Voice over IP is becoming the preferred choice for larger
companies thatwant to consolidate complicated networks, but will it
offer a return on investment?
Since leased lines were introduced in the 1960s, voice and data
networks have been run separately. Now, voice and data networks are
being combined. By the end of the decade it is likely that most
companies will run voice and data under one network.
What is making this possible is Internet Protocol, which governs
the transmission of data over the internet and most local area
networks. Voice over IP is a technology that allows the
transmission of telephone calls over IP networks. It digitises the
analogue voice signal and converts it into IP packets.
IP exchanges that could handle voice messages started to hit the
market in 1998 and now all major private branch exchange suppliers
sell IP PBXs. IT companies are also in the market, with Cisco
claiming 6,000 customers worldwide. Many traditional time-division
multiplexing (TDM) PBXs are now IP-enabled.
Growing market
Nigel Jones, business development manager at supplier Alcatel,
estimates that pure IP PBXs already account for 5%-6% of the
market, while IP-enabled TDM PBXs account for more than 33%.
Conventional PBXs are down to 60%, with sales flat to
declining.
Synergy Research estimated the global market for IP telephony
products to be worth $849m (£542m) in 2002, and predicted it will
grow by 50% a year to reach $4.4bn in 2006.
Circumstances where VoIP is likely to be most cost-effective
include where a company is building additional branches or for the
scheduled replacement of existing networks. "With a greenfield
site, it makes no sense to do anything else," said Maren Bennette,
communications programme manager at Cisco IP.
Advantages of VoIP are that IP PBXs are cheaper than traditional
PBXs; there is no need for separate Lan and telephony wiring; and
you do not need a separate phone system for each location, just
access to the IP wide area network. Also, only one management
system is needed. "People have been trying to merge support teams
for telephony and IP for years," said Tony Lock, senior analyst at
Bloor Research.
VoIP is usually suitable for organisations about to add new
branches to existing ones. Conduit, which is providing the 11 88 88
directory enquiry service, is one example. It adopted an IP
telephony and virtual contact centre to link its new Swansea site
with existing Dublin and Cardiff contact centres.
"Generally, VoIP is good for companies with multiple sites with
lots of voice traffic between them," said Peter Hall, research
director at Ovum.
Lock agrees. "Companies that have relatively good network
communications, such as large blue-chip companies, could save on
the cost of internal phone calls," he said. This is because
internal calls bypass the public infrastructure under an IP
network.
Case studies
VoIP can also make sense when it is time to refresh technology.
European bank Cr'dit Agricole needed to replace its data network
and had a hotchpotch of voice networks over 152 sites. It replaced
everything with a VoIP network and saved 46% a year on line
costs.
Paul Smith is a UK-based fashion and clothing company employing 260
people. It has united its voice and data networks in an IP-based
infrastructure and is already enjoying increased efficiency and
cost savings.
The company had reached capacity on network switches and its PBX.
Lee Bingham, business analyst at Paul Smith, said, "We could have
replaced our old PBX with a new one, but we felt that with VoIP we
were investing in the long term rather than bringing in a quick
fix."
The company installed Cisco VoIP equipment. Voice and data traffic
is now run over a Lan linking Paul Smith's two main Nottingham
sites with a warehouse in London. There is a gateway for
connectivity beyond the Lan, and the company uses BT's Equip
software to run traffic over a Wan linking Nottingham and
London.
In this set-up there is no need for a separate log-in for phone and
IT departments, as there is one combined telephone and data
directory. IP phones are connected to PCs with no additional
cabling. Bingham said, "The installation paid dividends through the
immediate increase in the quality of voice traffic."
Surrey County Council has replaced six Wans, one main voice network
and multiple departmental systems with a single IP network. The
council is now expecting to save £50,000 a year through lower
external phone charges.
The Belfry golf course, which needed to update its call centre's
basic PBX system for the 2002 Ryder Cup, is another organisation
that has adopted VoIP. Ed Sygrove, the Belfry's director of IT,
said a key benefit was "full access to management information that
was not previously available".
Not suitable for all
But VoIP is not the ideal choice for all. "Situations where it is
not suitable include companies with a single site where the
requirements are simple, there is no need for fancy features, and
the customer is not in the market for a high-end TDM PBX," said
Hall.
Also, if there is no reason to change the present network, it is
usually better to wait. "The case for replacing a digital voice
network with an IP voice network is less compelling," said
Jones.
Data networks will almost always need to be beefed up to handle
voice traffic. "More than 80% of all data networks are not capable
of supporting VoIP," said Martin Wicks, director at networks
supplier Avaya, due to the capacity requirement.
"You need about as much bandwidth for a VoIP call as you do for a
traditional TDM-based call," said Steve Kennedy, head of product
futures at network provider Thus.
One of the biggest problems in constructing a business case for
VoIP is the high cost of IP phones. They typically cost £190,
compared to £40 to £60 for a TDM phone. "Prices have to come down a
lot," said Hall. "Once they are readily available at under $100,
the business case will be very compelling."
IP-based telephony is now established, and the business case is
getting clearer all the time. "It is now a mainstream market,
rather than an early adopter market," said Hall. "Convergence will
be standard in a few years time."
VoIP at a glance
- By 2010 most companies will have converged networks, driven by
IP for voice as well as data
- IP PBXs currently account for 5%-6% of the market, with hybrid
systems accounting for about 33% and conventional PBXs 60%
- VoIP reduces management costs and call costs between sites. It
makes most sense for greenfield sites, for companies adding
branches and for scheduled replacement of networks.