Voice Over Internet Protocol: The Right Call for Your Business?

Taking the plunge into VOIP for enterprises is starting to become more compelling for many companies. Real-life results so far indicate that for certain enterprises, moving some telephone communications over to VOIP and eliminating internal switch-based lines can save both in the near and the long term. Particularly if your company needs to upgrade much of its equipment and technology, the time may be ripe to move to voice over IP at this stage in the technology's lifecycle.  
 
For years VOIP, which stands for Voice Over Internet Protocol -- breaking up voice electronically into smaller digital packets capable of being moved over a data network (the same way that e- mail and web pages are) and then reassembled at the other end, in a form that can be heard at the other end through a phone that in most every other respect looks and acts like a regular phone -- has been ballyhooed as a way for telephone companies and enterprises to make telephony more cost-effective and efficient. Eliminating traditional circuit-based equipment -- the backbone of telephone service dating back to when operators connected callers with patch cables -- has been the rallying cry.  Instead of maintaining two or more separate systems for telephones and computer data, moving data and voice along one network is portrayed as a match made in heaven.
 
Yet the technology is young, and the benefits not always clear. And traditional old telephone service so reliable and getting cheaper -- in the U.S., at least. Which leads to the question: just how inevitable is data and telephony convergence? 

Very, according to Peter Bernstein of Infonautics Consulting, a telecommunications consultancy based in Ramsey, NJ. "We won't even be asking the 'if' question about this technology two years from now -- it's just going to be a question of how fast it ends up penetrating the market. There's no turning back." Like other analysts and telecommunications specialists, Bernstein sees the compelling argument  for converged data and telephony coming from the enhanced services that placing phones on the same network as data brings -- such as being able to access voicemail and email from the same remote device, whether it's a cellphone, laptop, or PDA.  (As Andy Morgan, of Sharp-Sky Consulting, in Minneapolis, MN puts it, "Early on, people thought, 'I can drive the cost of my voice down.'... but the real benefit is integration.")
 
Both benefits will bolster enterprise use of VOIP, which for the moment is dwarfed by consumer use:  A study by Probe Research, a consulting firm specializing in telecommunications, IP and wireless markets, in Cedar Knolls, NJ, estimates that over the next four years, enterprise use of VOIP will grow from the current rate of 3% of total traffic to 45% of VOIP traffic globally.  (Nevertheless the study concedes that the growth of enterprise VOIP could be impeded by the kind of economic downturn which can slow new technology investment, as well as "corporate culture" issues which resist wholesale changes.)    Elsewhere in the world, particularly in the Far East, where the cost of traditional circuit-switched toll calls is high, packet-based telephony is growing explosively in the consumer market: one estimate suggests that up to 40% of long-distance telephony in China will be over IP by 2005.  By then, according to Probe Research, 20% of domestic US long-distance calls will be over IP.
 
Late in 1999, putting in-house phone lines over IP seemed like the right thing to do for Americana Community Bank, a Sleepy Eye, MN-headquartered bank. Pressed by a variety of considerations -- a need to upgrade from its old networking software in preparation for Y2K issues, impending expansion to five branches from three, and antiquated telephony services -- the bank decided to implement a Nortel Networks VOIP telephony solution. Having already chosen to go with a full T1 connection for the brand-new Wide Area Network it would be using to relay data among all the bank's branches, Americana elected to use VOIP for all its intra-bank voice communications.
 
Now, an Americana employee in one branch can dial a colleague located in another branch located in a different area code using only four digits, with no need to pay carrier fees.  
 
"We're all in different area codes, so were spending a lot for long distance charges with five different offices," says Americana assistant VP Sheila Christensen. For Americana customers, it also means that telephone inquiries they make to a local branch can be transferred to a remote offic -- with no long-distance charges. "It saves our customers money, and that's been one of the biggest pluses," says Adam Dittrich, recently promoted to IT Director at Americana.
 
Asked about the total savings, Dittrich pointed out, "The savings is there if you're planning on using a T1 anyway. If you only need a [slower connection for your data] and you bump yourself up to a T1 just to get the savings, you're going to have to have a lot of locations and a lot of long distance calls because full T1 is very expensive. We were going to go with the T1 anyway, so we are seeing some savings."
 
Since Americana was making an early entrance into VOIP, they got a discount on the deal from Nortel. "Americana was able to take a bit of a risk, and Nortel was willing to help them," says Andy Morgan, of SharpSky, a consulting firm, who helped manage the changeover.  
 
It didn't all go smoothly: upgrading the WAN and adding the VOIP at the same time isn't something she'd recommend to others. Christensen rates the reliability of Americana's VOIP system at about 95% of circuit-switched, and there's occasional distortion, "but for the most part it's been very reliable."  
 
Analyst David Neil, of Gartner Group, who anticipates the tide of convergence to begin to swell in 2002, suggests to companies considering the transition, "If you're faced with the decision of having to replace your existing telephone system, then you can do that now -- you can bring in the new IP pieces of voice equipment." But, Neil cautions, "it's still a fairly immature set of technologies, and you're buying fairly early in the lifecycle."  
 
Getting the right terms is critical, says Neil -- which means driving a hard bargain. "If there was thing I'd suggest putting in your agreement it's that you expect a certain uptime, availability, and reliability, from the telephone system. I would say you should go for at least what I call 'four 9s' -- 99.99% of the time -- if not 'six 9s.'  And if it fails to meet that for an extended period of time -- probably no more than 3 months -- then you can get rid of that system, and you can terminate the agreement without any additional charges. I think if I had to pick one, that's one thing I'd really put in there.'
 
Neil, who also cautions that the price is apt to be high for some early adopters, suggests "asking hard questions" of vendors. "Going in, you need to be sure who's going to service this equipment."
 
In a word, caveat. "We're seeing some companies that in some cases are supporting this equipment -- that quite honestly don't have a clue as to how to support it, although they're the distributors of it."