VoIP gear routes to services

For enterprises, in recent years the business of VoIP has mostly consisted in buying mysterious black boxes and IP-conversant network gear from vendors. The belief that slapping VoIP gear onto existing data networks would magically make expensive telephony charges go away is itself going away as legions of consultants descend on enterprises to make the voice and data parts work together. But this phase too will eventually end. So what will carriers and telecom providers do for an encore once revenue streams from VoIP infrastructure build-outs dry up? No free lunch The idea that an upfront investment in VoIP infrastructure would essentially result in free telephony is going the way of the dinosaurs. "This early perception has proven to be false," says Carmi Levy, SVP at Toronto-based AR Communications. "It takes ongoing investment to maintain quality of service (QoS) and replicate the voice experience." There are a multitude of recurring costs beyond infrastructure, he says. Telecom and data centre staff are needed to tend to converged networks. Since not everyone is using VoIP, there are still local access charges and costs for overseas calls routed through the traditional PSTN. Mobile phones and their integration must be factored in. And few organizations have ‘pure' VoIP in place, so there are still costs for conventional telephony infrastructure for disaster recovery or other purposes. "Until the last PSTN line on the planet is pulled someone will be paying for it," says Levy. "VoIP reduces telephony costs but it doesn't eliminate them. Some organizations reduce ongoing costs by 90 per cent while others barely make a dent, depending on the type of traffic." Slashing long-distance charges appealed to many organizations a few years ago, but this motivator has gone away. "Long distance has been inexpensive for a long time now, so people have to be careful about whether VoIP still saves them money on that score," says A.J. Byers, SVP of business services at Toronto-based Primus Telecommunications Canada Inc. The lure of unified communications is now the driver, says Jeff Lewis, director of product management at AT&T Canada. Cheap phone calls aren't enough to justify VoIP investments, he says. "CFOs are typically the ones challenging the costs and asking, ‘Explain to me why you're moving to VoIP?'" What organizations want is a converged platform that will enable them to maximize their investments in their increasingly mobile staff, says Levy. "People are their most expensive assets, and they're looking to collaborative technologies, video conferencing and so on to boost productivity. What organizations really want is to move to a common in-box so all forms of messaging will be accessible regardless of medium, channel or device." The first step is moving to VoIP, but costs are really just shifted around, he says. "Under the old PSTN model, the carrier assumed responsibility for the infrastructure, and organizations paid monthly subscription costs. With VoIP, you make a large capital investment followed by relatively low subscription costs - if you choose to manage the infrastructure yourself. So what carriers do now to maintain revenue is provide services." Implementing and maintaining a VoIP network isn't a core competency for most organizations, and getting all the moving parts to work properly is proving to be a major headache. VoIP network maintenance and quality of service (QoS) management requires specialized expertise and toolsets. For many organizations, these tasks are more economically handed off to providers. "VoIP maintenance just establishes a baseline relationship for delivery of more services over time," says Levy. "Once providers have infiltrated an organization, they're better positioned to introduce new services that can open new streams of revenue." VoIP networks' crisis of complexity The hosted model is also catching on as an alternative to owning and worrying about VoIP networks in-house. "We're seeing 30 to 40 per cent growth month over month in our hosted VoIP service, which we launched under a year ago," says Byers, adding that Primus is primarily focused on medium-sized businesses of up to 500 employees. "Some enterprises want to make capital investments in VoIP, and we can't compete with that. If they want to buy and use infrastructure over a 10- to 15-year period in the traditional sense of buying a phone system, a hosted solution is not for them." But he points out there's a ‘crisis of complexity' afoot in communications. "No one knows what to buy anymore. Technology changes faster every year and nothing lasts 10 to 15 years anymore, and those organizations that just want a fixed monthly operating expense are going for hosted solutions." Although overall costs are similar in both models, the biggest impetus for organizations opting for the hosted approach is that it adds unified communications, disaster recovery and scalability while taking away the headaches of managing infrastructure, dealing with multiple vendors and technology obsolescence, he says. "They get additional functionality at lower internal cost to their people, although I wouldn't say the total cost of ownership is lower." Traditional PSTN costs are typically higher than for managing a network at a high level. "For us, the cost to run a VoIP network is less than to run a traditional voice network, and we pass those savings on to our customers via VoIP and long-distance," says Byers. He points out customers also get the benefits of higher-end infrastructure likely beyond any individual company's budget. "Our hosted solutions are implemented over a private network with dedicated T-1 lines, not Internet links, and they get the benefit of a telecom-grade switch, which can cost thousands of dollars." Many companies don't really want to buy a VoIP phone system as such - they just want to buy efficiency for their people, he says. "This is why we wrap all our products in managed solutions - we provide all the hardware, software and phones for a monthly price per seat." All value-added VoIP services are also bundled into Primus' offerings: integration with MS Outlook, find-me/follow-me call routing, automated attendant and so on. The company's strategy is to expand its geographic reach across Canada, and to integrate chat, IM and unified communications into its offerings to appeal to younger demographics as they enter the workforce, he adds. Despite the benefits, hosted VoIP solutions have not dominated the market, says Jay Angl, analyst at the London, Ont-based Info-Tech Research Group. "For something as critical as voice, I don't think most companies are looking in that direction, but it's suitable for some. Although hosted VoIP has been around for some time, in-house solutions are a step ahead of hosted solutions today," he says. But he acknowledges that scenario is set to change, as software as a service and cloud computing are major and evolving business trends. "Once hosted offerings mature, they're going to be huge. And it opens up the market to new players like Google and Microsoft in the communications space." VoIP off-premise services to grow Large enterprises typically prefer to own and manage their own VoIP networks, but many providers believe future revenue streams will come from providing services off-premise in the computing cloud, says Levy. AT&T, for example, is focused on global multinationals, says Andrea Messineo, VP for Canada, Latin America and the Caribbean. While these have been reluctant to cede control to providers for VoIP systems, many are starting to come around. "Global multinationals are asking for consistent services on global basis. They're asking us to put more capabilities into the cloud so they can respond to business peaks and valleys effectively," she says. She says AT&T already owns the largest IP backbone in the world, and the company recently announced another $1 billion of investment to expand its global infrastructure. "The company's future vision is to offer hosted VoIP and IP services on a global basis. It used to be just combining voice, data, and video services, but now customers are also concerned about security and business continuity." The company started on its global cloud path by offering security services, she says. "By analyzing traffic, we can predict worms and viruses before they hit. Today, customers are buying managed firewalls that fit in the cloud, and AT&T's remediation service is to take those threats in the clouds and hand off clean data to a customer's site." The company has also evolved VoIP and other IP services, and now offers a continuum of hosted offerings, she says. "Early VoIP adopters tended to build their own networks, but now it depends. If they have the expertise, they may want to own it for large corporate sites, but rolling it out to smaller sites may be less economical. We see a lot of mixing and matching, with organizations managing larger sites but turning to providers for smaller ones." Adoption of IP services in general has been slow, but analyst firms such as Forrester Research are predicting a surge in the 2008 to 2010 period, she says. And according to AT&T surveys, about half of Canadian companies are looking to rollout IP services on a managed basis. "The biggest number of customers is moving now." With hosted services, large enterprises typically want their own dedicated PBX box, says Lewis. "There may be a unique integration with their other systems, but they don't want to manage VoIP." But some early adopters are now eyeing fully hosted services. "In this model, the heart and brain lives entirely in our infrastructure without a PBX in the middle. We've had that solution for a year and a half but we don't have it globally yet. It's a roadmap vision item, but we're still getting our arms around local regulations so we can be a local service provider outside the US." Cloud computing may open up new revenue streams for carriers in addition to telecom providers, says Levy. "Anything that forces people to rely on networks increases the value proposition of carriers that provide access points," he says. "They don't need to own the cloud, they only need to connect between the ground and the cloud. And this may actually forestall the commoditization of their services. Who cares which one is cheaper - people will care about performance, uptime, and security if they're to rely on cloud networks."

VoIP gear routes to services

News | 05/28/2008 3:15 pm EDT

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us