I spent some time on the phone today with Chris Lyman, CEO of Fonality, a leading telephony provider based on open source project Asterisk. Yesterday I skied for a bit with Larry Augustin, who sits on Fonality's board, and he was super bullish on the company's future. Between the two, I'm starting to grok what Tim has been saying for many moons: telephony is one of the brightest lights in the open source constellation.
How big? Well, as Chris told me, the PBX market is at least $7B domestically (USA), and globally is $20-30B. And that's not counting those dollars I pay to Cingular, Qwest, Vonage, etc. Massive. And ripe for open source disruption.
Fonality has been breakeven since 2006, and profitable since Q4 2006. It has grown 10% month-over-month for over two years. Every single month. It just raised $7M in Series C funding from Intel Capital (lead investor) and Azure Capital (Series B investor).
Unlike its incumbent competitors (Avaya, Nortel, etc.), Fonality has a (mostly) direct sales model. (70% direct, 30% channel) Traditionally, no one thought you could sell a complex PBX to a customer because it was so...complex. This meant that you'd add a middleman to handle implementation, which raised the already astronomical cost to a price range that is prohibitive to 50% of the market (i.e., companies with 5-100 users). Suddenly that $7B market could be much, much bigger....
Fonality can sell direct for several reasons, but the primary one is that it has made the buying and set-up process so simple.
I asked Chris to walk me through the sales/implementation process, start to finish, for a company like mine (with fewer than 100 employees). It was shockingly simple. A Fonality salesperson walks through set-up of the system (My calls get answered by my administrative assistant on days he's in, and come direct to me when he isn't. When I don't answer, they go to my tech support people, etc.), then sends me a server when I'm ready to buy. I plug it in. I start to make calls.
If it breaks, Fonality can fix it remotely without doing a truck roll. (This hybrid hosted model is hugely disruptive to the established vendors, each of which has to do expensive truck rolls - local service calls - to fix a problem.)
No monthly fees from Fonality. $1000 - $3000 or so for a server, ready to roll. You just pay for your T1, which you're paying for, anyway. That is pocket change compared with the alternatives.
No wonder the company is doing so well.
- HUD, or Heads Up Display, (which I thought was brilliant) has been bought by over 10,000 customers. Free users exceed 50,000.
- Current customer count for PBXtra is over 1600 customers.
- Profitable as of late 2006. Growing 10% month over month for the last 28 months.
- 65,000,000 calls across the Fonality platform since it started.
Posted by Matt Asay on February 6, 2007 02:34 PM
