Vonage says there's still 85% of the SMB market left to penetrate with cloud services

While other VoIP and cloud providers are anxious to move up markets into larger business accounts, Vonage maintains there's plenty of the small to medium business (SMB) market that has not been penetrated yet.

Speaking to investors during the Cowen and Company Technology, Media & Telecom Conference, Alan Masarek, CEO of Vonage, said cloud-based services are a good fit for the SMB market because they require no management and maintenance of on-site premise voice and data equipment.

In the cloud market, the opportunity that Vonage is looking to capitalize on is Unified Communications as a Service (UCaaS).

"UcaaS today is only a 15 percent penetrated market so the sale that a cloud PBX provider makes is I am offering you no hardware, lower operating cost and infininite scalability," Masarek said. "The technology is a better alternative to what has existed before."

Masarek said that while it does run into competition from other players like Ring Central, the main issue is selling into SMBs that do not use cloud services today.

"We don't sell that often in an RFP situation against Ring Central, for example, but rather the 85 percent of the market that has not yet moved to the cloud," Masarek said. "That's where you're stealing the share from."

As its competitors move up into larger business accounts, Vonage says it is adding up to 2,500-3,000 new customers a month.

At the same time, Vonage is aware that competition will heat up as more providers enter the space.

One way the service provider says it will be able to mitigate future price compression and other issues will be by differentiating its service with the capabilities it gained from its acquisition of gUnify.

"You can expect that you will see more competition and price compression as the market becomes more saturated and that's one of the reasons why we did this small acquisition of gUnify this past month," Masarek said. "What gUnify is a cloud-to-cloud piece of connected tissue that forward integrates with business applications that are part of your workflow like Google for work, salesforce, and Office365."

Masarek added that "as we can embed our solution through something like gUnify into the existing business applications that run your business every day, that gives us more and more of a differentiated solution."

Vonage appears to be onto something.

As the company has seen its traditional consumer VoIP revenue decline, it has been focusing on enhancing its play in the SMB space, a segment that Infonetics said service revenue grew 9.7 percent in 2014 over 2013.

Two of the key drivers in the business VoIP market are managed IP PBX and cloud-based hosted PBX and Unified Communications services.

For more:
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Related articles:
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Vonage brings consumer VoIP service to Brazil, emphasizes low-cost landline, mobile calling
Vonage taps AOL veteran Redling to head North American consumer services

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