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VoIP services spell trouble for telcos

Zeus Kerravala, Vice President, Yankee Group
There have been many technologies, such as ISDN and ATM, which were to create voice and data convergence. By and large, these technologies were dismal failures, never achieving the intended critical mass. One could argue that ATM was widely deployed, but it was used primarily because frame relay speeds topped out at T1 speeds, and ATM was used for higher-speed data access. So, what's the difference this time?

As everyone understands, VoIP allows for the coming together of voice and data while untethering the service from the network. In other words, the network operator that delivers the connectivity does not have to be the same service provider that delivers voice services. As an example, and this is true for any IP-based application, picture the way email works.

End users don't really care where the mail server is; they connect over any kind of network connection (Lan, WLan, EVDO, dial, etc.), invoke the VPN client and, like magic, a connection is created and email works (the performance of Exchange over a VPN connection is a big problem but isn't really the networks' fault). It doesn't matter where the mail server is, who provides the service, or what network it's on -- it just works. Now extrapolate that user experience to voice services. Imagine having a softphone on a laptop or other mobile device that can provide single-number, corporate voice services wherever you are. This "application portability" is one of the main reasons we've seen a rise in hosted applications in recent years, and I fully expect voice services to be no different.

Historically, though, Centrex-type services bought from a telco have been unpopular for a number of reasons surrounding cost, features and lack of trust for the telco. The move to IP-based voice services does have some promise, however. First, hosted voice services -- also known as network-based services -- that have been rolled out will continue to be much more full-featured than the Centrex offerings of the past.

Also, the rise of VoIP allows other companies that haven't traditionally sold voice services to do so. For example, Avaya recently announced a hosted service branded "Avaya On Demand (AOD)" that lets customers purchase Avaya telephony as a service rather than a capital acquisition. The service allows customers to purchase IP telephony, messaging services, and contact centers on a pay-as-you-go, user-per-month basis. The Avaya service is unique in that it's the first traditional equipment manufacturer to offer its product as a service, following in the footsteps of many of the application vendors that have moved to a "software as a service" model -- but I don't expect it to be the last.

In fact, I fully expect to see many other types of companies that offered other service to enterprises offer voice services. Companies such as HP, IBM, Microsoft, Google and Yahoo could easily deploy voice infrastructure and add voice and messaging services as part of their portfolio, and this can mean only good things for corporate buyers.

I know there are a number of smaller providers of hosted voice services, some of them targeting small businesses now, but the innovation to enterprise buyers will come from companies that understand corporate IT and business challenges. Unlike the risk-averse traditional telco that moves with glacier-like speeds, the aforementioned companies are much more aggressive with their product rollouts and aren't afraid to try new services and either retire them if they're not popular or accelerate the rollout of well-received services.

Moreover, the customer service from traditional telcos has been, at best, marginal. For customers, this makes the decision to use a telco for an application as important as voice and messaging a huge customer-service leap of faith.

I know hosted voice service has its skeptics, and deservedly so, but the shift to VoIP will create a wide variety of options for decision makers from various types of companies. Buyers should consider services such as AOD for voice services as an alternative to buying premise-based equipment and as a replacement for the traditional, feature-lacking Centrex services.

About the author
Zeus Kerravala manages Yankee Group's infrastructure research and consulting, working with customers to solve business issues through the deployment of infrastructure technology solutions, including switching, routing, network management, voice solutions and VPNs. Before joining Yankee Group, Kerravala was a senior engineer and technical project manager for Greenwich Technology Partners; a vice president of IT for Ferris, Baker Watts; and technical project manager for Alex, Brown & Sons. Kerravala obtained a B.S. degree in physics and mathematics from the University of Victoria (Canada).


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