There is no doubt that the Voice over IP (VoIP) market is growing rapidly and the genre is forcing change in the already shaken telephony industry. Frost & Sullivan has forecast that sales of VoIP gateways will be worth $260m (£186m) this year, and are set to reach $2.9bn in 2006.
Also according to Frost & Sullivan, the increasing number of firms using VoIP technology means that 75 per cent of all voice traffic will travel over IP-based data networks rather than analogue phone infrastructure by 2007. Yet these are still early days and the big question on everyone's lips has to be, "is this the year that VoIP finally breaks through and makes a difference?".
Head of new wave portfolio at BT, Steve Osborne, says that 2002 is expected to be the year of VoIP pilots and trials and there is already a lot of interest from customers in this area. "These customers tend to be ones who are already IP-enabled through the gradual upgrading of their systems, and they can see the competitive advantage of implementing VoIP," he claims. "While IT departments are keen to proceed, marketing and finance departments want to assess the risks, which is why we are seeing interest in pilot schemes such as those run by BT.
"For companies that are installing IT infrastructure into brand new sites or for SMEs looking to install technology for the first time," Osborne continues, "investment in VoIP is both cost effective and risk-free, and can enable them to leapfrog competition."
A key benefit of VoIP is its ability to increase customers' business agility. By way of example, Osborne mentions a recent project with the Greater Manchester Police where a key selling point was the ability for incident rooms to be set up more quickly. "As soon as a LAN is available," he recounts, "there are instantly phone lines to the room. Reliability is also a strong selling point. BT Exact's trials have shown that VoIP offers enhanced reliability: should a line go down, IP instantly connects to another."
Paul Harris, specialist sales manager with BT Indirect Channels agrees that VoIP can be used to improve sales and channel communications but has reservations. "The key is getting people's attention," Harris says. "For VoIP to improve communications it must first become ubiquitous. Until that time, it may actually hinder channel communications."
He doesn't think that 2002 is the year that the necessary attention will be grabbed though, arguing that "too many organisations are pushing VoIP as a means to reduce costs by converging two separate networks - voice and data".
"True, there are cost savings to be made in terms of running costs such as staffing, admin, bandwidth and so on," he adds. "However, the costs involved to move from two separate networks to a single platform are not always clearly stated up front."
When FDs look at the costs involved to achieve the ongoing savings, they can be alarmed. Add the inertia created by the fear factor of moving into new technology and you have some hefty barriers to overcome.
"VoIP will have its year," Harris insists, "but it will need to be positioned correctly and matched against tangible customer perceived benefits. To achieve this, a large investment is required by resellers/systems integrators in terms of getting to know a customer's environment. Not all are prepared to make this investment."
Mark Blowers, a senior analyst at The Butler Group, isn't sure that VoIP is going to take off just yet as that phrase implies exponential growth. He prefers to say instead that it is definitely on the runway and ready for take-off. "Adoption by enterprises will evolve over time as networks are upgraded and bandwidth issues - most notably in the local loop - are resolved. So the next three years will see more organisations starting to use VoIP."
NTL business IP portfolio manager, David Wills, thinks associating VoIP with the public Internet is a red herring - and it's an association made all too often across the board. "While technically possible," Wills explains, "the quality will remain unacceptable for businesses and consumers. While short delays are acceptable in the transfer of data, a delay of even a fraction of a second results in a significant drop in quality for a voice call."
Indeed, using the public Internet for voice calls takes quality control out of the hands of a single service provider, which means it is subject to the 'normal' delays of the Net. Where VoIP will take off is over private IP networks, where a single provider can retain control of the transport of IP packets across the entire network, enabling it to set and uphold service level agreements to guarantee quality.
"VoIP will definitely change the way business users work," Wills insists. "The key benefits will be for large corporates, particularly those spread over disparate sites on a national or even international scale. Voice and data traffic can be routed over the same virtual private network (VPN), improving network efficiency and delivering a number of performance and cost saving advantages, including free calls between VPN member sites. VoIP is just one of the applications made possible by migrating to an IP VPN. Additional considerations include provision of intranet and/or extranet facilities, a unified messaging solution, multimedia call centre applications and so on."
Different not changed
As you might imagine, not everyone agrees with this viewpoint. Take Kevin Dowd, CEO of Convergent Network Solutions, who admits that initially it won't change the way we work saying, "we might be talking through a PC connected headset rather than over a phone but that isn't change, it's just different."
Over time, however, Dowd sees a vision of voice and PC integration accelerating at the application layer, as well as at the transport layer. "I think the surprising effect will be that the combination of VoIP and improved voice recognition technology will mean that voice enabled apps will finally happen in a big way because pervasive voice/PC integration will make such apps useful," he argues.
Dowd also pooh-poohs the idea that the Internet is a red herring as far as VoIP transport is concerned, telling us: "It's not going to happen soon, as much for commercial reasons as technical, although both provide significant challenges. Widespread voice across the Internet is on more like a seven to 12 year timescale. It's VoIP inside the corporation and, to a growing extent between business partners, that we see as being the massive growth area in 2002 and 2003."
Marc Nackaerts, product manager at Ericsson Enterprise, warns that many companies are still asking questions such as: why change? what are the advantages? can it cut costs? The fact that the existing LAN/WAN infrastructure is most likely able to support the technology now is sidelined by these very sensible, issues - and for good reasons.
As Nackaerts explains: "If your WAN infrastructure is ready and has sufficient capacity, you can start using VoIP on your private WAN network to reduce communication costs and extra capacity rental."
But he warns that "if the capacity of your WAN/LAN is limited, you will need to invest in upgrading your data infrastructure, after which a second investment is necessary to upgrade or change the voice infrastructure. And all this to have less functionality on the phone you are using".
A viable strategy
It is easy to sit back and dismiss the VoIP of today as an over-hyped technology that never delivers, but don't ignore the potential for tomorrow and beyond. The reasons for the slow take-up are as varied as they are many.
As Ralf Ebbinghaus, vice president for sales and marketing at Swyx Communications explains, there is much evidence to support the claim that 2002 could be the pivotal year.
Taking a Europe-wide view, he tells us: "In Germany, most of the old legacy ISDN PBX systems were installed in 1992, 93 and 94. Most of these systems were leased or rented by companies. Typically, you have a 10-year lease/rental agreement.
"Therefore, 2002 is the first year where corporations will be thinking about their future PBX infrastructure."
He is undeniably confident that IP-PBX systems will be part of the new infrastructure in Germany, and there is plenty of other evidence to support VoIP as a viable business strategy, including wider use of Internet, e-mail and so on, along with increasing demand for customers to integrate voice into their holistic communications environment.
Voice quality has also seen a dramatic improvement, so it can compete well with traditional PBX-based telephony. Dowd sums things up nicely. "VoIP may have been over-hyped but that does not mean the technology is not credible," he says. "We have to stop thinking about convergence as a dirty word. It is the way forward; all networks will soon be converged networks and we will be back to talking just about 'networks' again."