A Call to IP Phone and VoIP Device Vendors… Achieving Success in the SMB VoIP Market

2. A Call to IP Phone and VoIP Device Vendors… Achieving Success in the SMB VoIP Market Fred Zimmerman Director of CPE VoIP products, Texas Instruments

3. SMBs: the market proclaims a hot segment “….the opportunity is ripe for VoIP vendors.The SMB space represents a significant portion of the opportunity, and vendors that have the right combination of quality ease of use, and cost, are well positioned, at least for the next several years….” - Rich Tehrani, president and editor in chief, August ‘08 “Since its introduction in the late 1990s, Internet-telephone service has been rapidly adopted by big businesses. “…this year, momentum will swing towards SMBs as they continue to evolve into more distinct markets with unique needs. Despite the challenges faced by SMB vendors, we believe that SMBs will begin to adopt VoIP in increasing numbers…. - Alan Weckel, Dell’Oro Group, July ‘08 But small and midsize counterparts have lagged behind. Now, that is changing as more small and midsized businesses come around to the technology.” - Bobby White, technology reporter, August ‘07

4. SMB market projections SMB Segments, 2007 $1.3 trillion Total IT Spending 2007 Total Growth 2007-2011 Upper mid500-999 empl.24% SB <100 empl.39% Lower mid100-499 empl.37% $1.3 trillion 2007 Spending $440 billion Source: IDC, The Emerging Global SMB Market Opportunity: Tapping Next -Generation "SMB 2.0" Firms, Doc # DR2008_GSRB, March 2008 • Approximately over 35 million SMBs WW • In the US, approximately 500,000 new SMBs per year

5. VoIP state of the union Residential Let’s get a reality check…how far have we REALLY come? • Predictions then… • By 2002 all will be in place to make VoIP the defacto standard for Cable telephony • More than 20M WW cable telephony subs in 2004 • Reality now…17M voice cable US subs Source: Texas Instruments Enterprise • Predictions then… • WW IP phones in 2004: 7.6M WW IP phones in 2006: 18.7M • Reality…. • WW IP Desk Phones in 2004: 5.1M WW IP Desk Phones in 2006: 11.3M Source: Dell’Oro 2008 Source: Dell’Oro 2008 • VoIP markets are evolving, but not as fast as expected. • SMBscanbe the next VoIP opportunity!

6. IP Phone…a diverse market with diverse challenges Ku Source: Texas Instruments • Wired enterprise IP Phones • Deployments to date primarily with proprietary PBX • Majority of users utilize simple feature set • Market is turning the corner, more IP phones shipped than analog • Wired residential IP “phones” • Vast majority of residential VoIP are POTS phones connected to gateway • Consumer feature set (call waiting, caller id)

7. SMB landscape SMBs differ from large enterprises: • Diverse environment across SMB space • Limited technical know-how is typical among users • Higher turnover = ongoing phone training • “Need it now” requirements vs. phased approach • Employees may be part time or working in shifts • Access to PC is varied and capabilities are limited

8. What does this SMB market mean to IP Phone vendors? • Residential VoIP features (call forward, call waiting) don’t necessarily translate to SMB • SMB solutions require customization • Less concerned with “VoIP” vs. specific traditional features, functionality • Bottom line: While “cool” apps sell IP phones, functionality and quality on par or better than traditional analog phones is critical

9. Case study: the VoIP SMB opportunity ADP IP Networked Services • Hosted VoIP services • Launched May, 2007 • Fastest selling product in ADP history • Initial niche has been small businesses less than 300 phones • Gaining interest from large, national dealerships • Recurring revenue • Customer benefits • Simplifies technology management • Delivers predictable cost • Simplifies vendor management • Increases reliability • Lowers application costs

10. ADP IP Network Services Broadband Access “On-Net Calling” ABC Auto Body Shop PSTN IP Network Broadband Access PSTN PSTN ABC Automotive QoS Enabled Broadband Access ADP Hosted Voice Hosting Center “Off-Net Calling” Into Public Telephone Network Pizzeria

11. Reverse phone lookup • Log lead • Record interests • Set reminder calls Real world example: ADP IP Network Services Current customer • Sales history • Interests • Repair record • Call history • Reminder calls • Sales history • Interests • Repair record • Call history • Reminder calls Phone call in CallerID Datadip • Reverse phone lookup • Log lead • Record interests • Set reminder calls Database New customer • Customer requirements • Easy to implement, cost effective solutions • Data services/phone integration • Advanced features (soft keys) to enhance response time/efficiency • Optimized use of costly bandwidth to the premise • Ability to support media generated audio • Transparent migration from analog to VoIP (call park, queuing)

12. “ In the automobile industry, customer service is everything. It can help make or break a deal in a matter of minutes. The dealerships we work with simply need reliable phone service and features that work as well or better than current traditional phones. ” – Marty Sorenson, GM, ADP IPNS

13. The VoIP opportunity What benefits does VoIP have to offer SMBs? • Advanced applications enable SMBs to “sound” like an enterprise • Improved professionalism/ image • Increased sense of stability • Enhanced productivity • Better customer service • Cost savings • Ability to expand geographic footprint Find me follow me Call routing Interactive voice recognition Integrated web-based selling

14. SMB translation…. It seems obvious, but benefits of VoIP must be translated into a unique value proposition for each SMB • Collaboration across industry will facilitate growth • Technology providers • Equipment makers • Third parties • System integrators • Quality of service and support is a MUST • SMB specific features and functions • Technology advancements Customer Service provider IP phone vendor Mediagateway Applications server

15. Can you prove your quality? • The nature of IP • Despite proven technology, IP is non-deterministic • Network dynamics can affect call quality • Call quality management is table stakes • IP end point instrumentation is a must • Cannot charge the end customer for operator required tools “ There is a real shortage of tooling/instrumentation beyond MOS scores that allows us to quickly identify problems along the media path and to subsequently troubleshoot them. ” – Marty Sorenson, GM, ADP IPNS

16. Creating an ideal communication experience Focus on user satisfaction and everyone wins User Provider • Real time QoS • monitoring • End point diagnostics and troubleshooting • Alerts and metrics OEM TI

17. Business architecture with IP Phone and quality management elements IPP Router IPP Headquarters IP Gateway Gateway Network Probe PSTN BranchOffice IP PBX Gateway NMS at IT

18. Benefits Path to higher quality HD voice experience for SMBs Ability to transmit voice at sample rates up to 48 KHz Better accuracy, clarity Less repetition in command structures No longer constrained to local loop Two times the audio capability, half the bandwidth CD quality sound New applications Real time language translation, etc. The HD voice promise Deployments • Residential • Small / Medium Business

19. Wideband voice value proposition • Wideband or High-definition (HD) voice is a differentiating feature over the current PSTN that enhances user experience with a richer and fuller HD audio based on TI VoIP technology • Lab subjective results show significant improvements are realized from wideband voice • Even low bit-rate wideband coders exceed subjective perception of uncompressed narrowband voice

20. Graphics and user interface driving broad range of electronics These technologies are moving from the mobile and consumer devices into desktop IP phone

21. Advanced user features Ability to program soft screens Easy to use, multi-extension features Customize music-on-hold, advertising Color screens with high contrast User activity management Recognition (speech, face, handwriting) Drive business user benefits Provide user feedback Corporate directory capability Internal news, training Extend personal area network Enhanced user productivity Potential revenue generation Advanced user interfaces

22. Power Naturally, power consumption is a “hot” issue for Enterprise and SMB Business Managers Idle mode IP phone features can save SMBs in energy waste and related utility costs • Enterprise case study: • Enterprise with 10k phones powered at class 2 POE • 6.5w/phone at 24x7 usage  $56k/yr to power phones alone! • However… • Phones are typically idle 16 out of 24 hours a day

23. Keys to SMB success • Call to action is now to tap market potential for VoIP growth • SMBs are unique – requiring solutions customized toward their varying needs • Quality, enhanced functionality are critical for VoIP adoption over traditional business phones • Collaboration is key • Technology advancements are furthering efforts toward a world where every connection is voice enabled.