When a small North Carolina company with a handful of employees was awarded the Johnston County Schools contract for a new 4,500 phone system, shock waves reverberated throughout the industry. How does a small company with a few technicians go up against a Fortune 500 technology company over a complex, demanding government contract and win?
Nicky Smith, Chief Executive Officer of Carolina Digital, has a simple explanation, “Quality, Price and Service.” But a full analysis of these factors uncovers a story that is more interesting than Smith's shorthand suggests and reveals a revolutionary new dynamic that is at work in the telecommunication industry specifically and has wide reaching repercussions for businesses across a multitude of industries.
The current state of the market for business phone systems is in flux. Mobile phone use dominates the headlines because of its explosive growth. But landline phones or fixed phones are also undergoing sea of changes as Internet Service has made the standard landline phone in many ways obsolete. Voice Over Internet Protocol (VoIP) phones, the replacement for a traditional landline phone, have been adopted more quickly by residential users than by businesses. VoIP phones, in simpler terms, are phones that do not utilize the standard phone company lines but rather use the internet to transmit a digital audio signal. These phones are also referred to as IP phones.
Residential phone use today is split evenly between VoIP and traditional phone landlines, according to the latest Federal Communications Commission (FCC) report, (Industry Analysis Report, 3). Meanwhile, for businesses,VoIP use is only 18 percent and a whopping 82 percent of business lines are still traditional. This might seem surprising but it makes sense considering early VoIP systems depended on an internet connection for service, which was anything but reliable in the early days. Also, prior to the ubiquitous high-speed connections, the bandwidth of most business internet connections wasn't broad enough to allow multiple phones and computers to be online at the same time.
Another factor for consideration related to business operations is the complexity and functionality needed in the phone system of an organization with a multitude of phones and departments. Initially, VoIP phones were not able to compete with all of the options available in an elaborate company phone system. But that pendulum has widely swung. The available features in a VoIP phone system now eclipses a legacy or standard phone system by a wide margin. Many companies have large capital investments in these systems as well and have been reluctant to make a switch to what has been perceived as an inferior service. However, the current VoIP phone is comparable to a complicated phone system. In fact, according to a study by Software Advice, business decision makers that are looking to switch from their standard landline phone system to a VoIP set-up, and they are doing so largely due to the more extensive phone features offered with VoIP phones. Features such as call queues, auto attendants, follow-me, find me and complex call routing rules, that can all be easily modified.
As the numbers show, VoIP phone adoption is the biggest change going on in the business phone industry. In fact, the rate of growth of VoIP phones is actually five times that of the rate of growth of mobile phones, although the number of mobile phones is much higher. The decline of traditional phone lines is currently 10 percent per year according to the FCC. As VoIP phone systems have become more and more robust, dependable and feature rich, the switchover from traditional phone system in the business community has become inevitable. It's no longer a matter of whether a company will switch to a VoIP phone system or not, but when.
This presents a tremendous opportunity for the telecommunications industry as thousands and thousands of businesses have held off making a change and have clung onto existing legacy phone systems, thereby creating a pent-up tsunami of need, set to burst across the nation in the form of demand for new VoIP phones. There are numerous mega-telecommunications companies that are vying for this business, such as AT&T, CenturyLink, Verizon, Windstream, Time Warner Cable and Earthlink. Unlike the traditional phone services that have been dominated by large monopolistic companies ever since the invention of the phone, the VoIP phone market contains smaller companies that are competing for market share in the new and growing VoIP industry.
However, it's not just businesses that are converting to VoIP. In addition to the business community, there is a plethora of organizations that stand to benefit greatly from the new functionality, freedom and cost savings, that VoIP offers; from the small nonprofit to a large municipality, and just about any organization in-between that has a need for dedicated phones — even a county school system, such as Johnston County Schools in North Carolina.
Johnston County sits in the eastern half of central North Carolina, southeast of Wake County, home of the state capital, Raleigh. Johnston County is mostly rural, encompassing numerous small towns and communities with a total county population of approximately 177,000. The county seat is Smithfield, with a population of 12,965.
The Johnston County School system is made up of 44 schools and a handful of administration buildings. Despite lacking the glamour and limelight garnering power of its neighboring county, Johnston County has one thing that no other county has, Dan Hicks, the Johnston County Schools Director of Technology Services. Hicks is a forward thinking administrator who has been pushing to keep his school system equipped with the best technology available.
Hicks became convinced that a VoIP phone installation was direly needed. For years, the school system had been dealing with 50 different phone systems in the multitude of buildings spread out across the county. These legacy Private Branch Exchange (PBX) systems could not communicate with one another and required a lot of upkeep. Even for minor changes a technician had to go onsite and manually make the programming change such as modifying an extension or moving an employee.
With a new VoIP phone system, a member of Hick's team would be able to login from his laptop no matter where he was and make these changes in a few minutes. Time savings like these multiplied across the county would add up to a tremendous savings in time and resources. There were numerous other features about the new VoIP system that excited Hicks. For example, there is a 911 feature that would immediately notify medical and security personnel at the school when there was a situation that might require outside assistance. The system would automatically notify certain school system employees when 911 had been called from anywhere within the county-wide system.
The hard cost savings alone was going to be remarkable. The school system was going to eliminate the cost of the hundreds of phone lines and completely divest itself of the phone systems, some of which the system was leasing at the time. Over time, the VoIP phone system was going to amount to considerable savings for the county.
Another factor that made VoIP system a particularly effective choice for the Johnston County School system is the high-speed broadband internet connectivity that every North Carolina public school has. This network, which was created and now managed by Microelectronics Center of North Carolina (MCNC), is 1,600 miles of fiber optic cable that connects every public school, all the universities in the UNC system, and many other institutions of higher learning to one another and the internet. The practical application of the Research and Education Network (NCREN) is that the Johnston County system has super fast and super reliable internet, as does every public school in North Carolina.
So the changeover to VoIP was the obvious and fiscally responsible move for Johnston County Schools. The question was from whom to get the new system.
The conventional wisdom would suggest that a company with hundreds of technicians, support staff and heft would be necessary to handle the changeover and maintenance of the new system. After all, US landline phone companies have traditionally been some of the largest companies in any market. In fact there are many very big players in the VoIP space. Traditional thinking might be that it would take one of the big players; a company with enough manpower and gravitas to handle the 4,500 phone installation job of Johnston County schools, a company perhaps, like Earthlink.
EarthLink is a Fortune 500 company based out of Atlanta, Georgia with more than one million customers and a market capitalization that is currently just shy of $900 million. Earthlink has been in the connectivity business since 1994 and literally owns a chunk of the internet, with 29,000 miles of fiber that it manages and operates along with eight data centers. Earthlink has more than 3,000 employees and boasts that its network covers over 90 percent of the US. Along with everything else it offers, Earthlink is a player in the VoIP phone business and was in the bidding for the Johnston County Schools job.
Conventional wisdom might be that it takes a company of Earthlink's size to handle these big jobs, but conventional wisdom would be wrong.
The mindset that it requires a company as large as Earthlink's to handle a large phone install job is as current as a dial-up modem. Carolina Digital won the bid for the Johnston County School system not despite its small size – only six full-time employees – but in-part because of it. In the fast-paced world of technology, Carolina Digital is more nimble and offers what Hicks considers a better product.
Nicky Smith of Carolina Digital, has more than 30 years of experience in the telecommunication industry and put together a team that allows his company to compete head-to-head with companies that are more than 100 times its size, and win. His winning formula “Quality, Price and Service,” depends on some key partnerships within the industry.
Carolina Digital offers Yealink Network Technology IP phones which have more functions and flexibility than the typical VoIP phone. In addition to the state-of-the-art hardware, one of Smith's key advantages is software. A VoIP phone is essentially a computer that is hooked up to the internet and can then be programmed any number of ways. Smith relies on another small company, an industry leading unified communications software provider, Third Lane Technologies, based in California, to give his phones expanded functionality beyond what his competitors can offer. Third Lane Technologies provides the platform that powers a Carolina Digital VoIP phone system. This system allows for customization and unique features, which creates phone system tailored specifically to the needs of the end users in every install. As far as installation and the need for a large number technicians to handle the install and management of the phone system, Carolina Digital is able to take advantage of what has become known as the “Open Talent Economy.”
Today's employment pool is markedly different than it was just a few years ago and many forward looking companies have adapted to be more flexible and nimble by utilizing contract workforces. According to a Deloitte University Press study, 34 percent of all U.S. workers are contingent workers and 51 percent of the businesses surveyed plan to use more on demand workers in the foreseeable future. Utilizing contingent workers is not a new concept and has been around ever since crops have needed picking, but what is new is the skill level of the available work force has to offer. Today's contract employees can be used to design a new website, write software or for example, install and program a complex new school system phone service.
Technology companies are no longer dependent on hiring, training and certifying technicians for complex technological applications. The trained and qualified staff exist and can be called on when the need arises. This amounts to tremendous cost savings for a company like Carolina Digital, which then can pass those savings onto its customers in the form of lower installation cost.
Smith's shorthand of Quality, Price and Service is not merely a marketing tag-line. Carolina Digital can boast of quality because of its market nimbleness and ability to offer the most current hardware and software that is custom programmed to meet the needs of each end user. Carolina Digital’s pricing is competitive, because the company maintains a small staff and is able to deploy technicians as needed. Carolina Digital does not have to factor in overhead and downtime of technicians as do larger, more traditional companies. The service aspect is well handled because Carolina Digital has a team of contractors that can be deployed to any installation site, and is hosting the software in a carrier class Greensboro data center managed by its own internal staff. This data center has a direct link to the NCREN network, which provides for an incredibly fast connection for Johnson County Schools.
Earlier this year Carolina Digital installed the new phone system in every Johnston County School and administration building and according to Hicks, “The employees love the new phones.” He said the changeover, “Has been nothing but positive.”
The only question left concerning this David vs Goliath technology saga is what are the larger implications. Was it a shot across the bow of the larger VoIP companies, putting them on notice that they had better become more flexible and adopt the most dynamic workforce arrangements, or was it a torpedo hitting below the waterline of another mega-corporation signaling, the end of an era?
Has King Goliath "the national provider" fallen victim to the emerging Employment Pool model used successfully by Carolina Digital? In this service-driven Internet of Things, it appears that it’s very possible.
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FCC Report: Local Telephone Competition: Status as of December 31, 2013 Industry Analysis and Technology Division Wireline Competition Bureau October 2014
Software Advice Survey: VoIP Software: Small Business Buyer View | 2015
Global Human Capital Trends 2015, Leading in the new world of work
Deloitte University Press
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Third Lane Technologies was established in 2003 and is located in Northern California. Third Lane provides advanced, reliable, scalable and cost effective software platforms and solutions for hosted and on-premises Unified Communications for businesses, public organizations, internet telephony service providers, and contact center operators. Third Lane Elastic Cloud PBX is a unified communications software platform for large scale hosted Multi Tenant PBX deployments by carriers and Internet Telephony Service Providers.
phone +1 415.261.6601
Yealink, the global leading unified communication (UC) terminal solution provider, helps businesses of all sizes make the most of their UC experience and embrace the power of “Easy Collaboration.” The company’s comprehensive product portfolio includes video conferencing systems, conference phones, desk IP phones, wireless DECT phones and accessories. For more information, please visit: www.yealink.com
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Nicky Smith, President
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