network, they can satisfy themselves that their network is going to be able to handle it, at least during a sales call.
DG: Absolutely. Yes.
DB: Crystal Ball Question. What would you be doing if you were us? Let's say that you just won the lottery, a million dollars, and you've always wanted to go from being a W-2 employee, let's say you're working for Qwest, you're W-2, and you're going to set up your own agency. What would you do setting up your own agency? And how would you attack the market going over the next 5 years?
50:24 DG: The first thing I would do is call SimpleSignal. The second thing I would do is ask for my Mike Sterl or Aric Applefield, who are two of the most experienced channel support guys. Then talked about how do I get started? What kind of go-to market materials do you have? How do I understand the feature set that SimpleSignal offers? How do I not get lost in the sauce?
And so, those are all questions that can be answered in a brief time with these guys. Then start attending the webinars that we offer weekly. You start reading the materials. You give us your picture or your logo, and we'll try those on those materials. And then it's just out there bringing it to, hopefully, their established customer base, or if they're just getting going then it's the cold call that they will need to do.
And, we have very strong go-to market materials that will help them with everything from door hangers to little pamphlets and things that they can use as leave behinds. So, we'd love to invite that channel partner into our agent portal where they can see the catalog of things that are available to them, which will probably spur other kinds of discussion or questions around go-to market kinds of strategies.
51:49 DB: Right. Now, of your successful channel partners, are they just co-labeling as SimpleSignal and ABC telecom where they're basically just selling you? Or are they selling you plus, oh here's an IP PBX and here's one other hosted VoIP guy?
DG: A lot of channel partners view neutrality to be a very important part of what they do. So, they want to appear as though they're not necessarily biasing the customer, that they're bringing to them a range of options that the customer then ultimately makes the decision, which is really kind of a good way to come at it, especially if they can figure out a way to sort of, let's call it prejudice their customer in the direction of SimpleSignal.
52:40 But really, it's a good strategy to put up a premise. Let’s say it's an NEC box or a Cisco call manager, and then put our hosted solution alongside of that showing them TCO, total cost of ownership, and then allowing the customer to make that decision.
DB: Last Question. Can you tell us what we need to know about SimpleSignal? Who owns it? How long has it been around? And, how big is it?
DG: Okay. So the big question, how big is it, is one that is kind of hard to answer because there are many ways to measure big. So, we have about 22,000 endpoints that we service now. We're, like I mentioned earlier, across the nation and international.
DB: When you say 22,000 endpoints is that seats, or desktops, or people getting SimpleSignal dial tone at their work?
53:40 DG: We look at an endpoint as being a concurrent call. So, that can take the form of a SIP trunk. It can take the form of a soft phone or hard phone, but in some point it's a DID that you can call and somebody is on the other end.
DB: Is that a universally acceptable measure if you trying to compare one hosted VoIP provider to another?
DG: Yes, I think so. Yes. But big really isn't big yet. There are no big guys. You have to point to maybe a Vonage that's crossed a million or to Packet8 that's a couple hundred thousand. But for the most part, independent providers like SimpleSignal range between 10,000 and maybe 40,000 seats. The largest one I can think of is claiming to be around 40,000 now.
So, really there's a lot of room to grow, and we think that the gates are now open so that you'll see some dramatic growth among some of us as we get prepared to move forward.
54:46 So, SimpleSignal was formed in 2004 back in the days when this stuff was bleeding edge and it just bled cash. And, it was a challenge to keep this thing up.
You know, it's interesting. A few months ago we were reminiscing, and we were saying, "Do we still have any of those poor guys that we started up and never told them that they were beta (test customers)?" It would be interesting to know, and as we looked across our first 20 customers, we still had 15 of them. So they were, and they are, troopers. We should probably reward them in some way for hanging with us for all these years.
But, those were the years of outages and things not working correctly, and the struggle that we had in the LANs because there was no SIP-enabled equipment out there. These were difficult years, 2004, ‘05, and ’06, but around 2006 we got this thing settled down and began to really start scaling, and the rest is history.
55:49 DB: Let's go back to our new agent just starting up with a big chunk of cash to get going. What is the average dollar size of a SimpleSignal billing customer? What's the average commission amount? And what's the average length of stay for a SimpleSignal customer?
DG: The average seems to be about $1,400 (average monthly billing), of which we pay the channel partner, depending on where they are, a percentage that is competitive. So that would be somewhere between 12 percent to 20 percent depending on their commit level and what's happening. So, that's what an agent can kind of expect.
DB: What are the contract terms that SimpleSignal customers generally sign? How long does the average SimpleSignal customer that doesn't go out of business stay with SimpleSignal?
56:51 DG: The average is a 2-year commit. Some of those we’ll give a further discount to a customer if they go to 3 years. Once in a while we'll accept a 1-year commit in certain circumstances, or that there might be a compelling reason to offer that.
But, the majority, probably 90 percent, is about a 2-year commitment. And, as far as people renewing, that is very common. Our churn rate is something that we watch very closely. We're at somewhere around a quarter to a half a percent of our total billable is churn in a month. So, we're trying to hold this thing between 3 and 5 percent churn annually.
We've been actually significantly below that number. We've been below 3 percent annually for the last 4 years. So, our customers have been very sticky. We believe that part of that is because of the amount of applications we have at work on those customers which makes it difficult for them to leave us.
57:54 So, sometimes throughout this recession we've seen a lot of our customers actually go out of business, and so that's kind of hurt us. But in general, our customers are willing to stay with us because we deliver a great service with a ton of functionality that makes them want to stay.
DB: I know there are some carriers out there and some CLECs (“competitive local exchange carriers”), Windstream comes to mind, who basically have an attitude they want the agents to get the customers on to Windstream. But, then Windstream sees it as their job to grow that existing customer for the benefit of Windstream and the agent, who gets paid more if they grow their customer.
Do you have that sort of ongoing contact during the term with SimpleSignal customers where you're trying to educate them how to use all the applications, and grow them into other applications they are not yet using to make it less likely they're going to roll over (or switch to another business phone company) at the end of their term?
DG: Yes. That is an area, though, that we are really going to focus on this year, and that is to put guys inside of our company that are going to specifically contact the end user. To this point, we've tried to educate our channel partners to be the face of SimpleSignal. To be constantly in that customer bringing them new ideas and new developments that we bring out.
59:15 But, channel partners are busy developing new business, and they are not all that effective in going back to already sold business, and they need our help. So, we are developing that this year and expect to really get some traction around the idea of getting back into the base, and upselling that base, and further making it more sticky.
DB: It seems like if you've got customers buying a lot of “naked seats” (dial tone without any added applications) that, you've got a lot of growth opportunity with your existing customers by having them take on applications they're are not yet using or paying for.
DG: That is correct. Yes, we do agree with you on that. We think it's like going back through the field after the harvest and picking up the fruit that wasn't picked the first time. So, there's a lot of that laying in the field.
1:00:09 DB: Great. This is Dan Baldwin. I've been talking to Dave Gilbert, the CEO of SimpleSignal. Dave, thanks for talking to us today. Is there anything that we forgot to talk about?
DG: We just like to be able to be effective and accessible to the channel partners. So, maybe we never talked about how to get a hold of me.
I’m ceo@simplesignal.com or dave@simplesignal.com.
Michael is michael@simplesignal.com.
And Aric, it’s spelled kind of strange, it’s A R I C, his parents were hippies, aric@simplesignal.com.
So, those are some ways to get a hold of us. My phone number is 949-429-4758. So, I'd love to talk with any of you who are listening.
DB: Great. This is Dan Baldwin. We've been talking to Dave Gilbert, CEO of SimpleSignal. Dave, thanks for talking to us today.
DG: You bet.
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