Availability of high speed broadband has driven the market for hosted VoIP telephony in the USA which is 3 years ahead of the UK.
Had dinner last week with Huw Rees, VP Business Development of 8×8. If you don’t know them, 8×8 are the largest provider of Over The Top VoIP services in the USA with over half a million subscribers. That’s almost as big as the whole UK market.
What’s more 8×8 are putting on subscribers at a terrific rate – over a thousand new businesses a quarter at approximately 18 seats per business. This is all public domain stuff. 8×8 is a publicly quoted company that turns over around $120m and with a Market Cap of $800m. Overall gross margin is 71% with GM on services up at 80% which is how they can achieve the market valuation.
This business performance is achieved in two ways. Firstly all 8×8’s technology was developed in house. They don’t have large licenses and royalties to fork out. In fact 8×8 owns a lot of patents. Secondly everything is low touch, automated and web based including the marketing. They do have an inbound sales team because business customers like to talk to a real person before committing to this kind of technology.
The final interesting point to make is that 8×8 saw a trigger point that stimulated business growth and this was the availability of high speed broadband – better quality and more reliable broadband connectivity. The USA went through this milestone around 3 or maybe four years ago. We are only now seeing it happen with the BT rollout of FTTC.
Since we started to sell FTTC at Timico we have seen it become a lot easier to sell VoIP seats. Reliability of the serviced is much better. VoIP even becomes a lever to sell people FTTC – they call in for one and we sell ’em both.
Our model as a one stop shop is different to that of 8×8 who pass on the connectivity and hosting revenues. The 8×8 success in the USA does bode well for the rest of us over in Blighty.