News
Zilker Ventures, LLC Interviews VP of Business Development Jay Blazensky of RingCentral
July 29, 2008
VP of Business Development for RingCentral discusses the PBX industry; what is happening, his predictions for the future and why more and more people are choosing virtual VoIP as their primary phone service.
- Why don't you give our listeners a little insight into your role at RingCentral?
- How is a virtual PBX system different and what are the advantages to using virtual PBX systems versus traditional phone systems?
- How much growth are you seeing in the hosted PBX industry as a whole?
- What's the role of Voice Over IP technology in the hosted PBX industry?
- What is the biggest problem people have with hosted PBX systems? And what has RingCentral done to address that problem?
- We believe that hosted PBX systems like those offered by RingCentral are superior to and cheaper than operating a traditional phone. What is RingCentral doing to educate the public about the advantages of your service?
- As the publisher of PBXCompare.com, we regularly check the RingCentral website to make sure that our information is current and accurate. And, it appears that the local area codes that are available are changing on a regular basis. So, the question is why is that and what do you do if someone wants an area code that's not available on that particular day?
- Many users who would be interested in a hosted PBX system are concerned about losing their existing phone number. So, what does RingCentral do to address that issue?
- Has the growth of mobile phone use and PDAs affected the hosted PBX industry? And how has RingCentral capitalized on that trend?
- PBXCompare.com tries to review every hosted PBX service in the industry. We're constantly coming across new service providers. So, the question is where are they coming from and should consumers be wary?
- What's the distribution of your customers? Individuals versus small businesses versus large businesses, etc.
- Geographically where are your customers? United States, Canada, Europe, etc.
- How many of your customers are signing up for their first hosted PBX system versus moving to RingCentral from one of your competitors?
- What do you see as RingCentral's competitive advantage in the industry?
- What's the history of RingCentral, where did you come from and what's your corporate philosophy?
- What are RingCentral's plans for the future?
- If someone asked you for a referral from an existing client, who comes to mind and why?
- Customer service is one of the most important aspects of operating an internet based service. What does RingCentral do to ensure superior customer service?
- What have you learned from your customers and how has that information led to change?
Gaines Kilpatrick: Hello. This is Gaines Kilpatrick of PBXCompare.com, a review site for virtual PBX systems. Today we will be discussing RingCentral Online and the virtual PBX industry with Jay Blazensky, Vice President of Business Development for RingCentral. Jay, why don't you give our listeners a little insight into your role at RingCentral?
Jay Blazensky: Sure. Thank you, Gaines and thank you for having me on your show. So, my title here at RingCentral is Vice President of Business Development. I am responsible for establishing strategic partnerships for RingCentral that will help the company expand and grow into different market segments and to help promote RingCentral through complimentary products and services with a pretty broad set of partners.
GK: Ok great. So, let's start with the first question. Most people have used a phone system in an office setting, whether they know it or not. However, most phone systems are physically located in an office where hard lines connect all phones in the office to the outside world. How is a virtual phone system different and what are the advantages to using virtual PBX systems versus traditional phone systems?
JB: Great question. Firstly, a traditional PBX system is effectively a box that would sit in a closet, and it would serve that particular office. It would require a resource to manage the PBX, configure the PBX, and there would be hard phones on everyone's desk. There's obviously a cost associated with that box, or that PBX if you will. A virtual PBX is where the processing for that particular phone system that would normally sit in an office is actually located in the internet, or in the case of RingCentral and most hosted providers, in a colocation center somewhere in the U.S. typically. And from that one site, we're able to serve distributed offices around the country, so that the hardware and the processing power for that PBX effectively sits in the cloud or in the internet, as how I'm sure most users would typically understand it. That's significant because what it means to a small business is that when you want that functionality of that phone system, like a PBX, you don't actually have to go out and spend the money and buy the hardware, and install it, and manage that PBX. Instead what you can do is you can simply have a subscriber model where you're paying a monthly fee, and you may need new phones. For many hosted providers, they're going to require that you still get new phones. RingCentral is different in that regard, and that's one of our big advantages that I'm sure we'll have time to talk about, but you don't actually have to have the PBX. So, for virtual PBX solution, the processing is done in the internet and you're only required to get new phones, or in some cases you don't even have to get new phones, which is the way RingCentral operates.
GK: And, how much growth are you seeing in the virtual PBX industry as a whole?
JB: The industry is growing quite well. I would preface that, and I would probably say, "Is the growth matching expectations for the virtual PBX industry?" And, I would say that's a different answer because in general, the hosted market is growing but the expectations were for VOIP and for hosted VoIP, and for hosted VOIP PBX's the expectations were quite large. And, I think what's happened in the last couple years is that there's been a dose of reality that's been sprinkled over the market, and that reality is that small businesses that are going to a virtual PBX still have to buy new phones, which gets back to my previous point. So, in many cases, even for a small business, while you don't have to buy the PBX, even buying new phones can be prohibitive. So, the industry for virtual PBX is growing, but I don't think it's growing at the rate that analysts predicted and I think that the reason for that, in large part, is due to the fact that for many virtual PBX solutions out there, you still have to get new phones, possibly a new router, you might even have to get new cabling. So, that isn't always as easy as customers thought it might be.
GK: And what's the role of Voice Over IP technology in the virtual PBX industry?
JB: Well, it's pretty significant and Voice Over IP has several different roles. The most obvious role and probably the most commonly thought of role is the IP network can be used to transport voice, so that your voice, rather than going over your typical copper wire out through the traditional TSTN, or telephone network, is instead packetized and goes over your internet channel into your office. So, your voice is being converted to IP and it's going out through your T1 or DSL and is running over the IP network. So, what that really translates to a user is that you're able to bypass the traditional toll network where you're actually paying long distance charges, and in fact you can reduce your long distance. Skype has obviously had a big impact in that market. For someone who's getting a vonage type service, being able to reduce your long distance by having your voice packets go over the internet is a very common perception of VOIP. Another very important area is simply in the management of your VOIP service through the internet, so that a user can have a user portal through their typical browser. They are then able to configure the rules for how they want their calls handled. So the management of this functionality and being able to have a user go in through the internet to manage their service is also very important. Voice packets are not traveling over the internet during that process, so it's really more of just a web-centric model that provides that level of functionality. And then, from RingCentral's perception, or from our view, we implement VOIP in our platform, so that we are able to route calls over IP backbones and save customers long distance. But, I think what you'll learn Gaines is that the real value of a hosted service, like RingCentral, for a small business has much less to do with being able to save money on long distance, and much more to do with helping a business look professional, never miss a call, connect to their customers, and things of that nature.
GK: And what is the biggest problem people have with virtual PBX systems? And what has RingCentral done to address that problem?
JB: This is an area that RingCentral has a business model and a solution that really tends to break away from the industry. So, the biggest problem for VOIP has been when you think about that IP connectivity coming into a business and the management of that. How can you best take advantage of the features of a VOIP solution or a hosted solution given the level of IP connectivity you have coming in? For example, in a managed network where you have a company, perhaps deploying a T1 service to your office with a service level agreement, and they've gone in and they've installed new routers and that you've made a significant amount of investment into the infrastructure to ensure that the quality of IP traffic coming in and out of your office is sustainable, then you're pretty much guaranteed very good quality. In the case where you don't have that kind of a managed service, perhaps you're a very small business or a home business with a DSL connection, and you're just using what many refer to as "bring your own broadband " where you've just gone out and purchased a typical DSL line coming into your home or small office and you're really uncertain of the level of guaranteed IP connectivity coming into your building. Then, it's a much bigger challenge to ensure that you're going get the voice quality that you're familiar with from your traditional phone. So, RingCentral has an interesting approach in that we start by allowing our customers, first of all, to use their existing phones so that you don't even require VOIP. You can just use your traditional mobile phone, your home phone or an office phone, and we're able to provide all of the rich services that you're looking for without requiring that a customer even use VOIP. So, that's number one.
Secondly, when our customers decide that they do want VOIP, and they want for example, an all you can drink outbound long distance plan to save that kind of cost, we start by allowing our users to download a free soft phone (meaning that a piece of software on their computer is actually acting as their phone). And we start by allowing our customers to receive an inbound call on their computer and to answer the call, and experience what the voice over their "bring your own broadband " solution is like. And if you have a good experience and the voice quality is acceptable, then that's fantastic and we would strongly encourage that that customer sign-up for all you can drink outbound plan, and perhaps even get themselves a Linksys Cisco phone or an adaptor, so that they can use their existing analog phone at home and have that normal experience of talking on a handset, rather than through their computer if that's what they like. If however, when a customer answers that call through their computer over their broadband, which we really are unsure of the quality, and it turns out they don't have an experience that's acceptable, then it's a good thing that they haven't gone out and bought the hardware and made those kinds of investments without having that guaranteed broadband con activity. Does that make sense?
GK: Sure, of course. We believe that virtual PBX systems like those offered by RingCentral are superior to and cheaper than operating a traditional phone. What is RingCentral doing to educate the public about the advantages of your service?
JB: Well, the most obvious one is through our website. We have a number of tutorials and just a very rich set of information on features and benefits available to our customers. We've also added several videos that are extremely informative and are also available through our website. Routinely, we'll put on some webinars and do online customer training, if that's something that folks are interested in. And, then we do have as well a number of different initiatives from a PR standpoint and tradeshows that we speak at, but for the most part, we pretty much educate our customers through the web using videos and online tutorials.
GK: Ok. As the publisher of PBXCompare.com, we regularly check the RingCentral website to make sure that our information is current and accurate. And, it appears that the local area codes that are available are changing on a regular basis. So, the question is why is that and what do you do if someone wants a virtual phone number in an area code that's not available on that particular day?
JB: Well, if it's not available on a particular day, we certainly hope they'll come back another day. The reality is that we work with a number of different carriers and partners that we inter-connect with and get numbers from. And, we've recently gone through an expansion; RingCentral is growing quickly. We have added new partners and expanded some of the partnerships that we have and through that we've been able to grow our number pool, particularly in the local markets. So, we've just recently made some changes in that area, and perhaps that's the time you were trying to get numbers. For the most part, I think our customers should be able to get the local numbers that they're looking for, and if when they visit they're not able to see the prefix or the number that they're looking for, then they should certainly come back. We do update that on a regular basis and the work we've done in that area should be yielding those improvements.
GK: Many users who would be interested in a virtual PBX system are concerned about losing their existing phone number. So, what does RingCentral do to address that issue?
JB: So, RingCentral does allow our customers to port their existing local phone number or their existing toll-free number. Now that said, what it typically involves is some cooperation with their existing carrier, which they are bound to do. The challenge sometimes is how quickly they cooperate, so it might take anywhere from several days to 45 days to actually complete the transfer of that phone number. So, we fully support that. For many customers that are looking for that instant gratification and they want to get a phone number today and start the service right away, they are pretty much required to get a new phone number if they want to get it that quickly. For the ones who are patient enough to wait the few days, or in some cases 30 or 40 days for that number to be transferred, that's absolutely fine, we support that process.
GK: Has the growth of mobile phone use and PDAs affected the virtual PBX industry? And how has RingCentral capitalized on that trend?
JB: Yes, it certainly has affected it. Mobile phones have been growing tremendously. In fact, many small businesses consider mobile phones their office phone and mobile phones are probably the number one competitive concern for RingCentral. It's really a double-edged sword for us because it makes it competitive, but it also makes it an opportunity because RingCentral's able to capitalize on that. For businesses that make mobile phones their office phone, we offer just a plethora of advantages and capabilities that can capitalize on that, so it's really a good thing for RingCentral. So, for example, you have your mobile phone as your business phone, however you don't have the kind of PBX functionality or business rules that you'd like for that business on that mobile phone. A good example is your business hours. For many users, they want to start taking calls at nine o'clock and after five o'clock, they'd like those calls to go to voicemail. That simple kind of rule applied to your mobile phone is very important for lots of users. Being able to have a professional greeting, music on hold, "find me follow me," and simultaneous ring with those devices - those types of capabilities we're able to deliver to the mobile phone in that hosted environment and customers that use their mobile phone as their office have a terrific experience with RingCentral.
GK: PBXCompare.com tries to review every virtual PBX service in the industry. We're constantly coming across new service providers. So, the question is where are they coming from and should consumers be wary?
JB: They certainly should be wary, and I can tell you where they're coming from. It does resonate with one of the earlier points I made, which is the VOIP industry and the virtual PBX industry in general, while it's growing, it really hasn't met expectations. A lot of companies that are suffering from that are now moving to a wholesale or an outsourced model, where since they were having difficulty reaching that small business and getting out there in their developing channels, they've decided, you know what, we'll just sell to another provider and we'll enable someone else to sell these services. So, what you're seeing in the industry is that it's not that difficult for a company that would like to get into this industry to simply wholesale or resell another company's services. When that happens, there are several problems that are created for the consumer or for the small business that's buying those services. First of all, you are not actually having a relationship with the company that controls the technology, the support, and the costs for that solution. So, you ultimately end up paying more and you end up dealing with people that from a support standpoint aren't familiar with the technology. And of course, if there are changes or customization needed, they're not able to control the resources to implement those changes.
GK: Ok. What's the distribution of your customers? Individuals versus small businesses versus large businesses, etc.
JB: So, we are very much focused on the very small business, which for us is typically one to ten people. We certainly have customers with many more than ten employees, but the sweet spot for us is probably in the one to five range. I'd say over half of our customers are in that particular one to five range. They might be a home business or a distributed office. So, we have lots of businesses that might have multiple employees, but they're not all under the same roof. They're able to take advantage of our features to make them look like they're one consolidated office. You might have a law firm with a single attorney in New York, one in Dallas and one in San Francisco. They might have a toll free number that front ends their national law firm, and you might want to speak to extension 3 for the West coast office, but it's a single individual working out of his house in the bay area. So, we have a lot of customers that have distributed employees, we have a lot of customers that are home businesses and I would say for us the real sweet spot is in the one to five segment.
GK: Ok. Geographically where are your customers? United States, Canada, Europe, etc.
JB: Right. So, we have been historically focused very much on the U.S. market. That said, we do have customers internationally around the world that have a U.S. phone number, but for the most part our number base is here in the U.S. So, our customer base is centered largely in the U.S. We have customers in Canada and in various other countries, but they're typically using a U.S. phone number. Recently (it was last Spring, I think it was in the March time frame) we announced a relationship with British Telecom and we have partnered with British Telecom to basically address the U.K. market and partnership. And, that's been extremely successful for the company. So, we are moving into Europe, but that is in partnership with a major carrier over there.
GK: Interesting. How many of your customers are signing up for their first virtual PBX system versus moving to RingCentral from one of your competitors?
JB: Well, we certainly have customers that move from competitors to RingCentral. We always enjoy it when that happens, but the real crux of our business and the real massive numbers that we get coming to us are companies that are coming to us and users that are coming to us for the first time. They're typically finding us either through search or they've come to us through a partnership. They might be a user that's just decided to start their business. Maybe they've been let go from a large company and now they're going work from home and for the very first time they're going be a consultant, for example. So, we get a lot of customers that are coming to us for the first time. We always enjoy it when we get competitors' customers, but that's not what we're relying on. It's not our strategy to necessarily try and get our customers from competitors. That just happens naturally.
GK: What do you see as RingCentral's competitive advantage in the industry?
JB: You know, I get asked that a lot. There are certainly features that come to mind that certain segments really value, but I think the real strength of RingCentral is in the big package, it's everything. It's the ability to instantly get yourself a phone number, and put it on your website, and increase sales within minutes. It's being able to have a voicemail and fax that come as an email attachment. It's being able to have your mobile phone ring at the same time as your home phone, and if you're out at a Starbucks and your kids answer, we have mechanisms in place so that they don't take the call; it can't be delivered to them. So, it's a very rich service and I think the real advantage that RingCentral has is in the ability to deliver all that functionality in a model that's easy to manage and it's instantly available.
GK: Tell us a little bit about RingCentral. What's the history of RingCentral, where did you come from and what's your corporate philosophy?
JB: Sure. So, I actually knew the CEO back during the 90s. About '94 or '95, I worked in a partnership with RingCentral, which I think was called RingZero systems at that time. The company was in the OEM software business. I helped the company at that time get into some major PC manufacturers, in particular Compaq and HP. The company did work with IBM and Toshiba and many other major PC OEM manufacturers. The company's OEM fax software, which at that time was client software, actually got loaded onto the hard drive. Those PC companies re-branded as their own and the company shipped over 25 million copies, if you can believe that, of fax and voice software. And, that too is part of our advantage because the software has been very tested and it's gone through the rigors of massive numbers of users from a support and usability standpoint. And, during, I think it was 1997, Motorola actually acquired the company. And then in 2000, when Motorola started spinning off many different divisions it got out of the DSP business and it went mobile and sold off several different components of its business. At that time, the CEO of RingCentral basically managed to repurchase the company back from Motorola, and added over the next several years some virtual PBX technology, as well as some VOIP technology and online provisioning. And in 2004, the company went live with RingCentral online, which by that time had now emerged from client software that was getting installed onto hard drives of major PC manufacturers to a web-based hosted service that was available over the internet.
GK: What are RingCentral's plans for the future?
JB: Well, the company's been growing extremely well. And, the company raised funds a little over a year ago now, from two of the top-tier VCs in the world, Sequoia Capital and Khosla Ventures. So, the company is extremely well-funded; it's growing, it's expanding outside of the U.S., as I've mentioned. We are in partnership with British Telecom to address the U.K. market and we have other engagements going on around the world. The company has been growing its distribution here in the states and has grown through several very successful strategic partnerships, one being with VistaPrint here in the U.S., so that someone who is, for example, designing a business card has been able to self-select a toll-free number while they're designing their business card can have that number appear on their card. So, those kinds of partnerships have been doing very well for the company and I think the company is really committed to making sure that it becomes the dominant leader in this space for delivering voice services to small businesses very cost effectively.
GK: If someone asked you for a referral from an existing client, who comes to mind and why?
JB: You know that'…(laughs) That's very interesting. There's a company that comes to mind, and it was in large part because eBay pro stores was the partner that this particular customer came from. The customer's called AntiqueTime, and they have an online store front that they've set-up through pro stores, and on the pro stores' discussion chat board this particular customer was speaking very glowingly of RingCentral and was encouraging others to add a toll-free number to their online store. The reason was that they had found that many customers simply wanted to talk to someone before they buy, and it helped increase his sales significantly. This particular customer repairs Rolex watches and he put a "click to call" button, available through our service, onto his website so that customers could click on that call button and speak to him at no charge. I asked him a question in an interview that I was doing actually; the question was, "Are you a local, a national, or an international business?" What he told me was that when he put a free "click to call" button onto his website, he became an international business. Users in Europe would then call him about sending their Rolex watch to him for him to repair and his sales went up 90% when he was able to speak to a customer. And, so that became just a really interesting case study because it was about a very small business, who had a website, who had established a presence on the web and simply by getting a toll-free number and putting that onto his website, and then later adding a " click to call " button, he was able to significantly increase his sales.
GK: Now, customer service is one of the most important aspects of operating an internet based service. What does RingCentral do to ensure superior customer service?
JB: So, RingCentral really prides itself on having a relationship with our customers, whether it's through the web and through a self-automated means of helping those customers, or whether it's through speaking with our agents, or simply getting their feedback and implementing their changes that our community of users is requesting. So, we take a lot of pride in that. To that extent, we have grown our support base of agents from the U.S. to outside the U.S. to support various timeframes around the country. So, the company remains extremely committed to offering quality service over the phone or through the web, and whether it's implementing changes in that process on the web or adding agents, we continuously update that process.
GK: And, what have you learned from your customers and how has that information led to change?
JB: This is a very important question. It's really at the core of our service, and why we've been successful. RingCentral owns the platform. We own end-to-end the infrastructure from the servers, the software, and the support. So, having that kind of control over the technology allows us to really quickly, with high reliability, listen to our customers, get that feedback and go ahead and then implement the change since we're in charge of the resources and the product. Some good examples: we have a button on our user portal, which is "give us your feedback." We actually look very carefully every month at the list of requests that we get coming in, and it's part of why the service is so rich and so intuitive because we have a lot of functionality in there. In fact, I often say we have over 60,000 businesses that use our service, and I like to tell people we have 60,000 product managers because they all have that channel back into RingCentral and can give us that feedback.
A good example of that is something I mentioned earlier, where one of our customers said, "Gee, I love simultaneous ring, so my home phone, my mobile phone and my office phone all ring at the same time and I can just answer whichever phone I'm closest to." Well, this particular user let us know that one afternoon when he was out getting that Starbucks coffee and his kids had come home from school that they answered the phone, and it was a bad experience for him. So, we very quickly, within weeks, were able to implement a change that would ensure that if anyone else other than himself answered that home phone that the call would not be delivered. This was done by either requiring that a code be put into the phone when he answered it or he could simply show the original called number, which was his business phone number, on the display at home, rather than the caller i.d. of the inbound call. So, we were able to satisfy his needs very quickly, and we really pride ourself in getting that feedback and then taking the necessary actions.
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