The Significance of Google Voice

March 16, 2009 by Dave Michels

The newly released Google Voice fills an interesting space in emerging telecommunications. I believe the service will have significant ramifications to PBX makers and software service providers alike; albeit not very quickly.

The fact is telecom isn’t so simple any more. Gone are the days of the PBX island. I assume every major PBX maker is now spending more money and effort on software than hardware design, and quite simply it isn’t enough. Their solutions tend to be focused on their own hardware – and simply can’t compete with the Skype’s and Google’s building hardware agnostic solutions. Telecom today is “multi-modal” – chat, presence, moods, video, screen sharing, and more.

Let’s start with a look at the current SMB PBX market. The phone system’s primary purpose remains a cost effective method to connect to the PSTN. The excitement, R&D;, and sales criteria are focused around the PBX applications. The popular applications are centered around unified messaging, presence, and mobility (sometimes collectively referred to as Unified Communications or UC). Every manufacturer offers at least one solution for ICQ chat (Mitel has 4), presence, wireless, video, and synchronized unified messaging. Customers evaluate these applications carefully even if they don’t intend to initially deploy them. The PBX solution grows broader, but centers around voice communications. The desktop phone‘s value proposition remains somewhat stagnant.

Now, let’s take a look at Skype. Skype currently has over 400 million registered users and is adding 350,000 new registrations per day. The service offers voice, but includes presence, video, chat, and more. In fact, video calls now represent 34% of their calls. Skype calls are getting longer and broader. They are expanding their installed base with mobile and PBX integration strategies (ActionTec Gateway, Asterisk Connector). Skype’s main attraction has traditionally been price – low cost international communications. But over the years, Skype has demonstrated some powerful capabilities and represents a simple, reliable, cost effective solution for many.

Are PBX Systems and Skype on a Collision Course?

No, not really. But the bigger question is why not? After-all isn’t the PBX a voice/PSTN device that is broadening its capabilities with UC, desktop, and collaboration capabilities and isn’t Skype a UC, desktop, collaboration solution with broadening voice and PSTN capabilities? Logically, they should be on a competitive collision path. You might be fast to dismiss the idea simply because PBX’s are expensive equipment and Skype is a free service – but consider that in 2007 – Inter-Tel before being acquired by Mitel reported annual income at $458 million and Ebay recently reported that Skype’s revenue is about $500 million with a goal to grow to $1 billion by 2011 (don’t underestimate the power of free software). The fact is the collision course may not be a real threat for quite some time primarily because of the huge gap between the quality and reliability of a modern PBX versus a distributed Internet based solution like Skype. Skype remains powerful for individuals and at best a complement to a corporate PBX.

Enter Google Voice

The brilliance behind Google Voice is its telco and telephone independent. This approach allows Google to go after the lucrative aspects the Skype model (offering competitive prepaid rates) while providing a UC, desktop, and collaboration suite the PBX manufacturers will have trouble matching. To the end user, no need to commit on a specific client or compromise on quality. Google Voice additionally offers a number of unique free features making the service very attractive.

For a small business, a new PBX phone system will run between $500-$1300 a phone (total cost, installed). The factors that drive the price largely have to do with the specific phone models selected ($125-$600 each) and the number/complexity of the applications deployed. However, a bare bones PBX with no applications (not even voice mail) and simple phones could be much lower; say $300/phone total cost- installed. As stated above, PBX sales now are largely driven by modern UC applications, so this second system is easy to dismiss. But what if we marry this base system (along with SIP/DID trunks) to Google Voice (free), and Google Chat (free). This cheap customer now has a communications solution with the following features and applications:

• PBX
  • High quality phones
  • High Reliability
  • SIP/DID support
  • POTs line support
  • Intercom/Paging
  • Internal dialing extensions
  • Numerous base PBX features: BLF, Phonebook, transfer, MOH, etc.
• Google Voice:
  • Find/Me Follow/Me/Ring-all on Steroids
  • Unified messaging with voice transcription
  • Click-to-Dial
  • On demand conference bridge
  • The ability to screen incoming calls (listen in to voice mail recording)
  • Call Screen/announce by callerid (get the choice to accept or reject call while caller only hears ringing)
  • Super low international rates – available from any phone including a cell phone
  • Call recording capability
  • Web Portal to access features
  • Call screen/announce
• GoogleChat
  • Presence
  • Chat/ICQ
  • Video conferencing – supporting a wide range of hardware and platforms

That is a pretty robust feature set – without servers or software assurance, and available to all employees anywhere they may be. In fact, voice mail transcription is not even available on most SMB PBXs. If the above plays out, we see a major threat to the PBX model and revenue. To further exacerbate the problem, many of these features are better on Google. For example most PBX based video conferencing systems only support videoconferences between like hardware over proprietary PBX channels whereas Google’s and Skype’s video service supports a large base of hardware (cameras, Operating systems, computer brands) over standard Internet paths.

Now back to today. Google Voice was just released. How well it really works and how much people find it useful is yet to be determined. Additionally, there are some serious risks and limitations to Google Voice version one that will keep most corporate customers on the sidelines. These deserve a quick look:

• Limitations
  • Number portability: Can’t port numbers to Google, but evidently you can port the number they provide you to a different carrier. Corporate customers would require the ability to port standard and DID numbers to/from a service like Google Voice.
  • Significant service limitations around outbound calling. Not only are some services unavailable, but as long you make calls from your cell phone – your callerid is going to get out and return callers will bypass the service.
  • No Integration with other Google Applications. The obvious one as illustrated above is Google Chat which is currently tied to Gmail. Presence is hot, but it must be integrated to the telecom system – otherwise there is no automatic way to report presence as “on the phone”. Other PBX solutions already offer integration with GoogleMaps (see where callers are calling from) and even Google Search (look up a number to a name while the call is ringing). Google Voice doesn’t offer these integrations or any others – such as click-to-dial from popular applications such as SalesForce.com.
• Risks
  • No SLA. Is a corporation really willing to publish a primary number through this service without an Service Level Agreement? An outage or even abrupt discontinuation of service could be devasting. But then how do you create an SLA for a free service anyway? Most SLAs only offer a rebate on fees paid.
  • Price Assumptions: It is hard to argue with free today – but we know people are willing to pay for their number. Think of how the cell companies lure new customers with great promotions, but fail to offer them to exsiting customers. As customers we either have to change carriers or change numbers to take advantage of the lower prices. Google Voice service really only works well if it’s the number you give out to everyone, which becomes pretty valuable.

Most likely, Google Voice will follow a similar path as Gmail – a free consumer based service – but a fee based corporate service that addresses some of the issues above. I think this makes a lot of sense, but even if Google agrees it will likely be years for any confirmation.

Therefore, as with most version one solutions, all we really have is a glimpse of what might be. Skype and the PBX companies are no doubt reviewing Google Voice and how to react over the long term. Google too will be watching call volumes and usage closely and testing its revenue models. Google tends to take its time, and I don’t expect version two of Google Voice for at least two years. So make yourself comfortable as the dust slowly settles.