4.Were sold, engineered, installed, and supported by
an experienced team of data and voice networking
professionals.Progress to Date
The concept behind VoIP2.biz came from some experimen-
tation in early 2004 by personnel working for the Harley
Services Corporation (HSC). HSC began business in 1995,
providing outsourced engineering, installation, and market-
ing services to telecommunications carriers throughout the
United States. By utilizing HSC’s services, carriers were
able to speed implementation of new customer services,
such as DSL, and reduce costs by outsourcing central office
engineering and equipment assembly. As a service provider
to the carriers, HSC was in a unique position to understand
and review new telecommunications technology prior to its
general availability. In 2003, engineers at HSC started to
investigate broadband applications, including video and
voice over internet protocol (VoIP) applications.
During 2004, Milkowski and other personnel in HSC
explored the market for VoIP and evaluated several then-
current VoIP service providers. As a result of these investi-
gations, the HSC project team designed a system to deliver
a cost competitive IP PBX solution for implementing VoIP
via an open source software platform. They selected an
open source solution because it had the advantages of: (1)
implementation on a commercially available commodity
PC server, (2) high quality application code due to the ongo-
ing review of a large user community, and (3) no licensing
fees. Milkowski believed that the open source approach pro-
vided the best technological platform for smaller business
customers due to its advanced call processing capability and
significantly lower monthly telecommunications expense.
Beginning in October 2005, VoIP2.biz was spun out
of HSC as a separate corporation, owned by several outside
investors, Milkowski, and HSC. HSC retained 70 percent of
the stock in VoIP2.biz. Milkowski then developed what was
called internally the “Phase I Plan.” In this plan, the infra-
structure and staffing of the business had to be completed
and some presence in the market had to be accomplished.
During late 2005 and the first half of 2006, employees at
VoIP2.biz added to the functionality of the open-source IP
PBX and entered into several reseller relationships with
equipment manufacturers and carriers. These actions gave
VoIP2.biz the ability to offer a complete end-to-end VoIP
solution for business customers. Milkowski and his team of
five engineers and sales professionals also sold the
VoIP2.biz solution to several customers. VoIP2.biz signed
agreements with four authorized distributors in Central
Indiana to help sell the service to the business market. The
team also developed a set of features for their product via
internal work and relations with outside providers. Through
its business activities to date, management was convinced
that the open source solution offered by VoIP2.biz provided
a small to midsize business customer a complete telephone
system solution for 10 to 30 percent of the cost of a new
proprietary solution from traditional vendors. For a detailed
description of VoIP2.biz’s services, see Exhibit 1.
By June 2006, VoIP2.biz was well on its way to
completing the Phase I Plan. The company had sold sever-
al customers (the current count was 22), resolved several
knotty technical issues, and completed hiring a small team
of engineers (three) and sales/customer service people.
However, the company was yet to break even financially
from either a profit or cash flow standpoint. Revenue for
October through December of 2005 totaled only $88,000
but resulted in a net loss of $86,000. Financial results for
January through June 2006 were expected to be somewhat
better with revenue expected to be nearly $150,000, but
earnings before taxes were expected to be a negative
$66,000. Several members of the board of directors
thought that the company should be generating a profit or
at least be at breakeven by June 30, 2006.The Changing Telecommunications Landscape
By June 2006, many experts believed that the Internet would
change business communication. However, while the
impacts were dramatically changing data communications
in a small or midsize business, voice communication often
remained on the Plain Old Telephone Service (POTS). In the
business market, voice communications was still important
to business, and remained 10 to 20 times the size of Internet
communication. Business still spent significant dollars
every month on legacy telephony technology.
While the Internet had not yet had a major impact on
business voice communication, several studies foresaw
that business was at the beginning of the next phase in uti-
lizing the Internet to further reduce costs. VoIP was seen as
the next major breakthrough in voice communications.
In late 2005, several industry analysts predicted that
much, if not most, of the voice traffic generated by busi-
nesses would be delivered over Internet technologies. This
change would happen for two key reasons:- Businesses could consolidate voice and Internet con-
nectivity into a single converged network that would
carry voice, data, and video, reducing monthly commu-
nications expense andincreasing Internet network
capacity. By combining all communications over the
Internet, the underutilized voice network capacity could
be used to increase data network capacity. Because
VoIP used less than half the network capacity of a tradi-
tional POTS phone call, customers would use less of
their network capacity for voice.
Case Study I-2 • VoIP2.biz, Inc.: Deciding on the Next Steps for a VoIP Supplier 129