VoIP: Still on hold

Voice over IP promises huge cost savings, yet companies are hanging back from investing in the technology. Philip Hunter...

Voice over IP promises huge cost savings, yet companies are hanging back from investing in the technology. Philip Hunter investigates

Small and medium-sized enterprises (SMEs) lay the turf while large enterprises should prepare for voice/data integration but be in no hurry to do it. Voice/data will increase, not diminish, dependence on single suppliers such as Cisco, Nortel, Avaya. Virtually all voice will be carried as IP packets within five to 10 years, and the question, therefore, is not whether to migrate, but when. Huge savings in equipment costs and network administration are promised. And yet many larger enterprises, in particular, seem to be delaying the day as long as they can.

The main reason for the delay, according to BT's marketing manager for convergent telephone systems Nick Malyon, is that the investment in a converged voice/data solution can often be justified only when it is time to replace existing phone systems anyway. "Purchases tend to be led by a business event such as replacement of an old PBX [private branch exchange] or move to a new site," he says.

When such an event occurs, however, enterprises often seem willing to pay a premium to install phone systems that can be plugged into an IP data network even when there is no immediate intention of doing so. "A lot of our customers are paying more for a platform that can be upgraded later on," said Malyon. The precise premium varies, but is usually about 15% to 20% above the cost of a voice-only solution. IP phones cost more than standard handsets, and there may be more to pay for a PBX that can transmit voice over an IP network.

This equipment premium is not the only cost associated with a migration to voice over IP (VoIP). The data network may need upgrading to carry voice with sufficient quality of service. Extra bandwidth may be needed over the wide area. And if the intention is also to migrate voice traffic from traditional phone wiring to a local area network (Lan) within the sites, existing Lan switches may need replacing as well. So the Lan, too, can retard migration to all-out VoIP - at least until it needs upgrading for other reasons. And they have to be good reasons, for the era of regular upgrades for their own sake vanished with the bursting of the dotcom bubble.

The immediate case for migration to VoIP, irrespective of whether the time has come to replace voice or data systems anyway, is economic and administrative. Over the wide area, the ability to fold voice into an existing data network saves on dial-up charges, and can cut administration significantly because there is just one network to manage. The same applies to Lan telephony, but then there are additional savings through having just one physical cabling system instead of two. Apart from reducing cabling costs, this simplifies changes within the office because adding, relocating and removing users is now a single operation for both phone and PC. It is just a matter of plugging a PC into the Lan for automatic configuration and downloading software to turn it into a phone, or to have a separate VoIP handset feeding off it.

Taking into account these apparent cost savings, most enterprises could make a sound case for an immediate migration to VoIP, even in some cases where this would mean replacing existing systems before the end of their useful life.

But such return on investment (ROI)arguments are often illusory for large enterprises, which is one reason why many are reluctant to make significant investments in voice/data integration for its own sake, says Sandy Aitken, mobile business leader for Europe at consultancy group Pricewaterhouse Coopers. ROI calculations are often made in isolation, on the false assumption that technology never changes, Aitken warns. Enterprises should consider voice/data integration in the context of the whole IT infrastructure and the wider business processes, Aitken insists. "Otherwise, an enterprise may save $50,000 (£31,850) on networking infrastructure through migrating to VoIP when they could have cut costs by $20m through business process change."

Aitken points to the growing use of hands-free and even cell phones within offices, which could mitigate the assumed savings through combining voice and data over a common fixed-cable network. If a business also implemented a wireless Lan, then the investment in VoIP and IP phones would become a waste of money. Most office phones and PCs are still attached to fixed wires, but the trend towards all things wireless is continuing, and so the case for VoIP may be less compelling for some sites than for others.

"Enterprises need a convergence strategy based on answers to the questions: what do you use? why do you use it? how do you minimise costs and maximise advantages?" says Aitken. "That's why some enterprises are investing in Digital Enhanced Cordless Terminal and GSM dual handsets in their offices so staff can still use their mobiles in the office without incurring cellular call charges while on site." Such a strategy, he says, will often save far more than a move to VoIP.

On the other hand, there are circumstances where the case for VoIP is compelling - notably within call centres, particularly when agents are working from home. VoIP makes it easier to manage homeworking agents and route calls to them, because both the voice and associated data such as customer details can be transferred via a single IP session. Without VoIP, the task of co-ordinating voice and data within a call is much harder, although not impossible.

In the case of homeworking call centre agents, VoIP will save money on both communications costs and equipment such as handsets and fax machines, which can be incorporated into a PC. But the real prize lies in improved staff retention through better quality of life, according to Neil Strenge, product marketing manager at phone and data systems company Siemens Network Systems. "Staff churn within traditional call centres is often 30%, which is expensive given the high costs of training," he says. "Already some call centres have reduced that significantly by allowing agents to work from home on the back of IP telephony, and this is having a huge impact on their profitability." The potential for assisting with beneficial changes in working patterns, then, constitutes another part of the bigger business picture that needs to be considered when migrating to VoIP.

The case for IP telephony within call centres is also strong where alternative channels of communication are supported, such as e-mail and Web chat. "With IP telephony, you can have a single queuing server for all channels, making it much simpler to manage the process," says David Mackenzie, principal consultant at CT Consulting, a specialist in voice/data integration.

For SMEs, voice/data integration is often easier to justify because the bigger picture is not so vast, and cost savings are easier to determine, according to Aitken. "Smaller firms have a better idea of what their fixed costs are," he says. "Big companies haven't a clue."

Largely for this reason, IP telephony has been unusual in that SMEs rather than large enterprises are at the leading edge. RSPCA has installed end-to-end VoIP both within its Lans and its wide area, based on a clear cost justification. The charity estimated that it would save £2m over five years on equipment and ongoingmaintenance. Similarly, the Greater London Authority has installed a Lan in readiness for a move to VoIP in the near future. A persuasive factor is that, for a new site, it costs little more to make the data network ready for IP telephony, with the latest Ethernet switches being capable of supporting the necessary quality of service. The major cost for greenfield sites comes on the voice side, especially in IP phones.

Whatever the size of the enterprise, the full potential for savings will not be realised unless voice/data integration at the technical level is accompanied by convergence between the respective teams. "There has to be convergence of people as well as of networks," says Andy Palmer, regional vice-president at Lan and VoIP switching supplier Foundry Networks. The traditional divide between the voice and data departments needs to be dissolved, and the skills transferred into a common communications team.

Strenge says the best way of effecting this convergence between people is to bring the voice skills into the data department rather than the other way round. Voice, after all, is just a form of data, and should be considered alongside other channels of communication such as e-mail.

It is important, though, that voice skills are retained, because voice does have unique requirements in terms of quality and user expectation. Within a large enterprise there will be varying requirements for voice quality, and this should be considered when investing in converged solutions. For some internal communication, lower voice quality can be tolerated, given that in many cases staff use their mobiles rather than a desk phone anyway, preferring convenience to sound fidelity. There can be scope for saving by compressing more voice channels into a given bandwidth for some internal links, while maintaining maximum quality where customers or business partners are involved, such as in a call centre.

The other important considerations are security and service availability. Traditional circuit-switched phone services have scaled great heights of availability. And they are also highly immune to security threats - notably, denial of service attacks, to which data networks are vulnerable. However, with VoIP, voice becomes another form of data, and susceptible to the same threats and availability levels. It is now possible to make data networks as reliable as circuit switched voice with inbuilt redundancy, and also to insulate the VoIP component to a large extent from denial of service attacks, but this all comes at a price.

Part of this price is a greater dependence on a single supplier providing a one-stop shop. Traditional telephony is based on mature signalling standards that have made it possible to mix and match PBX suppliers. But with IP voice, there are no agreed standards for negotiating quality of service along end-to-end paths involving multiple suppliers. So most consultants recommend accepting that your network will all come from one major supplier. "To get the best quality, it is difficult to mix and match. You are better off with a single supplier," says Mackenzie.

This may be another reason why some enterprises are holding back from a major investment - waiting for universal peering standards that enable quality of service for voice to be guaranteed across a multi-supplier network. But it is almost certainly a mistake to make major purchases of traditional PBXs rather than systems that are at least capable of IP telephony, for that is the way the world is going.

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