The lower levels of the PBX market are populated by a large number of businesses that have traditionally been more difficult to reach than the bigger fish. However, with the right solutions resellers can thrive on small system sales.

The small business sector is going from strength to strength as demand for new phone systems bounces back after the downturn, observes ipcortex Director Rob Pickering. "We do however need to realise that this isn't just a return to business as usual," he noted. "Channel players need to be aware that the rules of the game are different. Customers in this sector have significantly different expectations to those that were typical a couple of years ago. Understandably, the leaner, fitter businesses of today are demanding real value and efficiency savings from every pound they invest in business equipment."

As a result, notes Pickering, big leasing deals for bloated systems have become less of a viable option, certainly when concerning the larger end of this diverse market. "Instead, the focus is upon cost effective systems that allow businesses to achieve an immediate return on investment while at the same time allowing them to stay flexible and competitive for the future," he added. "Smart resellers can exploit this trend, but they need to have the right approach. They should be offering the full package of cost savings, a full UC-centric feature set and, of course, solid reliability. Something for which cost effective CPE is still king."

According to Pickering, it is the ‘full package' that has made the VoIPCortex IP PBX a popular choice for SMEs, with unit sales doubling in the past year alone. As its based on open standards it brings flexibility to resellers, who now have the freedom to offer solutions to meet most budget and functionality requirements. "ITSP agnostic, interoperable with any open SIP handset and with no artificial limitations on the number of users or the functionality it offers, the VoIPCortex IP PBX allows resellers to differentiate themselves, add value and maintain margin. The key ingredients required to succeed in convergence," Pickering claims.

High end applications and technologies are now available at the lower end of the market, driving the smaller PBX market in a new direction, stated Tim Freeth, Head of System Sales at Nimans and Rocom. He has been working on the front line with dealers for the last four years and says the smaller end of the market has evolved - as technology flows down from bigger market sectors - putting sophisticated features within reach of all businesses whatever their size. "Many major manufacturers are pushing new technologies, especially SIP. Smaller businesses are beginning to realise the cost savings available, but they need the systems to work on that platform," he emphasised.

"There's been acceleration in technology filtering down as more manufacturers release smaller versions of their flagship systems, to create a more level playing field at the lower end of the market. It's almost like the missing piece of the jigsaw. In the past it may have been cost prohibitive for end users to embrace technologies such as SIP but by releasing these new breeds of system, manufacturers have created many more sales opportunities."

Freeth noted that resellers working with just one brand now have a full kit bag to go out and sell. "It makes logical sense from a manufacturer's point of view," he said. "They have invested a lot of time and money in a product and positioned it in a certain market sector, perhaps 30 users and above but they've now managed to fill a very important gap. The lower end of the market is where big volumes of businesses operate."

He says there is a growing appetite in the smaller PBX market for higher end features. He continued: "From a dealer's perspective SIP is becoming much more important. If they can wrap SIP-based applications onto a system they should also be looking at trying to include broadband services and minutes which locks the customer into them. This will generate a regular revenue stream with maintenance as well as a one off purchase. It allows them to provide a service as well as product, building closer working relationships."

Toshiba gained market share in the lower reaches last quarter compared to the same period in 2009. The key driver for growth is spending patterns in this market. Businesses are now prioritising the purchase of robust and reliable technology, and are looking to spend the minimum possible, says Daniel Fuller-Smith, Sales Manager at Toshiba BCD. He believes that a recognisable and solid brand is crucial in this market. "Productivity is also a key demand for this market," he added. "For example, we often see customers with multiple sites keen to interconnect the systems to enhance productivity while maintaining and reducing staffing levels. This applies to both low and high end contact centre set-ups.

"Also, businesses this size are often looking to share resources between offices, where linking contact centres can be particularly useful. Tools such as tracking missed or dropped calls and enabling home working facilitate this improved productivity. Tools that enable more seamless communications also help present the company as a more professional entity. For example, by setting up sales or accounts message boxes rather than using a personal mailbox."

A proven background of investment protection is also key to ensure that customers feel comfortable parting with money during these tough market conditions. Customers are keen to remove as much of the costs as possible, reusing existing cabling or even the current system by upgrading where possible.

Another vendor thriving in the lower reaches is Orchid Telecom. Sales of the Orchid phone systems have increased month on month over the past year, and Jim Mortell, Managing Director at the firm, attributes growth to the current economic climate, greater awareness about Orchid's systems via the Internet search engines, and a range of entry level systems at realistic prices. Mortell believes that the main inhibiting factor for poor penetration into the bottom end PBX market has been lack of reasonably priced products with basic features, with most dealers still offering the corporate solution to a relatively naive market.

He said: "Resellers can increase volume sales by offering customers a range of entry level systems at realistic prices, and by not selling them features they don't need or understand. If the customer's business expands they will be back in the market for a more sophisticated solution for their telecom requirements."

Mortell says the majority of small businesses just need Hold and Transfer, Auto attendant, Auto Fax detect and System memories. "Most people with a corporate background understand the benefits of SIP and hosted VoIP solutions. Naturally, if they leave to set up a small business they will be looking for this solution for their own business. But the majority of small business customers in the market for a PBX want the ‘box on a wall' solution, start trying to sell them a hosted VoIP solution and you get ‘techno glaze over'," he added.

The bottom end of the market is far from homogenous. The inhibiting factors, features and motivations change from one niche to the next, observes Mark Shane, Sales Manager at distributor ICON. He splits the small business product market into three: Basic small business systems (simple no thrills basic telephone system), value small business systems (offering ‘bang for your buck' in terms of cost per feature), and professional small business systems (top end small business systems used as a tool for increasing profits and productivity). "The difference between these is not to do with the number of extensions, but more to do with the size and characteristics of the small business," said Shane. "To break into any of these the channel partner needs to understand the dynamics and motivations in the individual markets."

The small PBX market is generally flat, but Shane says not all of the small business market has suffered. "In the high end niches of the small business market sales of the TalkSwitch and Wave have been maintained," he noted. "These niches seem to have some resistance to the downturn. This maybe because these solutions are seen by the small business as a key tool for increasing profits and business, and decisions to buy are more considered and less influenced by external events."

In the professional small business niche UC itself is not asked for, but many of the individual elements and functions of a UC system - unified messaging, presence, and voice conferencing - are purchasing influencers for the small business owner. "Often these are packaged as standard, as in the Wave IP business communications system from Vertical, along with other sought after services such as call recording and desktop call management, in a solution which offers out-of-the-box UC capability for the small business," added Shane.

Mobility is an across the board requirement in the small business market. At the moment on-site mobility solutions such as the Polycom KIRK solutions are strong sellers into the small business market, says Shane. "The on-site/off-site mobility functionality provided by FMC solutions such as uMobility is not being bought by the small business, but it is our view that in the medium-term, and certainly in the long-term, small businesses will be an important market for the on-site/off-site mobility provided by FMC solutions such as uMobility," he believes.

To realise the market potential in the lower reaches it's important to understand the position that your customer is in, notes Anthony F. Bartolo, General Manager, SME and Contact Center Communications at Avaya. "The job for our business partners is to marry the right product with the right business need to ensure each customer is getting the best out of the technology," he said. "Particularly in our current economic climate, customers need a higher level of support from resellers throughout the implementation. Incentives like Avaya's zero per cent financing deal are helping our business partners as it allows their customers to move ahead with planned implementations without worrying about a hefty upfront investment as for many this is not an option."

Resellers can also help companies evolve their implementations by allowing them to gradually take up new technologies with a step-by-step approach. This piecemeal approach works well in the PBX market so it's an easy buying pattern to support, says Bartolo. "Another key point to bear in mind is that in-house technical know-how can vary as not every small firm has a dedicated IT department. Ease-of-use is therefore key."

Bartolo notes that companies of all sizes are investing in communications technologies and Avaya is seeing strong uptake in the SMB market where it can offer a real business edge. "Now more than ever, as we recover from tough economic times, we are definitely hearing from this market that they want affordable solutions that solve real-business problems and drive customer loyalty," he added. "Unified Communications, for example, gives businesses the tools to drive productivity through efficiency, and the flexibility that it offers employees leads to improved customer service and more accessible and responsive staff. The beauty of UC is that it can be anything you want it to be. If an SMB wants a complete IT overhaul with all the latest applications - that's great. But they can also choose to upgrade their systems gradually in order to cause less of a dent in their finances."

Over the past year Avaya has witnessed many smaller businesses take the evolutionary approach to communications rather than making large upfront investments. "It is, however, still encouraging that the SMB market clearly sees the gains that can be achieved through flexible communications in terms of increased productivity and improved customer service," commented Bartolo.

According to Bartolo, back-end technologies such as SIP and hosting aren't front of mind for smaller firms, rather, what they typically want is a way to pay for communications in a manageable, predictable fashion, and technologies like SIP trunking can help them to lower expenses. He added: "Many SME customers show a desire to keep their equipment on premise, but this is slowing changing. We work with our customers to deliver services that best fit their requirements, but the important thing is that we are working to address their business needs with a solution, rather than leading with the technology itself. It is with this approach that we start to see inroads."