the 1000 telecoms firms they analysed are losing money, a direct consequence of rising costs and price reductions set against a slowing market.

Of most significance, say Plimsoll is the amount of telecommunications services firms using an overdraft as a permanent means of finance - a dangerous position for any company to find itself in. The banks are taking a critical look at all unsecured finance and are reassessing their exposure to small businesses - this could leave these firms in a position where their overdraft would need paying back on demand. Many of these firms simply cannot afford to do this.

At least 239 companies identified in the analysis are running a dangerously high chance of failure, unless their problems are addressed.

Plimsoll have analysed previously failed companies, and noticed two characteristics in particular of failing or failed businesses.

1. The financial performance of the company is allowed to slide. Costs are not brought under immediate control. As a knock-on effect, debts increase and interest payments then further deplete profitability.

2. The final blow - an outside factor hits the company, such as the loss of a large contract, a bad debt, or a slow down in business. The failing company simply does not have the financial resources to adjust in time and the inevitable occurs.

One example of where this loss of a major contract caused a change of company ownership occurred this June when carrier THUS lost their flagship contract with BSkyB to provide Sky customers with home phone services. Worth between £200m and £300m the loss of this contract to BT meant it soon became just a matter of time before Cable&Wireless snapped up the company.

When analysing previously failed businesses, Plimsoll found that 8 out of 10 previously failed businesses showed these features.

Markets

Markets that are visibly suffering in the economic downturn are already being noticed in the channel as Dave Dyer at Siemens explains.

“Looking back at 2008, my first thought about our SME channel is that it’s a rehash of Bill Clinton’s famous line: ‘it’s the economy, stupid,’ but with some very exciting new opportunities being realised with our partners working in the SME space.

“The change has been remarkable - several of our market focus areas included estate agencies as well as professional services - but there are clear opportunities for partners that keep listening and looking. Last year, a Siemens’ partner contacted a car dealership and asked whether they could show how the owner could save money. The owner wasn’t interested – they were simply too busy to meet. Our partner rang the same dealer last week and they said, ‘I’ll see you tomorrow!’”

Innovations

Dave Dyer, “The last few months have seen growing partner interest in SIP trunking. End-users will benefit from cheaper calls and lower connection charges than ISDN. Small companies can give the impression that they’re a larger operation, or run their UK operation in winter from Spain - publishing UK contact numbers – or route technical calls to specially qualified workers.

“We have heard stories of retail chains examining cost base or rethinking their property estates altogether. SIP technology offers owner-managers the opportunity to rethink their costs base very quickly.

“Looking back on 2008 we believe, there’s no need to panic, channel partners need to make a change in emphasis and show clear benefits appropriate to different SME customers. It’s a different market, not a failing one.”

Andy Wilson, CTI Group’s VP Sales and Marketing takes an opposite view when he says although 2008 saw financial growth, some products and concepts have been less successful.

“SIP has not achieved a significant foothold yet, as the channel has not had the confidence in the product. SIP is delivered through the Internet and the UK simply does not currently have the infrastructure to maintain the quality of service that people expect from the technology.

“We are seeing more and more providers offering SIP trunks as a viable replacement for ISDN, but until a reseller can put faith in SIP we will not see a massive take-up. I foresee 2010-11 as being the year when this will change, as BT will have completed the current phase of upgrades on the core communications network across the UK.”

Lance Spencer, Product and Marketing Director for Tiscali Business Services says that to say that 2008 has been a difficult, challenging or eventful year depends on your perspective.

“If you are a merchant banker or if you have just seen your portfolio of shares slide down as quickly as the value of your house, then I expect your view will be that it was annus horribilis.

“The introduction by Tiscali of ADSL2+ opened up the potential for bandwidth-hungry applications to flourish.

“So, with 2008 also a year with environmental issues high on the political and social agenda, technologies such as video conferencing were back in the spotlight as a very real alternative to unnecessary business travel. ‘Carbon footprint’ and ‘credit crunch’ have easily become two of the most familiarly used and recognised terms in 2008, so why not video instead of hopping on an aircraft?”

Richard Bligh, Marketing Director at Gamma Telecom says that “the biggest trend over the last year in the mobile market has to be the explosion in mobile broadband and again Gamma’s unique proposition, where end-users only pay for their actual usage rather than underutilised bundled broadband packages, has been a big hit with our channel partners in 2008.”

Andy Wilson at CTI takes up the mobile theme, “Fixed Mobile Convergence seems to have started to gather pace during 2008; we are starting to see major players such as Mitel offering FMC to their clientele. The available technology has come on a long way in the past 18 months with mobile manufacturers starting to release more handsets with the technologies embedded in them. People are more mobile than previously and the increased pressure from the economic downturn means that business users are looking for more mobility from their communication solutions. The ability to react to a request or deal with a call immediately is now becoming the norm rather than desired and one that we are having to provide.”

Reseller Perspectives:

coming from a Cisco orientated environment where channel reigned supreme.

“It has been encouraging to see this shift take place and meet a bunch of guys that really understand the needs of the channel that are readily accessible to channel partners and ultimately prepared to put their money where their mouth is.”

Maren Bennette says…