Verizon court victory over Vonage raises questions of VoIP's real value
The folks at Vonage just can’t seem to figure out how to make a profit. They’ve tried everything: suing customers, stealing technology.
The folks at Vonage just can’t seem to figure out how to make a profit. They’ve tried everything: suing customers, stealing technology.
Yes, that’s right. After suing customers for failing to buy stock following last summer’s IPO, the VoIP provider got whacked with a $58 million punitive judgment — plus ongoing 5.5% royalties – -for swiping VoIP patents from arch-rival Verizon. Last June, Verizon sued Vonage for infringement of seven VoIP patents; the recent judgment found Vonage in violation of three of them. Verizon continues to seek a permanent injunction to stop Vonage from using the technology altogether; for its part, Vonage is appealing.
But no matter what the outcome, despite its best slash-and-burn tactics, Vonage is still losing money hand over fist. Its $269 million losses in 2005 increased to $281 million in 2006. That’s on twice the revenues, so presumably there’s some point at which Vonage actually delivers an ROI — but don’t hold your breath.
Can you tell I’m amused? Partly because I’ve never been a huge fan of Vonage’s ad campaign that implied anyone foolish enough to use services from its competitors is a moron. (Maybe we just prefer doing business with companies that don’t rape and pillage…oh, wait, this is the telecom industry. Never mind!).
But more broadly, Vonage fundamentally misrepresents the value of VoIP, and in doing so, does a disservice to enterprise IT managers. The value of VoIP is not, as Vonage’s ads imply, inexpensive voice service. The real value is that it provides a foundation for what I’m calling the virtual workplace: being able to reach your colleagues anywhere, any time, with the right context.
What’s the value of doing that? Plenty. It enables people to respond in real time and make decisions more quickly, and with a better base of information. Although it’s difficult to affix an exact price tag to that ability, any business executive worth his or her salt knows that making fast, effective decisions ahead of the competition pays off.
Another advantage to unified communications is that it enables the virtual workplace. Employees telecommuting or on the road have real-time access to the same applications and communications services as those in the office. And that allows companies to position folks closer to customers, distribute them in less expensive (and often, more convenient) offices, and minimize disruptive relocations.
That’s why companies are increasingly moving towards adopting the technologies — including VoIP — that enable virtual workplaces. Eighty-three percent of the companies we spoke with recently said they’re enabling virtual workplaces, compared with 57% in 2005. And the use of real-time tools has leapt from 75% to 93% over the same time.
In other words, the virtual workplace enabled by unified communications in general, and VoIP in particular, enables companies to do business faster, better and more economically. That’s a whole lot more important than inexpensive voice — though it’s still not worth suing your customers, or stealing technology.
