VoIP Outlook for 2009

In early January I was interviewed by Rich Tehrani, TMC President and Editor-in-Chief. TMC has published that interview which is posted below.

Rich Tehrani: Are you generally optimistic, pessimistic or realistic?

Jim Dalton: I am optimistic about VoIP and pessimistic about the overall economy. VoIP as a technology is losing its excitement as it matures, but in reality we are still very early in the process of replacing the PSTN with a global VoIP infrastructure.

As for the overall economy, we believe 2009 will be worse than the expectations we read in the press or the stock prices we see in the market. However, we think a very bad economy can be a positive for VoIP. VoIP technology is much more cost effective than traditional TDM telco technology. The cost advantages and flexibility of VoIP are more compelling in a bad economy.

RT:How many frequent flyer miles have you amassed?

JD: Same amount as last year.

RT: How surprised are you at the global financial situation?

JD: Our business has been good and the business of our customers appears good. So I was very surprised by the financial crash last October.

RT: How is your company changing the way it does business as a result?

JD: So far, our strategy and plans for the last three years have worked and will continue unchanged in 2009. This is not because we are smarter than other folks, we are just fortunate to be in the VoIP business that is not suffering the problems of the overall economy.

RT: How have customers reacted to the slowing global markets

JD: We see some caution and some customer’s reports longer time to collect receivables, but overall no significant changes.

RT: Do you see this time as an opportunity or a rough spot to get through quickly?

JD: We think this is a long term opportunity. We have already seen competing vendors who offer solutions for PTSN networks hit by financial troubles. We think this downturn is a good opportunity for vendors focused on VoIP solutions that are cost effective.

RT: What will companies need to do to survive this downturn?

JD: Manage their business so they can lower their prices and still generate positive cash flow.

RT: How do your company’s products help customers in a slow market?

JD: The simplest and most powerful value proposition we offer is Least Cost Routing. Service providers can increase their gross profit margins by 20% or more with least cost routing. It is a simple concept, but not trivial to implement. We make the implementation easy.

We offer a free 90-day trial period complete with technical support and remote training. Some of our customers save more money from least cost routing during the free 90 trial than it costs to buy our software. This means that our software has a zero payback period for the customer. This is an easy business case for CFOs to understand.

RT: What do you feel is the strongest segment of the communications space? Technology?

JD: The RBOC and the Cable Companies enjoy a market duopoly for services to the residential market. A duopoly is every business operator's dream, limited competition but unregulated pricing. The RBOCs and Cable Companies do a great job telling the FCC that they face daunting challenges, but in reality they enjoy a fantastic business model. RBOCs and Cable Companies are the strongest segment in the communications space by far.

Having said that, however, I also think that open source VoIP will become much more important segment in the communications space. I do not foresee open source as a strong segment financially, but very powerful in moving the direction of the communications space. The success and impact ofAsterisk is well known, but we also see OpenSIPS and FreeSWITCH continuing to increase their market penetration.

RT: Which would you rather be president of and why? Google, Yahoo, Microsoft, Cisco, the United States?

JD: Google's management is shrewd, but more importantly they are very effective at what they do. They are great operators.

RT: What does President Bush need to accomplish before he leaves office?

JD: Making a gracious and cooperative transition to the new administration has been one of President Bush's best accomplishments.

RT: What does an Obama administration need to do to help communications and technology become more pervasive?

JD: Enable more competition for broadband services. The duopoly market structure of the RBOCs and the Cable Companies does not encourage innovation.

RT: Will this slowdown present an opportunity to reinvest in your company/market? If so, where will you invest?

JD: We see the slowdown as an opportunity for vendors of VoIP solutions. We plan to increase our investment in software development in 2009.

RT: Which country will present the largest opportunity for your company in 2009-2010?

JD: We have customers in five continents, but we are a US company and the US is our best opportunity in 2009-2010.

RT: If Nokia, RIM, Google and Apple devices are stranded together on an island, who survives and why?

JD: Apple. No one can beat Steve Jobs for usability and elegance. Apple is the obvious winner of any user device competition.