VoIP – The Freedom of No Phone Contracts

VoIP technology shattered many barriers since its launch. The new IP-based systems offer more flexibility in almost every area – from the type of device you can use to what features you want in your plan. Consumers embraced VoIP wholeheartedly, with businesses following close behind.

VoIP attracted consumers with free or extremely low prices and businesses liked that aspect as well. But as VoIP deployment grew by leaps and bounds, companies were surprised at the things they could do with VoIP. Some tools and features were already available in analog PBX systems but were not affordable for smaller organizations. Others were brand new features that could not be implemented in legacy tools.

Telephony – Business Model

VoIP technology changed a lot of things including how people work. Organizations optimized their workflows and processes to unheard of levels. They upgraded their infrastructure to support voice on their networks. VoIP also upended the way the telephony industry worked. Service providers came up with creative new ways to deploy VoIP – offering clients multiple options for a customized implementation.

Before VoIP arrived, the telephony industry operated on a business model based on contracts. Enterprise clients could shop around before deciding on a vendor for their business but had to sign multi-year contracts for services. These contracts specified various fees and charges including penalties for early termination or cancellation. Depending on the size of the company, they might also have to enter into maintenance contracts for their hardware as well.

These contracts benefited vendors disproportionately while limiting client options. What could an organization do if the service level drops to unacceptable levels before their contract ended? You couldn’t switch vendors without paying a hefty early termination charge. You were essentially paying for substandard service with no recourse. In addition, switching to another provider took a lot of time and resources. To sum it up, most companies didn’t have many alternatives if they weren’t satisfied with their phone service vendor.

VoIP’s New Business Model

VoIP’s arrival heralded a new era in voice communication and that included brand new business models. For one thing, VoIP service providers did away with contracts. That’s right, no more contracts for your phone service! Companies are no longer locked to a single provider for their phone service.

Eliminating contracts opened up a whole new world for enterprise communication. Now you could sign up for a service without worrying about fees and extra charges if you wanted to switch at any time. If you weren’t happy with the prices or service levels, you could switch to a different vendor without financial consequences.

This no-contract approach has stayed with the industry as it grew. Even today, there is no sign of contracts making a comeback. Companies are free to test hosted VoIP services to their heart’s content before coming to a decision. Even after committing to a particular vendor, you don’t have to stay with them for years. Don’t like their new prices or has service dropped to unacceptable levels? You can always go to some other provider.

A New World of Possibilities

Most reputed service providers use the industry standard SIP protocol for their hosted services. This means clients don’t have to worry about buying new hardware when moving. At worst you might have to upgrade a few devices for minor compatibility issues. But almost all your SIP-based hardware should work on the new network without running into problems.

Removing contracts also incentivized vendors to work on their service quality. They could no longer rely on contracts to retain clients. If a company didn’t like your pricing plans, the features you offer or the quality of audio, they could leave immediately. In fact, most VoIP vendors offer service level guarantees for enterprise clients. These SLAs clearly lay out the minimum level of service they promise to deliver. There are even penalties clients can enforce if the service drops below the guaranteed level.

Instead of limiting customer choice, VoIP’s new contracts opens up a world of options. For instance, many vendors offer a lower price if a client makes a long-term commitment for say, 12 or 24 months. This means you can test the service to see if it fits your requirements for a few months. If you are satisfied, then you can sign up for a longer term to benefit from the lower prices. You can also protect your businesses from price hikes by locking in the particular amount for a set period of time.

This new business model has benefited both enterprises and service providers. The no-contract model led to increased competition on the basis of service and audio quality instead of entrenched monopolies. Companies can now choose their service provider without worrying about penalties, fees, and other financial consequences. Amazing what a difference one little change can make to an entire industry!