Internet protocol (IP) telephony is heralded by analysts as an enabling technology for telecommunications and computing convergence, rather than just a way of saving money on toll calls. The distinction between IP telephony and voice over internet protocol (or VoIP) telephony is simple: IP telephony goes beyond voice and the convergence of telephony and data on the one network, to incorporate enhanced services, such as streaming video.

In July 2004, the Telecommunications Users Association of New Zealand (TUANZ) published its second special report into IP telephony, A User’s Guide to Assessing a Business Case. In its introduction, author Greg Adams points out that since TUANZ’s first report into the subject in 2002, IP telephony has matured substantially.

This ought not to come as a surprise. Visionary New Zealand CIOs – who, as early as 1999, began planning infrastructure upgrades incorporating IP telephony – have done the groundwork for others and, in learning by doing, those early adopters have dispelled many of the misconceptions about IP telephony. At the Ministry of Social Development, for example, one of the world’s largest and earliest IP systems was handling between 130,000 and 160,000 calls as early as September 2000.

The Asia-Pacific region’s service providers today have a wealth of experience and at least five local vendors belong to the leaders in Gartner’s Magic Quadrant for Asia Pacific Enterprise Telephony.

In considering the maturity of IP telephony, it’s worth remembering that, while the local user base is growing, it is still largely confined to traditional early adopters and public sector organisations with large IT budgets: Of 28 major NZ installations listed in the TUANZ report, eight are in IT or telecommunications and another seven are in local or central government. So, what is the business case for IP telephony and VoIP (voice over internet protocol – the protocols for making a voice call over an IP network), and what are the options available to local organisations looking at an IP telephony upgrade?

Market forces
TUANZ says the cost of IP networks with a defined Quality of Service (QoS) – a vital consideration – is slowing New Zealand down in comparison with other countries, as is the continuing high cost of local broadband connections.

However, IP telephony growth is exceeding that of other IT expenditure, with leading suppliers claiming installations account for 60 percent of their business. While it is unlikely IP telephony will completely replace traditional voice services in New Zealand for many years to come, the Telecommunications Industry Association, in its 2004 Market Review and Forecast, claims IP telephony-based networks accounted for the majority of global traffic for the first time in 2003.

The reassuring factor for CIOs and CEOs, TUANZ says, is that IP telephony does not require them to swap out their existing communications infrastructure completely to benefit from improved functionality. While hybrid systems do not offer pure IP’s full feature range, many large organisations are making the move gradually, via a combination of IP-based and conventional telephony.

November 2004

By Chris Bell

Implementing applications
TUANZ estimates a solid IP telephony implementation should take organisations between three and 12 months, including a two month pilot, although it stresses this is largely dependent on the complexity of the rollout and the changes required to the data network. As a guideline, the Ministry of Social Development’s innovative and world-leading project — involving 8000 users — took 21 months, including planning, lab testing and a two month pilot. Organisations have historically made the mistake of believing toll savings will be the main benefit of an IP telephony upgrade. In fact, a TeleConsultants IP telephony survey this year places far more emphasis on the gains to be had from a single network infrastructure.

Of almost equal importance to toll call savings are improved or reduced administration and increased functionality. Among the criteria TUANZ cites as good reasons for organisations to upgrade to IP telephony are:

• A mobile workforce or multiple sites;
• Replacing an existing PBX and communications network;
• Situations where organisations are leasing separate voice and data lines;
• Growing existing IP networks by adding sites that require voice and data;
• Functionality that exceeds that of the existing telephone system.

Gartner recommends prospective IP telephony users work out the total cost of ownership (TCO) of the current telephone network. IBM advises its customers that if they save 25 per cent on their calls, and then channel around 5 per cent of those savings into business transformation, they can realise further savings of 10 per cent. Again, it is important to view cost only as part of the overall benefits picture.

Putting the case and making it stick
Gartner has said, even fairly recently, that VoIP simply did not have compelling business benefits for most enterprise applications. However, it acknowledges the technology is maturing, and the strategic drivers are changing, which serves to make the business value more clear. It emphasises: “Enterprise architects and managers must explicitly define the end-to-end functional layers of their enterprise voice over IP infrastructure and IP-telephony application architecture.”

But boardroom executives and CEOs aren’t likely to be swayed by architectural definitions. The main benefit IT telephony proponents should bear in mind is rationalisation: Combining voice and data on one network results in lower overheads.

Toll savings are somewhat more contentious. Spare capacity on IP networks does allow you to avoid paying telco tolls charged for use of the public switched telephone network (PSTN), but the cost per minute varies depending on the provider, the business rates enjoyed by your organisation (which are negotiable, but likely to be shrinking, rather than growing) and any supplementary costs such as rental and maintenance. All of the above make a business case based on toll savings alone difficult to argue convincingly.

New functionality and improved productivity are far more reliable metrics when it comes to marketing a telephony upgrade within the organisation. Gartner, for example, has been urging a “cohesive discussion of the applications that VoIP and IP telephony enhance”.

In a call centre, or anywhere where improving customer service is the main expected outcome, VoIP and IP telephony can have a major impact. IP telephony experts such as Gabriel Vizzard, global leader, emerging broadband solutions at IBM, stress the improvements resulting from business process improvement.

TUANZ lists a number of benefits relating to customer service in a contact centre environment, pointing out that other business models will enjoy similar benefits:

• Simplified upgrades: Increasing the physical capacity of IP telephony systems is simpler than for a PBX.
• Ease of diversification: IP telephony is easily merged with new modes of communication, such an instant messaging, chat, text, streaming video or audio and PXT phones, offering real time visibility, monitoring and manager interaction.
• Integrated mailbox: Enhances the customer experience with email, instant messaging, websites, SMS text and voice.
• Real time call tracking: Call centre agent KPIs can be tracked and metrics tweaked by their managers.
• Reduced absenteeism and staff turnover: By encouraging rather than hindering mobile workers and allowing them to work from remote locations or from home, skilled labour can be attracted without costly and risky relocations.
• Tools to help agents: Customer information tied to a phone number, and instant recall irrespective of the communications medium.
• Reduced management and support costs: MAC (move, add and change) is simplified when staff move, because IP phones retain the user’s contact details, even when they move to another branch.

Barriers to adoption
It’s a worthwhile exercise to list the possible objections to IP telephony, as any new technology has its pros and cons. The cost of the new infrastructure, staff training for the new system and the installation costs may easily eat up more than the expected savings on toll calls.

A lack of internal expertise to match that available for your PBX can also be a limiting factor. But for most of the arguments against IP telephony – reliability; QoS; comparative PBX maturity; lack of inhouse skills; security concerns; and conflicts in communications standards – there are strong counter-arguments. And there is no reason to believe that a VoIP or internet telephony system is inherently less secure than any other IT system the CIO manages.

The internet is nowhere near as reliable as the telephone network, so new adopters must be prepared for outages. It’s hard to compete with the 32 seconds of downtime a year common to a traditional telephone. However, TUANZ points out the Mean Time To Repair (MTTR) for a traditional PBX phone may be much longer than for an IP system phone.

“IP-based PBXs will deliver similar MTBF [Mean Time Between Failures] and MTTR results as traditional PBXs, because they use many of the same physical components,” TUANZ says in its report, adding that downtime in one call centre these days usually just causes calls to overflow into another, something for which IP-based systems are well suited.

A considerable barrier to adoption, Gartner found, is price. In its User Wants And Needs survey this year, more than 80 percent of respondents were waiting for a significant price drop before adopting IP telephony.

TUANZ argues that rather than taking a ‘Yes/No’ approach to assessing the business case, businesses should instead ask what form their move towards IP telephony should take. They should ask questions about the current status of their data network and whether there is enough existing bandwidth; what elements of the business would benefit from an IP-based approach (such as a many mobile workers); which areas of business performance requires improvement (those related to customer service and the associated speed of response are most likely to benefit); and what cost benefits are being sought (these might include such things as reducing staff travel time).

If it ain’t broke...
The resilience and dependability of traditional PBXs is another reason why many organisations opt for hybrid systems – a mix of VoIP and traditional telephony - rather than ditching their existing systems entirely. Perhaps the hardest sell for stakeholders in the IP telephony campaign is reliability. Voice is considered mission critical in most organisations and, if the current PBX system works just fine, you may have difficulties convincing those around the boardroom table that IP telephony can beat it. As TUANZ says in its report, “If a packet of data takes two seconds longer than it should, no one will even notice – if voice fails it will kill the system.”

Adherence to standards that enable enhanced services, such as SIP (Session Initiation Protocol), and the championing of these standards by suppliers like IBM, is sure to bolster IP telephony’s maturity and gradually silence those who question the technology’s readiness.

For more information on IP Telephony click here

IP Telephony – arguments to sell it to the board

Local user experience can be helpful when considering the business case for IP telephony:

• Risk management: IP telephony distributes and mitigates risk, by reducing dependency on a single PABX at head office.
• Free up your staff : Reduce HR costs by being able to move staff between offices and branches.
• IT consolidation: Bring your telephone system in line with your other network architecture — and under the management of your IT executive, rather than your CEO.
• Economies of scale: It’s cheaper to run IP phones at a small site than it is a traditional PBX.
  

  Confine system vulnerabilities: If you treat phones like PCs and run them on known operating systems, security becomes manageable and transparent and it can be consolidated with that of other IT systems.

  
  
• Use a hybrid approach: Implement a VoIP network with voicemail and call centre functionality, then expand as necessary, based on user satisfaction.
• Manage your remote sites more cost-effectively: Connecting sites, regional offices and mobile workers to your corporate IS and telephony systems will reduce support costs in the long run.