VoIP Will Not (Necessarily) Save Your Enterprise Money article has several quotes from Neal Shact
May 7, 2004 • Vol.26 Issue 19
VoIP Will Not (Necessarily) Save Your Enterprise Money: IP Telephony Rapidly Becoming A Must-Have Network Tool
Your company's office manager has decided to change the 5-year-old telephone system. He has heard about what new data-rich features telephony systems offer and has called upon you, the IT admin, to look into options. Some of the field sales staff has expressed an interest in making phone calls with their notebooks when plugged into a LAN or a Wi-Fi network when cellular connections are spotty. Some want merged voice and text messaging that they can access like email from any Internet-connected PC. Traditional TDM telephony switches far fall short of offering these features, while VoIP telephony, or a hybrid system that combines both VoIP data and voice capabilities and traditional TDM telephony, can accommodate applications that merge voice and data. Meanwhile, you quickly learn that VoIP is not necessarily going to reduce your enterprise's phone bill. While Internet telephony several years ago offered cut-rate prices vis-à-vis traditional calling plans, telephone carriers have long since reduced their rates. Now, long distance cost-savings VoIP phones might have previously offered are no longer a consideration.
So will VoIP save costs that can be demonstrated on a balance sheet? Probably not. Can VoIP add to enterprises' efficiencies and thus boost productivity? Probably.
"A few years ago people were looking at replacing phone minutes with cheaper IP telephony," says Steven Taylor, an analyst for Distributed Networking Associates. "Now VoIP is being driven more by applications and redefining business processes than it is saving cents per minutes on calls."
Indeed, analyst numbers indicate that VoIP has gained a wide-scale entry into mainstream network applications as enterprises take advantage of its advanced voice and data convergence features. "We are just about at the point where we will cross over to VoIP from traditional telephony—if it hasn't happened already—so that there will be more VoIP phones than traditional phones," Taylor says.
According to Distributed Networking Associates, over 85% of enterprises either already have IP telephony or plan to install a VoIP system. By 2007, about 19% of all business calls will be over a VoIP network, according to In-Stat/MDR. For cable operators alone, the VoIP sector will account for 4.2 million new subscribers per year, which will generate $5.4 billion in sales for cable system operators by the end of 2008, according to analyst firm Kagan World Media. Traditional telephony providers, and even DSL service providers, are also looking at more than 50% VoIP growth rates per year, several analyst firms have reported.
Testing The Waters
Recently, telephony equipment vendors have mainly sought to upgrade their VoIP products at the expense of their traditional telephony systems, which has served as a more recent impetus for enterprises to select VoIP instead of traditional telephony. Meanwhile, broadband adoption by consumers has pushed VoIP's adoption in the consumer sector. "With the economy recovering, companies are now beginning to replace their phone systems just when the manufacturers stopped doing R&D on switched circuit equipment and focused on VoIP," says Neal Shact, chief executive officer for reseller firm CommuniTech. "On the consumer level, VoIP is catching on because the increasing adoption of broadband means that there are people who have already invested in a bigger pipe, and the incremental cost of VoIP is much more cost effective than the traditional telephony with its more expensive local and long distance rates, especially when you factor in the additional taxes," he says.
However, when selecting a VoIP system, enterprise buyers do not always have to completely discard their existing telephone systems. It is possible, for example, to buy hybrid systems that combine VoIP switching with TDM switches. "The traditional vendors, such as Nortel, Siemens, Avaya, or Mitel, offer the hybrids with which customers can migrate at the speed they feel comfortable with. However, buying a TDM switch doesn't make any sense since R&D is dead for these products," Shact says. "So, the result is buying a hybrid or a pure VoIP switch, which almost by definition is going to have added features and capabilities."
Many of the earlier adopters are enterprises that do not necessarily have to live and die by the bottom line and are attracted by the increased efficiencies VoIP offers. "Many of the early movers in VoIP are the customers that always have money regardless of where the economy is and also have large data networks [as is the case, for example, with] governmental bodies and universities," Shact says. "Also, the entry cost for VoIP is a lot less if you already have a state-of-the-art data network."
A Technology Leap Of Faith
Similar to the 1980s during the mass-scale adoption of PCs when enterprises began outfitting most of their employees with computers, VoIP is often seen as a technology tool to boost productivity, without necessarily generating immediate cost-savings. But how can VoIP boost productivity? "VoIP is an enabling technology, although it is more of a catalyst than a technology in and of itself," Taylor says. "It is for airline companies redefining their airline procedures or catalogue sales companies that have their distributed workforce that have their agents working at home."
Other applications include integrating email and voice mail so voice functions are combined with text and text functions are combined with voice, Taylor notes. As with email, for example, you can retrieve voice mail from the PC or access it over the phone. In a nutshell, VoIP allows for the integration of all conceivable voice functions into existing data networks so that the phone or headset becomes a peripheral for a PC or a notebook.
Still Not Bug Free
Unlike data applications, any hiccups in voice telephony are largely unviable as users for decades have grown accustomed to mostly glitch-free voice communications. However, VoIP still is not completely bug free, which is the main concern many potential customers have. Indeed, new VoIP products and technologies are emerging that offer enticing features that do not always work all of the time.
One analyst, for example, noted how Microsoft recently unveiled new VoIP features in its forthcoming Windows CE 5.0. The OS offers an embedded computing platform for use in VoIP-enabled devices and features multiparty audio conferencing, Exchange Server integration with contact search, calendar functionality, and unified messaging, as well as newly added automatic provisioning and a user ID function.
"Phones incorporating the new features should be able to plug and play into an Ethernet network and be freely relocated without having to reconfigure settings or servers, or wiring for that matter, as with legacy analog PBX setups," says Ron Cook, a consultant for Technology Made Easy. "In reality, there are a lot of growing pains. For example, Microsoft's new CE 5.0 is sure to run up against firewall issues when someone
is on the road. That means ‘plug and pray' and not ‘plug and play.' "
by Bruce Gain