Cost cuts are the immediate lure of VoIP. But greater business efficiency is also a potential prize for users, as John Kavanagh reports
Tesco's recent announcement that shoppers could put a £20 voice over IP pack in their trolleys alongside their groceries highlighted the extent of the latest revolution in telecommunications.
A switch from the telephony approach of the last 100 years to VoIP is inevitable in the next 10 years; even traditional phone service companies and private branch exchange (PBX) manufacturers say so. And telephony is seen as just the start, as companies look at the potential opened up by the convergence of voice, data and video communication over IP.
Over 60% of UK IT managers questioned by network consultancy Telindus believe VoIP will carry at least half of all UK business voice traffic within 10 years. Thirty per cent have already introduced or tried it, and another 25% are making plans. About 10% of UKbusinesses see no need for it.
Industry analysts' annual growth estimates range from 20% to 45%, with some saying VoIP will account for 75% of worldwide voice traffic within just a few years. Such figures are remarkable for a phenomenon that only really started catching the eye a couple of years ago when Skype offered free calls to consumers.
Indeed, some industry observers say the business take-up of VoIP, as with instant messaging and mobile communication, has largely come from consumers taking it into work.
IT directors are certainly getting to grips with the idea now. UK research by communications integrator Affiniti shows that the number of IT directors that understand IP convergence has grown from 59% to 70% in 18 months. With this understanding has come a shift in emphasis among the reasons for adopting VoIP.
Cutting costs is still the biggest reason - mentioned by 65% of IT directors in the Telindus survey. Research group Gartner puts call charge savings alone at 15%-30%, depending on the extent of a company's IP network. Big international organisations can cut long distance call charges by sending calls through their IP intranet, making a local link at the other end for external calls; smaller companies can do the same if they currently use the public phone network for voice calls between offices.
Capital and operational savings also arise from the convergence of networks. Capital spending is cut by anywhere between 10% and 40%, depending on which study you look at, and dependence on proprietary PBX hardware and specialist engineers is eliminated. Affiniti's research shows lower equipment and maintenance costs as a key reason for going to VoIP for 46% of the IT directors questioned, and 42% mentioned communications standardisation.
Research group IDC has put savings on adding, moving and changing user facilities for a converged VoIP network as high as 68% compared to a traditional voice network.
"Wiring expenses, power consumption and space requirements are greatly reduced," said Mark Bath, VoIP specialist at network services company Global Crossing, which switched to VoIP for internal use and saved 20% in the first year.
The company now uses a single cable to carry both voice and data communications to the user's desk. With cabling and wiring costs reduced - and much desktop clutter gone - Global Crossing found deploying IP telephony to a new facility was more cost-effective than moving a traditional PBX it already owned.
The benefits of implementing IP telephony include greater efficiency on the network, which helps drive down access costs, as well as simpler administration. Global Crossing has found that many user requests previously needing input from PBX maintenance suppliers can now be met by in-house support staff through web-based administration.
"Moves, adds and changes are dramatically simplified. Staff simply plug their IP phone in at their new desk: it automatically downloads the user's features, such as network identity, voicemail box and e-mail account," Bath said.
Similar benefits are highlighted by Cisco. It saved nearly £350 per employee on wiring costs alone for 1,200 staff at its London office, and puts return on investment at 16-24 months. And Cisco says its customers have been able to reduce dozens of typically proprietary PBXs to a handful of standard servers.
Even so, capital and operational cost savings are only the start as organisations get to grips with the potential of VoIP. The convergence of data, voice and video brings new capabilities to an organisation.
One example is multimedia messaging services. For instance, an end-user could start a voice call and press a button to move it to a video call. Or the end-user could choose people from their instant messaging list to start a conference call or voice-data call or video-data call.
It is also possible to start an audio or video conference where data is integrated into the conference - the conference participants only need to press a button. "There is no need to upload documents or start a new application," said Pat Finlayson, European product manager at IP phones specialist Polycom.
Because such features follow people wherever they go - as long as a fixed or wireless broadband IP link is available - VoIP specialists talk a lot about flexibility, mobility and productivity.
Executives on the move and people working from home can have their phone numbers follow them to wherever they are and can access company data and systems and work collaboratively through video or conference calls as if they at the office.
Indeed, productivity is now a key reason for moving to VoIP, being mentioned by 42% of IT managers in the Telindus research.
Other services on offer include local dialling codes for cities in the UK, the US and Europe to give a company the appearance of a local presence.
Despite the benefits described by industry analysts, suppliers and users, switching from telephony tried and tested over 100 years to an IP future that potentially demands a rethink of an organisation's entire way of working, is quite a leap of faith.
"VoIP comes with its own problems and they need to be carefully addressed for the full advantages to be realised," said Ian Cummins, a European director at Network Instruments, supplier of network management products. "One common problem is quality issues with the lines. Only when these problems have been rectified will VoIP really dominate business communication. Just throwing bandwidth at it will not solve the problem.
"You have to ensure a peaceful co-existence between VoIP traffic and the rest of the network. And you need continuous proactive VoIP management."
Existing networks and traffic certainly need to be audited before switching to VoIP, said Peter Hall, a research director at industry analyst Ovum: "The local area network is especially important and you need to ensure it can support VoIP. Most modern networks can, but older ones will need an upgrade."
Hall and others suggest segregating voice, transaction data and lower-priority web or e-mail traffic, for example, to travel along different virtual pipes in a virtual private network. Many experts regard adopting VoIP as analogous to putting all your eggs in one basket, so effective disaster recovery and business continuity are of paramount importance.
Product maturity can also be an issue for users. Established mobile phone specialists like Nokia, and newcomers with conference phones and other end-user devices are bringing new products to an emerging market.
Security is another issue on which suppliers are giving conflicting views to potential VoIP users. One view is that some scaremongering is going on, especially among suppliers with a lingering vested interest in traditional telephony. Another view is that VoIP phones can make a company network as vulnerable as any PC.
"The next two to five years will be the most dangerous time," said Mike Murray, director of vulnerability exposure research at security specialist nCircle. All the protocols are new and are still getting debugged. Moreover, e-mail and voicemail might now be housed in the same Microsoft Exchange server. "With old phones, hackers have to be skilled in a specific supplier's system, now they only need any widely available exploit tool for Windows Server or Exchange," he said.
"Best practice must be stressed. Treat your VoIP system like any other back-office IP-enabled service of high value."
Perhaps because of all the uncertainties, many organisations are going for a gradual move to VoIP rather than ripping out a telephone system that has served pretty well for so long in favour of this newcomer. This is partly due to the fact that many companies replaced their PBXs only six or seven years ago to ensure they got through the Y2K issues safely. Systems might not be fully depreciated in tax terms, and are typically running perfectly reliably.
"The most common hybrid approach is to upgrade your PBX on the trunk side, adding gateways to get VoIP over your data network between your branches," Ovum's Hall said. "You don't get the full VoIP features, so this tends to be part of a migration plan."
Those full VoIP features offer a challenging future for organisations, the management of their converged communications and their business processes. Some researchers and suppliers are already saying the future is not VoIP, but its extension: MoIP - multimedia over IP.
Geoff Johnson, a vice-president at Gartner, sees the future as "voice over everything". He said: "Voice will be embedded in everything, enabling anything from voice-activated documents to voicemails in e-mail inboxes. At the click of a button users will be able to speak to people who are working on a jointly written document to make amendments, reply verbally to e-mails, or check a person's availability, as with instant messaging, or by accessing the diary."
Johnson sums it all up with a simple conclusion, "Today we dial, tomorrow we click."
Steps to a converged VoIP future
- Identify business drivers
- Assess current infrastructure, with a detailed audit of the data network and voice traffic
- Identify and assess applications and potential process improvements
- Logically separate voice from data where possible
- Get proposals from suppliers identifying all costs, including infrastructure upgrades and new equipment and software. Ensure suppliers understand the security issues
- Get a clear development roadmap from the supplier, with clear vision on issues such as open standards and wireless communication
- Adopt open standards or at least familiar standards such as Windows, rather than proprietary offerings
- Identify potential cultural, technical, operational and organisational issues and barriers
- Define evaluation and acceptance criteria
- Ensure quality of service, with guarantees from service suppliers, plus network management and monitoring
- Run a pilot and learn from it
- Identify training needs
- Converge staff where necessary, defining roles and responsibilities for implementation and support
- Establish proactive support.
Sources: C&C Technology Consulting, Global Crossing, Gartner, Networks First
This was first published in February 2006