Dell begins bundling Fonality’s open-source software with
its enterprise servers today, its latest gambit to compete in the
already-crowded VoIP market — this time targeting companies with 125
employees or fewer.
This is fertile ground:
Analyst Alan Weckel of research firm Dell
‘Oro Group estimates
annual PBX revenues, including those from VoIP phone systems, will exceed
$7.5 billion by 2011. Much of this growth could come from small- to
medium-sized businesses. Weckel told The Wall Street Journal in August that
he thinks 35 million small businesses will adopt IP phone service before 2010
(about 11 million currently use it), a number that’s likely to ramp up if the
economic situation worsens.
Granted, this is a market
that has never fulfilled its promise. Few of the many hosted-PBX service
providers are even making money. Yet Dell (DELL) still sees opportunity in
hawking VoIP to businesses. Why? They buy more gear than cost-conscious
housewives. If there is one thing Dell knows, it is that empires can be built
on the incremental profits inside lots of gray boxes and the software that
runs on them.
Dell is a relatively late
entrant here. Cisco,
Avaya,
Nortel
and Alcatel-Lucent,
to name a few, are established players in the VoIP space, though their
products also target larger customers. In the small business space, Digium and Microsoft,
which released its Microsoft Office Communication Server in 2007, will be the
chief competitors. (Microsoft has claimed a working relationship with Dell in
the past.)
Late or not, Dell lives
to put the squeeze on the margins of its peers. The Fonality VoIP Phone
System will be priced at about $750 per employee for a five-employee system,
or $9,999 for a system that will serve 25. This is far less than Cisco-class
proprietary system, which can cost as much as $2,000 per employee. Being open
source, Dell-Fonality boxes are simpler than most too, and capable of
self-installation — an additional savings worth thousands of dollars.
“The big five phone
systems-vendors are going to wake up today and see Dell as a competitor and
it’s going to be a watershed event — the end of the phone system-oligolopy,”
Fonality founder Chris Lyman said.
It certainly is a
watershed event for four-year-old Fonality (as
Lyman tells Found|READ), which has been selling its own branded VoIP
boxes since 2003. Fonality now has 5,000 business customers (and 130
employees). It could sure use Dell’s sales channel to scale. Dell has between
6 million and 7 million small business customers, according to IDC.
Fonality will get a
standard revenue share: hardware proceeds go to Dell, software revenues flow
to Fonality (Dell won’t disclose the exact breakdown). Users will get their
bill from Dell. Tech support will be handled by Fonality for at least the
first year, Lyman says. Dell’s service is available for purchase today, via
phone. Customers can order systems at Dell.com by February.
