During a session at the recently completed ITEXPO (News - Alert) East, about VoIP Trends in the Enterprise, I made the prediction the 2008 will be the year that VoIP finally catches on in Small and Medium Business (SMB) market. One might ask, "Why hasn’t it caught on previously?" Well, that’s a valid question and the one to be addressed in explaining why the prediction.

Certainly the SMB market, however one defines it, is large. If we define SMB as businesses with less than 500 employees, the U.S. Census (Source: 2005 County Business Patterns) tells us that almost exactly half of all employees work for firms that fit this SMB model.

Almost 6 million SMB firms employ 58.6 million employees; of firms with less than 500 employees, they work in almost 6.5 million establishments (a surrogate for locations) — far outnumbering the 1.1 million locations in which the other 58 million employees work for the 17.5 thousand firms with 500 or more employees. While establishments do not directly translate to sales opportunities, the magnitude of opportunities in small business far exceeds large businesses. Outside of the U.S., the balance is even more skewed towards SMB.

Over the past few years many, if not all, of the manufacturers have announced new VoIP products tailored to address the immense SMB opportunity and have or are making changes to their distribution models to address SMB sales more effectively. And similar activities by service providers have been launched to offer managed or hosted-VoIP solutions. We’ll address these Telephony-As-A-Services offers in future articles.

Even with all of this SMB focused activity, penetration of VoIP solutions in small businesses is much lower than in the Enterprise market — still in single or very-low double digits in penetration percentages.

My contention is that there have been three major and one tertiary reason why SMB VoIP hasn’t taken off until now. And that these impasses are, in 2008, finally largely removed and that SMBs — likely to continue to be the economy’s engine, even in a downturn — will be turning to VoIP solutions in greater numbers beginning in 2008. So, what are the impasses and how have they been removed:

The first impasse has been the awareness of and confidence in VoIP solutions. The growth of and awareness of consumer VoIP, and its associated dollar savings, as well as the public successes of larger enterprise VoIP deployments has reduced the natural avoidance of "New Technology (News - Alert)" by the majority of SMBs. VoIP has certainly "Crossed the Chasm" to mainstream and technology-averse SMBs are becoming more comfortable in deploying this technology.

The second impasse has been the significantly higher price points of VoIP systems versus older technology (TDM) systems. Previously, VoIP solutions for SMB had prices two or more times the expectation of from $300 to $500 maximum, per user, that the old technology cost. Now, following Moore’s law and the growth of the overall VoIP market and the introduction of offers to fit the needs of SMBs, the price points have come down significantly to be much more in-line with SMBs willingness-to-pay.

Thirdly, and perhaps the most important of the impasses, until now, there wasn’t a convenient, local place for SMBs to acquire a VoIP system. Now, distribution channels wanting to sell VoIP solutions to SMBs have come on-line — traditional telephony resellers, data VARs, telephony providers and other channels that serve this market, have all added SMB VoIP products to their portfolios as they see that SMBs are now more willing to purchase VoIP solutions.

The tertiary reason, affordable broadband network connectivity is now finally available in most areas (with the exception of the problematical rural market). And bandwidth pricing is much more reasonable than previously — and may even be available from multiple providers in many locations, at competitive rates.

One might say that I’ve just answered the "which came first? the chicken–or–the-egg" question with the answer "both", with respect to SMB VoIP adoption, and I agree, I have. Reaching SMB with a comfortable to adopt, more affordable and locally sold and supported solution is the only way to be successful in the SMB space. Now that these impasses have been virtually removed, 2008 will be the Year of SMB VoIP. Also, one might speculate that the growing UC focus on business process improvement may also stimulate SMB adoption of VoIP — but that is the subject of future commentary.