If you believe what you read these days, you can now run your telephone system over a computer network and save your business buckets of money. The reason for this is ‘IP telephony’; a term which a few years ago described headset-clad home computing pioneers straining to hear their relatives over a public internet connection. Today, however, IP telephony describes the ability to make voice calls and run PBX systems and telephony applications over any data network based on the Internet Protocol (IP).

For home users this might still mean making voice calls over the public internet; but for security, administration and voice quality reasons, businesses use their own private (and faster) IP networks. While IP telephony is commonly called “voice over IP” its true scope is wider than that.

A business with IP telephony can integrate voice, video and data, which means text messaging, voice calls and video can be combined as information is sent or received. Faxes can be received by a computer and printed on a network printer, voice calls can be dialled with the click of a mouse button, and phone systems can be controlled from a computer desktop or web page. For the end user, things look much the same as they always have; IP phones still look like phones; and IP-enabled fax, modem, eftpos terminals and PBX systems connect to the IP network in the same way traditional devices connect to switched circuit networks. However, IP telephony has the potential to make a big difference to the business bottom line.

So how does it work?
Without getting too technical, a voice-enabled IP network can turn voice signals that would have stayed voice signals on a traditional phone network, into packets of data. As data, the packets are sent consecutively over the IP network until they reach their destination where they are turned back into voice for the recipient.

As long as the IP network has been properly engineered, voice conversations will be as good as those made over a traditional phone network. With the right technologies, IP telephony networks can also be wireless and may link up with mobile phone networks.

Who’s doing it?
So how interested are New Zealand businesses in IP telephony? According to the MIS Top 100, which catalogues New Zealand’s 100 largest IT users, IP telephony is being widely piloted amongst universities, government departments and large companies.

The report notes companies in the top 100 see the move to IP telephony as inevitable and as an opportunity to make significant telecommunications savings. David Lutterman, national sales manager for telephony specialists Ericsson Enterprise Systems (EES), likens interest in IP telephony to the earlier interest in the digital telecommunications service ISDN. “People started off by making sure their networks were ISDN capable, but it was five years before they actually began to invest.” He says while EES is expecting a sharp increase in the uptake of IP telephony this year, few companies will completely replace existing telecommunications platforms with pure IP telephony.

A case in point is the University of Auckland. Stephen Whiteside, ITSS manager for the university, says while an eventual move to IP telephony is inevitable, the university’s legacy PBX system still works well. “Our [IP telephony] strategy will be incremental rather than a big bang.”

Several other organisations are following this example and dipping a toe into IP telephony. Phil Wright, information management and technology manager for the Christchurch City Council, told the MIS Top 100 a move to IP telephony had increased network performance and reliability and reduced the council’s telecommunications costs.

Other organisations planning, trialing or using IP telephony include New Zealand Steel, Whitireia Community Polytechnic, travel firm Gullivers Pacific, Waikato Institute of Technology, financial services group IAG, and the Auckland University of Technology. Lutterman says organisations typically consider IP telephony when satellite sites need upgrading or older PABXs are not up to supporting new applications.

“A classic scenario is a head office with regional and branch offices that can be served by IP extensions. Cost modelling drives the case for the IP extensions, while it may make no sense at all for a head office to have IP telephony if its legacy PABX is working perfectly.”

The uptake of IP telephony by smaller companies in New Zealand is also minimal, with few case studies on offer. Reasons for this include cost, lack of understanding, and the fact IP telephony specialists mainly work with larger companies. However, there are alternatives for smaller businesses – with services that give businesses access to applications hosted on the IP networks of telecommunications providers like Telecom and TelstraClear becoming available.

In the case of TelstraClear, its Private Voice service offers up to 120 hosted telephony features and is designed to scale so smaller businesses wanting 10 IP lines one month and nine the next month will only be charged for the exact number of lines they use. TelstraClear product manager Rod Grieve says Private Voice can integrate with Microsoft Outlook and a software call manager so users only need to click their PC mouse to dial a number. It also supports remote teleworking, provided the user has a secure connection to the local area network.

Lutterman says while EES is in competition with services like Private Voice, there is an economic “hop off” point where it makes sense for smaller companies to hire or lease IP telephony. He says while the hype surrounding IP telephony is a nuisance, interest in the technology is well founded. “IP telephony’s time is fast approaching. Organisations are looking hard at ways to reduce costs through alternative technologies and New Zealand is ahead of the global market.”

So is IP telephony a good idea?
IP telephony is a good idea if a business case supports it. For example, it is well suited to organisations transporting a lot of voice and data traffic between dispersed sites, whether these are national or international.

According to research, the returns on IP telephony investments are threefold; greater productivity through telephony applications being easier to use and access; reduction in IT support costs through a centralised voice, telephony and data network; and the much touted call savings which occur because the business can use its own network for calls made between geographically distant workers with local or remote access to the network.

Brian Evans, product manager for EES, says businesses that haven’t yet invested in IP telephony shouldn’t fret. “There’s no need to panic; you’re not missing the boat. We have actually charged into customers a number of times thinking ‘let’s take the IP telephony view’ and then ended up using traditional models.”

He says businesses want access to the telephony applications they want – and to receive the voice quality they’re used to. As a result, when IP telephony installations go ahead, they tend to be heavily customised. “You have to look at each company, its individual users and then at what the company wants them to be able to do and where from. Sometimes a mobile phone or cordless phones will do the job at the end of the day.” Lutterman says EES customers ask for on site and remote access to IP telephony applications like voice and unified messaging which accept email, voice mail, SMS and fax messages.

Mark Gordon, IP telephony practice manager for telephony specialists Logical CSI, says businesses of all sizes can expect ROI on an IP telephony investment within six to 18 months, irrespective of the size of the installation. “The real benefits are in the applications. If you have a contact centre which caters for multiple sites, then one operator can see the status of all branch office extensions from one desktop. And if a main call centre gets too busy or overloads, calls can automatically be re-routed to the correct branch or extension.”

Gordon believes smaller businesses will become accustomed to the benefits of IP telephony as IP telephony products and services become more established. “Applications like unified messaging and call detail recording packages are becoming easier to install, and the cost of them is coming down. Some smaller IP switches now even have unified messaging built in.”

How do we get it?
If IP telephony is beginning to sound worth a look, a look is what you might like to start with. The two main ways to introduce IP telephony are to IP-enable an existing PABX, or install a new fully deployable IP telephony infrastructure. Most businesses start by running a few IP phones alongside a legacy system until they feel comfortable IP telephony works.

Gordon says a typical pre-IP telephony scenario consists of a company with a reasonable network, a legacy PABX and separate telephony applications on a network separate to the data network. A hardware upgrade to IP capable switches and routers is usually needed, and the cabling and the bandwidth of the data network may need to be increased to accommodate voice. IP telephony installation times tend to run for three to six months and move forward in phases.

So a company might start with 50 phones then decide to buy another 20. Whatever way you do it, Gordon says using an experienced IP telephony partner is a must. “We’ve had a few customers say their IT team could handle it and invariably they’ve had to put their hands up and ask for our help.”

He says, most importantly, organisations have to get ‘voice’ right. “If the delivery of a voice data packet is too slow or of poor quality it’s going to have a very visible impact on business.”

Evans says the most critical part of IP telephony installation is ensuring the data network is voice capable. “It should be load tested for its capacity to carry voice and data reliably and in a timely manner. Then an IP telephony server can be set up and end user devices connected to the network.”

What does it cost?
As you might expect, as an organisation increases in size or telephony complexity; so does the cost and complexity of installing IP telephony.

Gordon says while ballpark costs are difficult to gauge, a business with an IP telephony system with more than 1000 extensions will pay several hundred thousand in IP products and installation.

A business with a few hundred extensions will pay tens of thousands and the cost for an 80 person company with a single site wanting a reasonably complex IP telephony solution will probably stay under $100,000. Very small businesses of less than 50 users may pay less, but will probably find a hosted service like TelstraClear’s Private Voice more economical.

Lutterman says the cost of IP telephony depends on the applications wanted and Evans says the biggest unknown is always around the status of the data network. “Less than 15 percent of our customers would have a data network capable of running voice. The other 85 percent would have varying levels of infrastructure to support it.”

April 2004

By Vikki Bland