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June 1, 2000

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On the Fax Track

Posted: 06/2000

On the Fax Track
Enhanced Faxing Anchor Leg in Unified Messaging Race
By James R. Dukart

One analyst calls them the “Rodney Dangerfields of Wall Street.”

Fax services companies get little or no respect on Wall Street as financial analysts are convinced e-mail will overtake them, says Peter Davidson, president of Davidson Consulting
(www.davidsonconsulting.com) and author of a recent worldwide fax services market report for International Data Corp.

Davidson and other telecom observers say Wall Street may be premature in its dismissal of fax services, insisting robust markets exist.

They add that a move to continued outsourcing of fax services presents an excellent opportunity for voice and data carriers. In addition to creating new or increased current revenue streams, enhanced fax services can be used to round out a complete set of services that customers demand. In many cases, these can be a stepping stone to advanced services such as unified messaging (UM).

In his IDC report, Davidson projects an increased compound annual growth rate
(CAGR) for worldwide fax services of 22 percent, from $1.2 billion in 1998 to $3.2 billion in 2003. Of even greater importance to carriers, Davidson sees the biggest gains in outsourced fax services–including outsourcing to voice and data
carriers–with 65 percent CAGR, from $90 million in 1998 to $1.1 billion in 2003.

By 2004, outsourced fax services will be as large as the current fax services leader–broadcast faxing, Davidson predicts.

Carriers will have the opportunity to provide outsourced fax services to customers. Smart carriers, even those that don’t specialize in fax services themselves, will be able to fax-enable customers’ desktops, then turn around and outsource the fax services part of the business if they want to, he says.

“It will take very little on the part of carriers to make these kinds of sales,” Davidson says. “As you are fax enabling every desktop, you are stealing the business away from the fax legacy guys. This is going to be particularly large in Asia, and to some extent in Europe, where you don’t have as many LANs or a big fax server industry, but you still have a lot of faxing going on.”

In the domestic market, faxing continues to be a service in demand for industries such as the travel sector to deliver hotel and airline reservation confirmations, and in the legal field for documents that must be printed and signed rather than simply distributed via
e-mail, Davidson adds.

Broadcast faxing also continues to prosper.

“Broadcast faxing is a staple business, and it is not going away,” Davidson says. “There are still huge lists that businesses have of fax contacts, and for some it is the best way to get the word out. Internet faxing also makes it easier than in the past, so now it becomes mostly a database function.”

Davidson adds one more fax category that he says could be the hottest of all, and that is the use of fax services to complement e-commerce.

“The Internet itself is providing infrastructure that can be used by fax providers to increase services and cut costs,” Davidson says, citing new opportunities to do things such as integrate faxes into web pages.

Davidson’s IDC report predicts that linking e-commerce to fax services will nearly triple the number of fax pages sent out worldwide during the next three years, from 3.6 billion pages in 1998 to some 10.6 billion in 2003.

Selling the Sizzle

Charles Coates wants to help carriers make money off those 10 billion fax pages. He also wants to help companies increase productivity through smarter faxing.

Coates is director of business development for Concord Technologies Inc.
(www.concordfax.com), a company that provides wholesale fax, IP fax and messaging services to carriers and ISPs. Concord offers co-branded distributor and private-label branded reseller options, and Coates says the main driver for carriers is that enhanced IP fax services can differentiate what they sell.

“Competitive carriers need to be able to talk about more than their core services, because many of those services are becoming commodified,” Coates says. “They need to have something sexy–some sizzle to sell along with the steak. Internet fax can provide that, particularly for a customer that is struggling with a cumbersome fax server and trying to throw all their faxes over the PSTN.”

The key way IP fax can bring up sizzling images in the customer’s mind is through increased productivity and efficiency, Coates says. Carriers would be wise to sell their customers on the cost savings that come with moving from traditional manual faxing to IP faxing.

He estimates that manual faxing takes up to eight minutes per page in time spent printing and ordering documents, carrying them to a fax machine, dialing, possibly redialing and confirming transmission.

IP faxing with a PC can accomplish the same in an average of under two minutes per page, Coates adds.

“A company with 30 employees sending five faxes each day will gain 3,900 hours in added productivity over a 52-week business year,” Coates calculates. “Factoring in labor and expense at the rate of $15 per hour, the company will save $58,500 in labor costs alone by implementing Internet fax. Savings on fax rates, dedicated fax lines, fax machines and supplies also add additional cost savings for Internet fax customers,” Coates says.

Broadcast faxing and enhanced fax services create a “good-sized revenue stream,” in addition to providing high-demand, high-touch customer service, adds C. Lenn Brown, executive vice president for C2K Communications, a Louisiana-based CLEC serving the nine states in BellSouth’s territory, as well as California, New Jersey and Texas.

Brown adds, outsourced fax-on-demand services have found a nice niche in the corporate and association market, where groups are eager to outsource to carriers.

“Say we have a plumbers association, for instance, that wants to provide information on the organization via fax,” Brown offers as an example. “We can provide them an 800 number, where it will ring into our IVR [interactive voice response] system, the number is read and routed to a voice message that is specific to that association. It then goes into a fax server pool where callers can select from among options to have information faxed directly to them.”

Such a system is something many associations or corporations are not interested in setting up and maintaining, he says. In addition, a fax-on-demand system may be something an organization needs only for several months leading up to an annual convention or trade show, or based only on a specific educational or lobbying push.

Buying fax servers and maintaining an IVR system and dedicated fax lines can easily cost thousands of dollars, he adds.

“Why would you do that when you can literally outsource it for $40 to $75 per month, and only when you need it?” Brown asks.

Broadcast faxing also is an attractive outsourcing option for customers, particularly those with several different far-flung sales offices or companies that want to do large fax-based marketing pushes, he says.

The same advantages to outsourcing apply here as to fax-on-demand or other enhanced fax services, he says, adding that C2K has set up template-driven fax applications to provide turnkey fax solutions for all customers.

Messaging – the Mother Lode

While outsourced fax services, IP faxing and broadcast faxing present decent revenue opportunities for carriers, another reason faxing deserves greater respect is its role in the evolution and adoption of unified messaging.

UM generally refers to technologies that let people communicate via voice messaging, e-mail or fax, picking the transmission vehicle and method of reception to fit their needs. The projected growth of UM is astounding. The International Engineering Consortium (www.iec.org), for instance, predicts that total revenue for UM products and services will grow from under $1 billion in 1998 to about $10 billion in 2003.

In his IDC report, Davidson found the number of users of free fax-to-e-mailbox UM services has grown from zero in 1998 to 4.8 million in 1999.

Davidson says that even though fax services revenue by itself is dwarfed by e-mail or voice mail revenues as part of UM, carriers who want to provide an overall UM solution need to be in the fax game.

“If you are a CLEC and you are planning to get into UM, you have to get into fax,” Davidson says. “The technology is already pulling everyone in the direction of UM anyway, so you might as well start enabling desktop users to do these kinds of things [convert faxes to e-mail and vice versa].”

UM also will change a few of the underlying characteristics of the fax services business, including how services are charged, Davidson says. He adds that he sees a general movement to flat-rate pricing instead of a per use or per transaction charge.

“Service providers will give you buckets of offerings,” Davidson predicts. “For free, you can look at your faxes on your computer and hear your e-mail. But you can’t fast-

forward through e-mails, and you probably can’t send faxes out. For full features, you might get 50 minutes of faxing included, and depending on how much you pay, you can get unlimited amounts.”

Coates agrees that flat-rate pricing is the future for UM.

“Whatever carriers do with their voice calling plans, it will also apply to their fax calling plans,” Coates says.

On the IP faxing side, there may be more per page or per minute pricing, he says, as he agrees with Davidson that UM is more a complement than a threat to existing enhanced fax services.

“A good analogy is, did television knock radio out of the water?” Coates asks, then answers, “No.”

Likewise, he says, “e-mail is growing at a phenomenal rate, but with faxing you have a more mature market that does different things. We have some customers who are using fax broadcast services to send to e-mail boxes. They can be overlapping or related business.”

Brown adds, “We are moving into unified messaging. We sell one-number services around the country that have fax applications, voice to e-mail and voice to fax. We are finding it has become very, very popular as an easier way to communicate.”

Coates urges carriers to look beyond U.S. borders.

“On the international side, there are a lot of areas where e-mail is much less prolific,” he says, adding that IP faxing versus traditional
PSTN-based faxing offers a tremendously appealing arbitrage opportunity by beating relatively high international dialing rates.

Chart:Worldwide Outsourced Fax Service Revenues, 1998 – 2003

Coates says Concord operates through distributors in about 100 countries worldwide. “You can still approach an international fax customer based on productivity, but the cost basis also enters it more.”

With the ongoing strength of the broadcast and production fax markets, the promise of outsourced enhanced fax services and the shimmering allure of untold riches through UM, some might wonder why fax services get so little respect.

Davidson explains it may be that images of the curled-up thermal fax paper rolls and unreliable fax transmissions of yesterday are hard to erase from the public consciousness, particularly when compared with sexy newer technologies like e-mail or UM.

Stress should be placed on the capabilities inherent in desktop-enabled, IP-based faxing and messaging, free from the constraints of clogged telephone lines, suspect fax servers and unanticipated outages of fax paper or toner.

As such, Davidson has a few pithy words of wisdom for fax purveyors–be they pure fax service companies or carriers–eager to provide what continues to be a valued and valuable communications service.

“They’ve simply got to stop using the ‘F’ word,” he quips.

James R. Dukart is a freelance writer based in Minneapolis. He can be reached at
[email protected].

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