Fonality: More Than A Business Phone System, with David Scult

Story by Benjamin F. Kuo


In an intensely competitive area, how do you differentiate yourself and grow a company? With around a hundred employees in Los Angeles, and $40M in revenues, Fonality ( --a developer of voice-over-IP phone software and systems--has managed to rise above the crowd of commodity voice-over-IP and PBX service providers. We spoke with David Scult, the company's CEO, to learn more about what the company is doing nowdays. Editor's note: we're cross posting this on our Texas site, as Fonality is split between Culver City and Plano, Texas..

What does Fonality do?

David Scult: Fonality is a provider of small business phone systems that both support a cloud implementation or an on premise implementation. Our software is in the cloud, but the customer can choose whether they want the call control, the PBX, in the cloud or on premise. So we now have around 275,000 users that have subscribed to the system over the past 10 years.

Who is the idea customer for you?

David Scult: The ideal customer is the customer who has 25 employees and three locations, and don't necessarily want to have w receptionist at each location, and in some cases don't even want to have a manager. Our best vertical is insurance. Typically we have one owner, and they have three offices, and lots of really young sales people. The hone system actually helps them manage those people. So, you might be the owner in at 5:05 in Office A, you can see who is in Office B and Office C making phone calls. You can even listen in, as a training technique, to those calls. Using our call center software, you can also see that Mary has made 24 calls, and Bob has only made four calls. There's a high probability that Mary is going to be more successful than Bob in selling insurance. So, the phone system becomes lots more than just sending and receiving phone calls.

What's behind your growth?

David Scult: In my two and a half years, we've just had the laser focus on the customer experience. Customer think of us as our software, HUD, heads up display. If they think of our competitors, they think about an IP phone, a desktop phone. We've really focused on how the phone system can be much more than just sending and receiving phone calls. It has won us tremendous loyalty with our customer. We have the best churn rate in the industry, and we lose less than one percent of our entire install base every month. Industry average is about 50 percent more than that, it's about 5 percent.

What's the biggest thing you've done in the past two and a half years to turn the company around?

David Scult: Customer focus is one. I've been in the software and collaboration industry for thirty years, and the other thing is taking the company, is bringing a focus on the software and developing great software and user experience. The actual dial tone is a commodity. We average $40 per user per month. Most of our competitors around $25. Theirs is not very sticky. If you have cheap VoIP, and someone comes along with cheaper VoIP, customers will go to them. However, if they depend on your software, it's really hard to fire you.

What's on your goal list now?

David Scult: We are just interested in scaling the business. We've recently introduced several new offerings, including business collaboration, screen sharing, voice mail transcription, integration with Salesforce, integration with Box. Every month, we try to get more and more touch point with the customer, so they look to Fonality as their primary vendor for unified communications.



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