Last week we happened to get demonstrations of versions of two different virtual office tools: Central Desktop and ContactOffice (out of Brussels). However there are more competitors in this space (Webex WebOffice (used to be Intranets.com, office.com, Infostreet, Groove Virtual Office 3.0 (now Microsoft), Zoho Virtual Office, and Foldera, and probably even a few we don’t know about yet.

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All of these tool vendors are focused on the SMB (small medium business) market, because it is the one market that Microsoft is not dominating, and because there are over 5 million SMBs in the U.S. alone today.

But there is a catch, it’s called “cost of sale.” Essentially, because the SMB market can include SoHO (small office, home office) or single proprietors, this market is not only very cost conscious, but the sale has to essentailly be a “no touch” sale, in other words, a very low cost sales process. The cost of acquiring customers also has to be low.

Do The Math!

I once heard that Salesforce.com who also proports to go after the SMB market, spends about $600 to acquire each user, and that over the course of two years the amount they make is about $2500. For these virtual office vendors, the cost of sale would almost have to be zero (try it, and then buy it), and the cost of acquiring customers would have to be under $100/user. With an average subscription cost of $25 - $50/mo. or $600/year and the assumption that most users will stay at least 2 years, then the revenue per user would be $1200.

However, almost every vendor offers a “free” version with full functionality, but just limited storage. Office.com offers their basic service at $6/month all the way up to their “Hyper” service at $35/month for up to 8 people (access) and 4GB of storage. ContactOffice has similar pricing with their “Hyper” offering also at 4GB storage and a cost of 50 Euros/ month ($63/mo.). Most of them allow you to subscribe for a month (ContactOffice) or three months (Central Desktop) but others like Zoho, do a yearly subscription of $295 for 25 users, which is about $0.50/month per user... that's almost free!)

Maybe these offerings work much like the "Exchange Bank" in the old Saturday Night Live skit, where "they will make their money on volume." Most of the vendors we talked to are able to scale to support up to 10,000 users per company, and offer support for hundreds if not thousands of companies, so scaling (or volume) does not seem to be an issue.

Features and Functions

I was particularly impressed with the connectivity to ContactOffice. You can get to it over the web or from almost any mobile device. They also “white label” their software and are resold be a number of other resellers like mobile operators in Europe who are looking to dif-ferentiate their service. They support SMS messaging on phones as well as RSS throughout the offering. Their calendar can connect with Outlook and supports the iCal standard, and in their next release they will integrate at a deeper level so that tasks in ContactOffice will also show up on your Outlook task list and vice versa.

All of the tools offer e-mail, document storage, team document access, RSS feeds, some offer integration of presence with various IM clouds. ContactOffice integrates with the Jabber server (more later).

CentralDesktop, which focuses on small businesses, has just added web conferencing features (for an additional cost) called “Central Desktop Live” and offers one meeting room that can accomodeate 10 people for $25/month. They are also partnering with Attensa to deal with(attension) activity awareness in the future and all of the objects in their “office” are RSS enabled, so you can subscribe to an object. Because they are more project-oriented then some of the other vendors they even give you the ability to assign a task to multiple people (which seems to happen a lot at CS), and all of the data is held underneath Central Desktop in a Postgres SQL database.

Mobile Connectivity

ContactOffice offers connectivity through a Pocket browser and offer good functionality; they also offer a WAP interface. Office.com offers WAP connectibity to use your Windows Mobile PDA/phone.

IM Connectivity

Since SMB’s tend to have a lot of mobile knowledge workers, we asked about connectivity to various IM clouds (Yahoo, AOL, MSN, etc.), the closest we came to an answer was with ContactOffice which will connect to the Jabber (open source) IM server. We believe one of two things will happen in the future. Either their will be one IM cloud (right now Microsoft and Yahoo have done a back end federation, and Google and AOL are also integrating) to connect to, which all of these virtual office vendors will do, or they will add Trillian, or Gaim (client-side IM aggregation) functionality to their office tools so that you will be able to detect presence in any of the IM clouds. What would be nice would be better presence integration into the various functions in the virtual office.

User Scenario

Here is a scenario we talked about with many of the vendors we interviewed. You get a call from someone on one of the teams you work on and they are discussing an issue, you go to your virtual office document repository and look at the latest version of the document, and decide with this person that with one click of a button the two of you want to move into a web conference and maintain your context (i.e. have the document you are discussing in the conference with you). While you are on the phone an alarm goes off letting you know you need to drive to your next client meeting, but your not done with the conversation with your colleague about the document. You are transparently able to move the conversation over from your desktop to your cell phone, while your colleage still works on the document, and you get notification of the document changes on your PDA phone as soon as your colleague saves the new document version. As you are waiting in the lobby for your client, you check the new version of the document you just worked on from your PDA by clicking on an e-mail link and assure yourself that all your changes were implemented correctly and everything is on track.

Most of the vendors we talked with can do some but not all of the functions in the above user scenario. But this scenario is not a bizarre business circumstance, but most likley a very common occurance, so it is compelling. We can only hope that the competition between vendors will drive the price down some more, as they all continue to add features (isn’t capitalism great!), and hopefully by year end one of these vendors will be able to support the user scenario outlined above.