IP phones touted as voice of reason

If your company is thinking about making the switch to voice over IP, you’re not alone. Most early adopters of IP telephony are motivated by cost savings on long-distance — and aren’t always aware of how the technology can help them in other areas, such as improving productivity or delivering better

customer service. But high start-up costs mean they need to consider these other benefits and develop a business case before deploying VoIP.

TechTrex Inc. made the move to VoIP last May, after closely watching the market and deciding the technology was finally ready for prime time. The Mississauga, Ont.-based company provides hardware solutions for the card payments industry and has offices around the world, including the U.S., Japan, Korea, China and the Philippines.

Daniel Kim, the company’s vice-president and general manager, travels two weeks out of every month — one overseas and one week in the U.S. With a VoIP phone, customers can reach him wherever he happens to be by calling his Mississauga phone number. By switching to VoIP, he says the company has seen a “”dramatic decrease”” in communication costs. Now, it spends $30-$35 per month per phone.

“”Before it was hard to keep in touch. I had to use e-mail,”” says Kim, calling from his VoIP phone in South Korea. “”Now I don’t lose a day trying to get back to people.”” In fact, he says, most people don’t even realize he’s not in his Mississauga office when they call him. He likes the fact he doesn’t have to worry about expensive hotel rates for long-distance calls or deal with international calling codes anymore. “”Once you see how much per month you can save, I don’t see how the traditional phones can compete,”” he says.

The company has also given some of its key customers in Asia a Vonage box so they can call any of TechTrex’s offices without having to worry about long-distance charges. “”They think it’s great. They can call North America for free,”” he says.

He also likes the features that come with VoIP. His voicemail, for example, is e-mailed to him. As a result, his VoIP phone has become his primary line; his cell phone is his secondary line.

An IP evolution

Over time, IP telephony will go from being a secondary line service to a replacement for the primary line, says Keith Nissen, senior analyst with In-Stat/MDR. However, this will be more of an evolutionary process than a mass conversion to IP. “”The time has come for it because even though there are portions of the technology that are not necessarily stable, it’s there, it’s being deployed by enterprises, it’s being deployed by the carriers,”” he says. “”From an industry standpoint it’s disruptive because a lot of the business models that are in place today are going to go away and they’re going to be replaced by new business models that may or may not be more beneficial to a specific company. But that change is going to be forced on companies.””

The migration began last year as companies realized they could receive significant cost savings by eliminating their dedicated PBX voice trunks and using Internet transport facilities instead. “”Any time that you’re reducing the number of devices that you’re managing, that is good for IT costs,”” he says.

In many cases, a company bases its ROI on transport savings or the conversion out of its PBX assets. However, Nissen says, they’ll also see “”abstract”” savings and productivity gains that are difficult to quantify through an ROI analysis, such as the ability to support mobile employees. In Europe, for example, transport costs are already low, so the migration to VoIP is being driven by equipment change-out and the features and functionality of IP.

“”It’s about making your telephone a computer. It’s about turning your telephone into a productivity tool,”” says Catherine Devlin, president and founder of Rimode Inc., a Toronto-based company that builds IP telephony applications. The evolution to IP is inevitable, she says, considering the telephone hasn’t changed much over the past century. “”Alexander Bell would be absolutely thrilled with this if he could see it,”” she says.

Back-end benefits

VoIP allows the telephone to perform basic — and, in the future, much more complex — interactions with the back-end databases that run a company. When Rimode (formerly Devlin eBusiness Architects) made the switch to VoIP, the company’s decision was based solely on back-end integration, she says.

“”Long distance was not the issue. It does save money, absolutely, but the capability of these phones to run services was our decision-making factor.””

Some of these services include integrated e-mail and voicemail systems, audio and text-based broadcast systems, dashboard applications that interface with corporate ERP and CRM, as well as call accounting and billing.

But, as in the early days of the Web, people don’t understand exactly how VoIP can help them. “”IP telephony in its infancy is a long sales cycle,”” she says. “”It is difficult to show people right away all of the benefits you get from integrating the phone into your back-end infrastructure and talking over the Internet, so it’s early days.””

Quantifying your benefits is hard, says Amol Shah, telecom and Internet research analyst with IDC Canada. “”Senior management want things to appear on paper and it’s not always that easy,”” he says. “”But the whole cost of your IT operations goes down because you’re managing a lot less. Everything’s on an IP backbone. You can be anywhere in the world with an Internet connection.””

A broad range of companies are adopting VoIP, despite the fact it’s hard to quantify these benefits and the high start-up costs. However, many are taking a wait-and-see approach before they put a constraint on their budgets. While we’re already seeing early adopters, Shah says we’ll see a dip in 2005 as companies hold back and watch the market, then higher adoption rates in 2006-2007.

In search of skill sets

Some are waiting because they don’t have the skill sets to deal with VoIP. “”The telecom guys are going to have to get a lot closer to the data and network guys in terms of how they’re going to manage this infrastructure,”” says Bob Seehra, Rimode’s director of technology.

“”It’s something new to both areas. You’re not going to have in-house expertise right away. It’s something you’re going to have to build.””

This will be the case in the higher end of the SME market, which doesn’t necessarily have the same in-house staff and skills as large enterprises, says IDC’s Shah.

“”This is why a lot of companies outsource it and have it managed or hosted by the provider,”” he says. “”Most providers are pushing that as much as they can because it’s an added revenue stream for them. And it’s a pretty big revenue stream.””

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Jim Love, Chief Content Officer, IT World Canada

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Vawn Himmelsbach
Vawn Himmelsbach
Is a Toronto-based journalist and regular contributor to IT World Canada's publications.

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