Small to mid-sized businesses are still somewhat confused about the Voice over IP value proposition, and need much more education about the service itself, according to a new study from Savatar, released today at VON.

The technology consulting firm surveyed 300 SMBs, in conjunction with wholesale service provider New Global Telecom, and found that many were ready to move to VoIP service, if they were properly pitched on the service by retail service providers.

“There is a lack of information and as a result, there are misconceptions out there,” said John Macario, president of Savatar. “We looked at the sales process of a number of vendors attempting to service this market. What they are not realizing is that this is a cost-driven decision. Smaller businesses have got some awareness of what VoIP is, but they really don’t understand who is selling it. In fact, they are almost equally split among the companies they turn to. But the market is very clear in that it is a cost decision for them. And yet the service providers are in there pitching features, feature, features that the SMB decision makers really don’t understand and don’t value.”

Those selling practices create a disconnect that could slow some service providers’ VoIP adoption among smaller to mid-sized businesses, and provide advantages to others, said Richard Grange, president and CEO of New Global Teleccom.

“This market is huge and it is clearly up for grab – it is not clear who the winners of the market will be,” he said. “The SMB market does not know who will ultimately win as the provider of the VoIP services and telecom. Our growth has been double what we anticipated at the beginning of the year. We thought we would be at 30,000 subs by end of ’05, we’re at 39,000 and we are growing at a rate of double what we expected. We are seeing some of our service providers figure out how to address the market, what SMBs to target and how to target them.”

Those service providers who have taken the time to understand the SMB market have a clear advantage, Marcario added, while others may misinterpret their lack of success and try to compete by dropping prices.

“That’s not necessary,” he explained. “The total cost of ownership is very competitive. But they need to be able to explain it better.”

Surprisingly, one quarter of SMBs surveyed were unfamiliar with VoIP and its advantages, a further indication of the need for more education. The survey also showed that while 74% of the businesses are looking for lower monthly recurring charges, reducing total cost of ownership and easing administrative costs were strong lures as well, attracting 73% and 68% of respondents, respectively. SMBs are also still open to non-traditional telcos, the survey showed. Thirteen percent weren’t aware of who provided VoIP but the remaining 87% was equally divided between traditional and non-traditional providers. The SMB market remains “high-touch” in respect to customer service, Savatar reported, and larger service providers including incumbents need to do a better job in the sales process, or turn to channel partners.

"We pick up the phone and call major carriers, big ISPs – and it’s difficult to find this stuff if you call into the call center that normally handles small business for an ILEC,” Marcario said. “It takes us three to five phone calls to get a sales person to call us back. The observation from the study is that many of the providers are not being proactive in going after this market. Maybe it’s because they are too tied up with enterprise accounts – but they haven’t done the blocking and tackling for the SMB.”

New Global Telecom is supporting the research to enable its retail customers to better address VoIP’s market potential, Grange said.