Vladimir Shmunis managed to squeeze into the North American telecommunications market, reducing the cost of corporate communications through cloud solutions

When Vladimir Shmunis was called to the stage of the World Economic Forum to receive the “Technology Pioneer 2010” award, experts were perplexed - RingCentral was not the first to turn cloud telephony into a business. But when the phrase “for reducing the price of corporate communications from tens of thousands of dollars to $10” was heard, everything fell into place. Thanks to its clever code and architectural design, RingCentral offers business Internet telephony services at a lower cost than its competitors. But price isn't the California-based company's only weapon in its battle with communications giants like AT&T and Verizon for the more than $5 billion market.

Odessa programmer Shmunis, after moving to California, worked at HP and Ampex, and in 1993 he decided to start a business transmitting telephone signals via the Internet. His startup, Ring Zero Systems, offered computer manufacturers an application for Windows that served as a switch: receiving and delivering calls and voicemail. IBM and HP have sold more than 20 million computers with RingCentral, as Shmunis called the application. As a result, the startup was bought by Motorola. Shmunis became a millionaire and a top manager of this company.

The technological breakthrough of the late 1990s changed the communications market - network protocols such as SIP allowed Internet companies to penetrate telephone cables and deliver calls and faxes to customers. The system worked like this: a database of numbers was stored on a server, the call went through an electronic switch and entered the telephone network through certain interfaces. The business seemed extremely profitable. For example, in recent years, Verizon has invested $10 billion in its cable network, and the infrastructure costs of cloud telephonists were limited to nominal fees to providers and the maintenance of servers on which there was a cloud of data with call recordings, voicemails and other information stored in it.

Shmunis bought the system code of his first product from Motorola and created a new cloud service based on it. In 1999, he and his partner Vlad Vengrov created the company RingCentral. Vengrov was able to build a software architecture that reduced costs so much that the company was able to offer a number to any city in the United States, as well as calls, voice mail and faxes, auto attendant services, and call transfer to other subscribers - for just $10 a month.

Competing with corporations like Cisco or Nortel to sell telephone solutions to medium and large companies was stupid, and for ordinary people, calls within the United States were already inexpensive. That left small businesses—firms with up to 20 employees—who would like to have a single number associated with their landlines, mobile phones, and computers. Shmunis structured sales so that you could buy the service by registering on the website and leaving a form with subscriber numbers, area code and number of employees. After that, having paid by card, the client began to use the service.

It would seem that small firms are not the most attractive audience, but Shmunis had something to fight for. Small businesses in the United States employ more than 20 million people, and the communications market is worth billions of dollars. The RingCentral service was appreciated by lawyers, designers, doctors - in general, the service industry. The only people who did not appreciate it were investors, whose funds Shmunis needed to scale the business.

The story of his quest for money was published in the New York Times with the subtitle “How to Resist the Temptation of Accepting Investment from a Layman.” Venture capitalists promised RingCentral mountains of gold if programmers changed their business model, refocusing on ordinary citizens. Shmunis invariably refused: he did not want to get into an unfamiliar and highly competitive niche. Only a few years later did the Khosla and Sequoia funds believe in the model. Shmunis invested the $24 million he received from them in infrastructure, marketing and brand promotion.

The company hired more and more sales representatives, and as its service expanded into major cities, the partners realized that onboarding new customers needed to be made even easier. In 2009, Shmunis released the product RingCentralOffice - an orange box with a phone hidden in it, configured for cloud services. In the next round of investments, Cisco invested $10 million in Shmunis’ brainchild, and now its stationary devices are offered in boxes.

Cisco and other investors were right. Over the past three years, RingCentral's customer base has more than tripled to 250,000 connected firms. Of these, 90% are small entrepreneurs, 10% are large corporations. Shmunis made his way to the latter by proposing that Cisco include cloud services in the corporate Internet telephony package. The revenue of RingCentral, which also entered the Canadian and English markets, is about $300 million.

What are the prospects for Shmunis? According to the research company IBISWorld, alternative energy and IP telephony will become drivers of growth in the US economy. According to Infonetics Research analysts, the American corporate IP telephony market has grown by 22%, and the total volume of cloud services will reach $76 billion by 2015.

RingCentral never has any competitors selling phones with pre-installed cloud services. The enemies are the same: telephone corporations, whose sales managers sell traditional PBXs to conservative businessmen. “It is difficult for such companies to compete with large players, but in the field of small businesses, whose owners do not want to hire a communications specialist, cloud telephony is competitive,” says Valery Tarasov, head of the Russian office of TeleOpti, a provider of solutions for managing telecommunications costs.

How to expand your customer base? “Our task is to rethink and reimagine business in the context of smartphones and tablets and easily accessible broadband Internet through 4G, LTE standards,” says Shmunis. RingCentral has already released applications for phones on Android and iOS platforms. If the company hit the bull's eye with the clouds, then problems arose with mobile services. For example, the BlackBerry app failed because small businesses rarely used those phones. Shmunis doesn’t see anything wrong with this: programmers have already started developing a business terminal for the iPad.

How an Odessa programmer won clients from US communications monopolists