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| The abuse of VoIP? SEEL (Systems Engineering Economics Lab) held a workshop this week for its research and development associates. This workshop was concerned with re-specifying some aspects of how SEEL manages its applied research and development activities under the Seel-Telesis® banner and how Navatec.Com's marketing and sales management should lock into that to align fully with customer interests. These workshops are organized roughly once every 6 months and they review lessons learned since the last workshop and involve decisions on how to improve performance. These workshops are supported by a keynote address on some issue concerning the market for an existing Navatec.Com application or a planned application. This time the focus was on how VoIP is being marketed. The conculsion is that VoIP is being misapplied in a sort of combined abuse of the technology and consumers. Technology, pricing & markets  This point of view arises from SEEL and Navatec.Com's approach to economics and how they describe what constitutes a market. They consider a major role of technological innovation to be a driver of economic development based on the growth in real incomes of anyone who uses their products and services. Indeed, the priority listings of just about every product and service upgrade, except for removing bugs, are determined by the potential contribution to user real income levels as measured by reduced operational costs and enhanced technical and economic performance.To get their pricing right, Navatec.Com works out a fair return on investment against estimates of customer numbers. This ends up with surprisingly low service charges. Such low charges radically reduce the cost of ownership of powerful capabilities thereby ramping up the return on investment for the user (ROI). The service charges and prices "drop the bottom" out of the existing market so that more people can afford to use the services offered. This results in an increased uptake of services and service operations costs decline. This leads to an increase in service provider's profits. Unit prices are then adjusted downwards to meet the established corporate targets for return on investment. This drives the creation of an expanding market whose boundaries are set by what is known as the Real Value Market Envelope (see diagram above). Classicists Most VoIP operators are not growing the market but seem to be using the advantage of lower operational costs to attempt to provide VoIP services in a way which has them all fighting in the Classic Market Envelope. This has come about because VoIP is perceived to be as a substitute for the telephone as opposed to just another application. It is therefore often regarded as a public consumer service substituting conventional telephony. Several VoIP providers have seen their main rivals to be the traditional telephone companies and in order to compete have made the mistake of trying to emulate such public services. They have done this by trying to build in "convenience" factors such as the ability to use cell phones (mobiles) and fixed phones to conneect to VoIP. This undisciplined approach was even associated with the tragic deaths of individuals who thought they could use such services to call 911, for example. This prompted the US Congress to introduce the E-911 requirements. SEEL analysts note that the predictable outcome is that many VoIP providers are not in fact making a profit because of a confused marketing model which has failed to lever the real advantages of VoIP. By playing the same game as the traditional telephone carriers they have lost ground technologically and ended up concentrating on seeing what the market will bear against their rising VoIP costs.  SEEL has made some guestimates of the likely vertical costs structures of some of these companies and has concluded that on the basis of returns on investment, Navatec Voyager is amongst the most competitive. As reality has sunk in there seems to have been a panic response on the part of VoIP operators to ramp up their linkage charges per minute to levels which now exceed those of traditional carriers or the specialised, now well-established, "low cost charge/minute" services. This, according to Hector McNeill of Navatec.Com is a saga of people intent at competing at all costs, trying to make money at all costs and very much to the detriment of the consumer. Rip off territory Attendees were shown the current overseas charge lists published by Skype (Skype-Out) and Vonage (USA). Surprizingly some of these rates are exceptionally high. Some Skype-Out charges are as high as 43 cents of a dollar/minute and Vonage have several in excess of a dollar/minute. The lowest per minute rate managed by Skype-Out was 2.4 cents of a dollar/minute and for Vonage 2.00 cents of a dollar/minute. The Navatec Voyager service on its highest charge band comes out at around 0.83 of a cent of a dollar/minute (assuming people speak for around 1 hour each day). Navatec Voyager's medium charge band is the equivalent of half a cent/minute and the lowest charge band is 0.28 of a cent of a dollar/minute. It should be mentioned here that included in these prices Navatec Voyager services do not just include VoIP but a range of easy to use business performance enhancing applications. Misleading the customer Without mentioning provider names, Hector McNeill showed some advertising material which goes before the public for certain services and which certainly gives the impression of close to free services. But in reality the presentation and the sales packages are, to say the least, are very misleading. Talking straight to the customer Hector McNeill showed that the advertising techniques rely upon having a series of valiables such as so many free minutes, a standing charge and so much per minute. In reality, most people find it difficult to determine what all of these add up to in practice, in terms of a monthly bill. Navate.Com makes life simpler by just providing 100% 24x7 calling to anywhere in the world via the Real Net for $15/month. Navatec.Com does not entice people with linkages through the public telephone systems and therefore remains apart from the scenarios described above. Here the customer knows what is offered and knows what it will cost. For every 10 hours extra a customer uses each month there is an increasing saving over and above those 500 "free minutes" included in most packages (see the diagram above right).
The opportunity cost of convenience By integrating VoIP into business applications people can work on documents as they speak to the people for whom they are being prepared. These can be quote, proposals, offers, acceptances and many other types of document. Such integration increases the quality of document flow because the relevance of content is increased and in the case of business transactions, the likelihood of acceptance also increases. As a result the productivity of work flow can increase dramatically. These sorts of benefits are lost when people are struggling with hand sets and trying to manipulate computer-based applications. So there is an opportunity cost associated with the assumed convenience of integrating conventional telecommunications provisions into the VoIP setting. The opportunity cost is less integration and less performance at the application level and on top of this far higher telecommunications and VoIP service bills. Trying to create hybrid systems in the name of convenience comes at a high opportunity cost through lower work performance and higher costs. Giving the customer the information they need Navatec.Com has opted for a marketing approach which encourages potential customers, or existing customers, to calculate the potential or actual economic benefits of Navatec Voyager services. The workshop referred to above was used to announce the introduction of so-called Expert Dialogue Systems, used to calculate real comparative costs, not just for VoIP but for all applications. The EDS approach is explained in the box on the left. By way of example in the VoIP area, there are two EDS included in the box on the left. One which compares conventional telephony with Navatec Voyager VoIP and the other compares "low cost minutes" options with Navatec Voyager. These EDS are already online at the Navatec Voyager Technical Center. Some potential customers who have used these calculators at the Technical Center, have been quite surprised at how much money they were losing for the "convenience" offered by other VoIP operators. Such providers offer absolutely no other business applications to help boost business management performance.
Because of the many different and confusing consumer "packages" offered by telecom operators, and here we include cellular, conventional and VoIP, SEEL is developing a new series of EDS which will allow for all possible eventualities. The underlying objective is to provide potential customers with the facts and no spin. As Hector McNeill commented, "Why should vendors treat their potential customers in this way when VoIP offers such amazing benefits in its own right both in terms of cost savings and as a fundamental component of productivity-boosting applications?" |
