This $22B Industry is Ripe for Disruption!
We haven’t seen nothing yet!
If I would tell you that the Telephone Industry is about to be disrupted, you would probably think that I am off my rocker, right?
We have seen so much disruption in the last 10 years, VoIP, Skype, Vonage, Whatsapp, Viber etc. etc. It is hard to believe that there is still something is still waiting for change.
Well there is! Stay with me for 2 minutes and I will explain. Almost all businesses have some kind of Switchboard aka as a PBX, Phone System, IVR, or Auto Attendant. In fact there are around 62 million active phone extensions in businesses in the USA alone.
For years businesses have installed a system on their premises. Companies like Panasonic, Tadiran, Avaya, Nortel and LG made tons from selling and servicing these systems.
Then, along came “The Cloud” and companies were told you can now save on your CAPEX, there is no need to buy a box for your phone system anymore. We will put a box in The Cloud for you and you can connect your phones to our box over the internet. Now it is the turn of companies like RingCentral, 8X8, Vonage Business and others to make tons charging businesses $30 a month (and up) per extension for their phone service. RingCentral (NYSE: RNG) is trading at crazy multiples and the landrush is on with new service providers joining the fray every day.
But, there is a catch. These “Cloud” phone companies do not innovate. They put the switchboard boxes in the cloud, but they are still complicated to use and service providers still employ large support staffs. Moreover the cost of customer acquisition is sky high and RingCentral the current leading player is losing over $30m a year.
So what will happen next? Lets look at a few points -
The majority of businesses are still on old “on premise” legacy systems. The “new” cloud systems are complicated to use. Gross Margins (before support expenses) are obscenely high.
The time is ripe for someone to come along and build a phone system for small businesses that is easy to setup, easy to maintain and costs less than the existing solutions.