128
(KTSs), were special purpose machines with both
proprietary hardware and software. As a result, they
were expensive to buy, in the $1,000 to $2,000 per
user range; expensive to maintain; and lacked the
flexibility to easily adapt to specific user needs. They
generally required specialized skills for moving,
adding, or changing end-user stations—and therefore
had a significant maintenance expense once installed.
3.Business customers understood that customer rela-
tionship management can be enhanced and addition-
al sales can be made by the effective handling of
their customer communication. For many business-
es, the cost to purchase and implement the automat-
ed call distributors (ACDs) and the interactive voice
response (IVR) applications required were just too
expensive to be practical.
4.Business customers, particularly those with one to a
hundred employees, or several hundred spread over
several facilities, received very poor service from the
traditional phone companies. They were often served
by under-trained account managers with little tech-
nology experience or business knowledge, so it was
difficult for the customer to get his or her questions
answered or specific needs addressed.
5.Many customers lacked experienced networking
people to help them make telephony decisions, and
they often lacked a strong data processing staff with
any experience in voice processing.
In order to meet these market needs, VoIP2.biz sold
systems that:
1.Provided the economic benefits of collapsing the
voice and data networks together into a consolidated
network— one network instead of two,
2.Included the call origination and termination services
in lieu of traditional phone company services, includ-
ing low-cost long distance, E911, and all of the
advanced features available through any traditional
telephone carrier,
3.Utilized an open-source call processing platform that
operated on commodity hardware in place of propri-
etary telephone systems, which was 10 percent to
20 percent of the cost of a competing technology, andCASE STUDY I-2
VoIP2.biz, Inc.: Deciding on the
Next Steps for a VoIP Supplier
Lawrence R. Milkowski, President and CEO of VoIP2.biz,
Inc., an Indianapolis-based start-up supplier of Voice over
Internet Protocol (VoIP) telephony to the small and midsize
business market, knew he had a difficult job ahead of him.
It was Friday, June 23, 2006, and he had to prepare his rec-
ommendations on the next steps for his fledgling company
to the board of directors at its meeting on Tuesday, June 27,
- While Larry was a firm believer in the direction of
the company, he knew that the board was anxious to resolve
the future of the firm given the slower-than-hoped-for
progress in getting the company’s cash flow to break even.
The Company
In 2006, VoIP2.biz considered itself a systems integrator that
worked with business customers to help them move their voice
communications from legacy technology to VoIP technology.
Through these activities, VoIP2.biz would become its clients’
telephone company, thus earning a recurring revenue stream.
Management’s plan was to continue to gain dominance
in the Indianapolis market, expand the company’s business
activities throughout Indiana, and then open additional sales
offices throughout the Midwest, gaining a first mover posi-
tion in the marketplaces they served. Management believed
that success in this strategy would make them an attractive
acquisition target in the 2009 to 2010 timeframe.
Management thought that VoIP2.biz’s business
opportunity came from the recognition of five basic mar-
ketplace facts experienced by business customers with less
than 400 voice telephone lines:
1.These businesses had often invested in separate voice
networks, data networks, and Internet access technolo-
gy whereby they had two distinct and separate monthly
cost streams—a network for voice and one for data.
Moreover, the voice network was often overconfigured
and underutilized. In addition, specialized circuits for
transporting voice calls often cost more, sometimes
twice as much as the equivalent data circuit cost.
2.Most voice communication systems, called private
branch exchanges (PBXs) or key telephone systemsCopyright © 2010 by Stephen R. Nelson and Daniel W. DeHayes.
This case was prepared to support classroom instruction. Some names
and figures are disguised.