Steven Golub wondered why it was so difficult to get his telephone service to work. The Manager of Operations at Success Apparel, a children's sportswear manufacturer in New York City, he had to deal with three different suppliers whenever there was a problem. He says customer service at Verizon and MCI was "a horror story." His PBX supplier, however, "was also part of the problem."
While the three argued and pointed fingers, his phone system was dead. "I was caught in the vortex of who was responsible. We just wanted our phones to work!" he says.
It seems Success Apparel's Manhattan office was on the edge of Verizon's central office. "The T-1 line dropped calls twice a month for varying periods of time," he says. "Down times were brutal," Golub remembers.
One time the phone was dead for three days. "That cost us $5,000," he says.
These malfunctions created major problems for Success Apparel's bottom line. "In our customer-service area, our life blood is our computer and our telephone," Golub says. Customers call "constantly" to check on their orders. "Email will only go so far when they need an answer or you have to settle a problem right then and there," says the executive. In addition, the manufacturer found it "impossible" to set up onsite meetings because of the telephone troubles.
So when the company moved its offices, Golub reconsidered their phone system provider. "We had to purchase a new phone system. I said, 'I'm not going through this again,'" says Golub. His IT consultant suggested calling on hosted, or outsourced, VoIP (Voice over Internet Protocol). He liked the idea but was hesitant about outsourcing. "I really wanted to control the process," he says.
M5 Networks Inc., a New York City-based outsourced IP phone system provider, sat down with Golub and explained the benefits of outsourcing. "The more I listened, the more I thought giving up control wasn't as bad as it sounded," says the Success Apparel exec. Looking at it another way, he realized "they actually control the process, unlike me, who couldn't control anything at all."
The manufacturer, however, "was extremely concerned about call quality," since the calls use VoIP. M5 allayed Golub's skepticism by setting up a temporary VoIP line for a two-week trial. "I couldn't tell the difference between a VoIP call and my regular PBX," he says. Call clarity convinced Success Apparel to enter its first outsourcing telephony agreement.
"In the end the decision to outsource was a no-brainer. They took me out of the loop completely. Now I don't have to get migraine headaches or stomach aches about my phones not working. They handle everything," he says.
As Dan Hoffman, President and CEO of M5, explains, "When you outsource with us, the phone system goes away. Instead you connect to us using IP technology."
The Benefits of Outsourcing
Golub says he knew he made the right decision 14 days into the outsourcing implementation. A Verizon technician showed up at the office and announced the T-1 line was down and he was there to fix it. "We didn't even notice a degradation in service. The DSL backup kicked in when the T1 when down. But M5 noticed, called Verizon, and put in a trouble ticket," he says, incredulously. M5 has "sophisticated equipment that detects a problem before I even know I have one."
As with all its clients, M5 provides a back-up DSL connection in addition to the regular T-1 line. When the first line gets cut, the system automatically reroutes the calls to the back-up line and monitoring equipment then alerts the telephony provider to the problem. "The goal is to have our customers never lose their phone service," says Hoffman.
Hoffman says T-1 lines "can be trouble" for businesses since they are easy to disrupt. When a new business moves in next door, the technician can accidentally disrupt the service. Or a street repair crew can cut one digging up the street. "Whenever that happens, a light goes off in our data center," says Hoffman.
While reliability was the primary reason Success Apparel dialed into VoIP, the agreement has produced cost savings of between five-to-seven percent. He adds that M5 included unlimited local and long distance calling in its service plan.
Since the Internet is global, Golub makes local phone calls around the globe carrying a three-pound VoIP phone. (He could also use a microphone and headset with his laptop.) For example, when he travels to the plant in Hong Kong, he can plug in the special phone and make local calls to anywhere. The company has a large traveling sales force; Golub says this is big advantage for everyone. "It's like having a direct line wherever you are," he explains.
Hoffman says M5 has processed calls from passengers 3,300 feet up flying in a Lufthansa airplane. Satellites carry the Internet signal in this case.
Outsourcing allows Success Apparel, which sells children's sportswear in the US and Canada, to have more telephony features than it could have afforded if the manufacturer had decided to sew up the loose ends and build this system in house. "M5 is constantly introducing new features and technology," reports Golub.
Finally, if there is a disaster or a blackout (not so uncommon--residents in Queens, one of the five New York boroughs didn't have electricity for 10 days in July 2006), M5 can reroute calls to cell phones or landlines in another city.
The only blip in the system was the learning curve. M5 trained 80 Success Apparel staffers before the system went live. But Golub says no one really paid attention until they had to use the system. "The first day everyone was at a loss," recalls Golub. He says "the really bright people" learned how to dial in 10 minutes. Others took up to two days.
Here's How It Works
When someone at Success Apparel makes a phone call, the VoIP signal travels across a private T-1 line to M5's data center. "By carrying the traffic over a private network and not sending it over the Internet, we can guarantee the quality of the call," explains Hoffman.
The system changes the VoIP signal (data) into voice at the gateway. M5's phone system then routes the call to its final destination. When Golub is in Hong Kong, the call travels across the Internet into M5's data center.
The "find me, follow me" feature assigns users one phone number. When anyone calls that number, the call finds the user regardless of where he or she is--at home, in the office, or behind the wheel--or what kind of phone they are using--landline, cell, VoIP phone, or a laptop. M5 can forward calls to a Success Apparel voice mail, so its employees are never away from their phones when traveling. M5 can also integrate VoIP calls into existing applications like Customer Relationship Management (CRM) software.
The Benefits of VoIP
Peter Hall, research director of Ovum, insists that IP telephony "has reached the mainstream." In Western Europe, he predicts VoIP will reach 50 percent penetration by 2007 and 60 percent by 2008. Golub says those numbers reflect his observation of the American market.
In January 2006 Yankee Group predicted the global business VoIP market will reach $3.3 billion in service revenue by 2010. Most of the anticipated growth will come from the hosted market, according to its "Business VoIP Services Poised for Dramatic Growth" report.
Hoffman says large companies have IT departments that are skilled enough to deploy VoIP themselves. But small-to-medium businesses (SMB) "don't have the sophisticated IT departments to operate VoIP on their own, at the level of reliability they are used to." In addition, there are the not insignificant start-up expenses they would have to incur if they were going to do it themselves.
"Everybody who doesn't outsource this process is crazy. Truly. The headaches you avoid are monumental," says Golub. He pauses, then adds, "As long as you have the right supplier to deal with."
Lessons from the Outsourcing Journal:
- Small-to-medium businesses typically can't afford the start-up costs for VoIP service. They also don't have the IT staffers with the expertise. Outsourcing the process is a good option.
- VoIP was much more reliable than landline service for Success Apparel. One reason: M5 Networks, its outsourcer, was responsible for everything. The buyer previous had three providers pointing fingers while no one fixed the problem.
- If there's a disaster or a blackout, the supplier can reroute the calls so the company is always in business.