Hoffman's M5nifesto

The founder of the largest VoIP provider in the Northeast showed how to take VoIP to the next level.

by Alex Goldman ISP-Planet Managing Editor [May 9, 2007]

We thought the event held by New York City-based M5 was a press event. We were wrong. It was a moment for outreach to customers on the occasion of the company's seventh birthday, and a few members of the press were invited.

Walking into the 16,000 square foot bar called Pressure, we found most of the members of the company's sales team already talking to customers and to each other.

Soon, Dan Hoffman, M5's president and CEO, took the stage below the movie screen.

What Hoffman said reminded us of a presentation at ISPCON in 2005 that impressed ISP-Planet a great deal. Elliot Noss, president and CEO of Tucows, told us that ISPs should not be selling technology, such as T-1s, but services, such as what M5 sells: a phone system that works. It's all about Common Sense in Selling Services.

No more phone systems
Event organizers were handing out buttons stating the company's new sales pitch, which is "Never Invest in a Phone System Again". Hoffman said that some people predict that the business phone system will die out in five years, others, including Steve Ballmer, predict it will take ten years.

(The Ballmer quote we found is: "The way I think about this is within the course of the next ten years, where N is actually a relatively small number, all communications in businesses and organizations around the world will move to be IT-based. That literally means there are hundreds of millions, hundreds of millions of people who will be getting a new communications experience over the next four or five years, and if we can't make that into a gigantic opportunity for Microsoft and for Nortel, shame on us.")

VoIP is a service
Hoffman sees the same opportunity, and feels M5 is perfectly placed to take advantage of it, if the company is able to change its sales pitch from selling technology to selling services.

Hoffman says that the old sales pitch was "we're not the phone company" (a sales pitch familiar to ISP-Planet readers, and one that is effective). "We said, 'we're not lousy service, we're not five different vendors.' But we've been selling the un-cola. Today, I want to talk about what we stand for. I believe that we are at the beginning of an inflection point, the beginning of the end of the phone system. We'll do more business in 2007 than we did in the five years leading up to our last party, our Cinco de Mayo 05/05/05 party."

Small businesses should now be able to compete with big business, but as IT requirements rise, IT resources are flat. Meanwhile big businesses are adapting to competition from small business by, for example, allowing people to work a more flexible schedule.

"We are selling voice as a service," Hoffman said. (That's VAAS, which is like SAAS?)

"My favorite analogy is the VCR. You could, in theory, use a VCR to record a whole season of The Sopranos. But you'd need a TV Guide, you'd need to understand the instruction manual, and you'd need lots of tapes. You might need someone to set the VCR for you. In fact, there are VCRs blinking "12:00" in closets across America. Compare this to TiVO. There are PBXs blinking "12:00" in business closets. SMBs use about 16 percent of currently available features on a hosted PBX. When we move to IP phones, that means they'll be using, what, two to three percent?"

M5's competitor may be Covad, but Covad's not the company it compares itself to. Avaya may compete with Covad and M5, but Hoffman does not compare M5 to Avaya.

"The peer group we need to associate with consists of companies like WebEx, ADP, and Salesforce.com."

We're in your phone system, changing your business
Hoffman called three customers on to the stage to tell stories.

Real estate firm Coldwell Banker tracked myriad ad placements by placing a unique phone number in each ad. M5 supplied 2,000 unique phone numbers.

Integrator Bluewolf uses the system to track the performance of its sales people, who are rewarded in part based on the number of calls they make.

The Brooklyn Brewery lost its legacy phone system in smoke and fire and had a new phone system from M5 in four days. Integration was fast because the company had already been talking to M5 about the purchase.

Hoffman told one more. "The Union Square Café was a client for six months. We were able to tell them that between 9 AM and 10 AM only half of all calls were getting through to reservation and that the St. Regis Hotel was their top caller."

Some small businesses are extremely cyclical. Sherry Lehman, one of New York's top wine stores, does two-thirds of its annual business in two months of the year. The U.S. Limousine Company has a huge spike in demand during the Academy Awards. IP services can handle this bursty demand.

Videos
Hoffman ran some videos, which will be on the M5 website when this article runs, featuring other members of M5's leadership team. Ray Lieu, vice president of service development, talked about transparency. "You see what we see," he said.

Transparency ensures that the customer knows that no issues are being hidden. Transparency forces customer service to explain what's really going on. However, if there's a service issue with M5, it tries to notify the customer before they notice the issue.

M5 measures customer satisfaction through a metric is called "reference-ability." 95.3 percent of its customers would provide a positive customer reference for M5. At present, M5 asks this question every six months. In the future, it plans to allow companies to change their answer at any time.

Kerrin Parker, vice president of on demand solutions, said that customers don't always understand everything M5 can do. Currently, the company has five solutions:

• Sales Engine
• Flex Staff (for a distributed work force)
• Client Service Manager (to help companies ensure that someone always answers the phone)
• Campaign Manager (to use hundreds or thousands of phone numbers to track an ad campaign)
• Call Center (to allow anyone to track what's going on in your call center)

Glen Stoeffel, who runs SalesForce.com integration for Bluewolf, said that his sales force and tech team are learning slowly to sell services instead of technology. "We landed a big client, BusinessWeek, and I asked my CTO to find out why they'd chosen us. He went and talked to them and came back sad. He said they'd chosen us because we knew the business, because we had customers like CBS and NBC. I realized that he was sad because he was accustomed to selling a story that goes, 'customer problem? Tech hero!'"

Instead of a technology hero, Bluewolf, like M5, is learning to tell a story in which the service is the hero and customer doesn't need to learn anything about the technology.

Questions
In the question and answer session, we asked Hoffman why his solutions were not more elaborate, why he wasn't more deeply involved in his customers' businesses. He replied that he would not roll out anything unless he was certain it was ready. "We've been asked about video, about unified messaging, and we believe that less is more," he said. "If a service it not complete ready, we drop it."

Then he logged onto Call Center, which showed us M5's own call center in real time. It showed each active call center agent, and it showed that the center had no live calls at the time. When Hoffman's call come in, we watched Kevin Kilroy, an M5 customer service representative, answer it, and we watched Hoffman invite the rest of his team to the party.

— End