In principle it seemed a straightforward proposition, but with the technology then still at an early stage and many businesses unwilling to invest in IP (Internet Protocol) telephony beyond small-scale trials, it made little real impact in the marketplace initially.

Now though, the technology is stable and cost effective, with a number of blue chip New Zealand companies adopting IP telephony – the most high profile being the (then) Ministry of Social Policy. At the time of installing the technology at the end of 2000, MoSP was the largest IP telephony implementation of its kind in the world.

In addition, buying decisions around traditional telecoms systems are substantial long-term investment as the architecture begins to reach the end of its shelf life. Users have to think very carefully about getting tied in for too long when the IP route is so clear. The attitude of large organisations towards IP telephony has changed as its flexibility and cost efficiencies make it the obvious choice for many.

So with IP telephony now ready for mission-critical enterprise communications, is the enterprise ready for IP telephony?

The answer to that question, it seems, cuts deeper than the straightforward adoption of a new technology purely to save operating costs.

Analyst firm International Data Corporation has estimated that IP telephony can cut traditional call costs by as much as 80 per cent, making it a far cheaper alternative for both the residential and business segments.

But the true picture is far more complex. Recent research from other analysts reveals that many companies who have investigated moving to IP networks have found that cost savings alone are not the only justification for the investment involved. The real driver for adoption today is the possibility of rolling out value-added applications that are either far simpler than those enabled by regular telephony systems, or totally new applications like user registration that allows phone users to be identifiable and fully functional no matter which handset they’re using.

The premise is simple enough: combine the voice and data calls within a company on the same network - using the ubiquitous nature of the underlying Internet Protocol (IP) technology - and you immediately have the potential to save a great chunk of a company's communications costs. These savings have been the principal accelerator for IP, but as telephony via the Internet gains acceptance, there is a growing realisation of what IP telephony can really achieve.

"Originally, people perceived Voice over IP (VoIP) to be about low-quality, free calling. No one ever thought of it as the technology of the future," says Frost & Sullivan Industry Analyst Elka Popova. "Free PC calling helped show-case the technology. The actual benefits of VoIP, however, are being realised in wholesale services, as well as in emerging enterprise solutions and consumer phone-to-phone services. It is certain that VoIP is about to become an accepted technology."

IP telephony is only the first stage towards the enhanced functionality and improved productivity that network convergence signifies. And it is proving to be a rude awakening that is forcing corporations to plan their networks with a long-term view. So although cost was initially seen as the big issue that would compel organisations to start ripping out their standard PBXs en mass, now it is flexibility, investment protection and intelligent customer handling techniques that are commanding the attention of corporate telecoms managers.

Come The Revolution?

Customer management systems that first allowed call centres to see the identity of the customer calling by linking the incoming phone number to a client database have opened the door to far more sophisticated systems that can be linked with online services, such as banking. As customer expectations continue to increase, however, there is a clear requirement for the telephony infrastructure that underpins the new breed of customer contact centres to allow companies to do more to sustain and develop their customer base.

According to another analyst, Durlacher: “In the call centre, IP telephony becomes an increasingly attractive proposition when one considers how internet technologies are being used to distribute and access information, and, as e-commerce emerges, to conduct business. These two factors alone provide a compelling argument that make this technology an inevitable development for the call centre.”

This is where IP telephony is really beginning to come into its own. Essentially, today’s desktops IP handsets function just like a small computer. Companies with large and critical contact centres can see tangible advantages in taking this approach rather than continuing to be tied to regular telephony systems which – which although rich in features – promote little flexibility and are difficult and costly both to configure and to reconfigure.

Integrating voice calls into the IP environment and providing high-performance handsets allows companies to deploy intelligent customer management applications that link seamlessly with customer data over the network, to forward or divert calls with ease, and for call operators to log on to any phone, supporting remote and home working. Walls no longer bound contact centres, an IP based contact centre need not have boundaries. Call operators can work from home, temporary centres can be created in remote sites or in hotels, all enabled by IP telephony.

The Cost Case

For most large businesses, overhauling a PBX-based telecom infrastructure is a long term investment decision. However, with telephony requirements becoming more demanding and new technology creating business advantage in shorter timeframes, IP telephony has become a more and more realistic alternative. And while cost projections will inevitably vary enormously from one company to another, most equipment vendors and IP telephony integration specialists would claim return on investment within one or two years.

Putting the voice and data traffic on one set of wires instead of two also seems to make good commercial sense when compared to the cost of developing and supporting two separate infrastructures. A large part of that cost is a human one – and again there is a clear case for creating one pool of skills rather than two, so that voice calls essentially become just another application running on the network. In reality the network will only see information packets, some of this information originates and terminates within a data edge device whilst other packets of information on the network will originate and terminate in voice edge devices. To successfully allow this to occur the datacoms infrastructure must built to accommodate this with its obvious need to be able to tag a higher level of importance or priority to the voice based information.

This, though, does pose organisational challenges. The corporate status quo is to have separate departments responsible for datacoms and telecoms. The coming of converged network infrastructures supporting applications like IP telephony means the logical argument for keeping these two disciplines separate is rapidly breaking down. Converging the operational support structures needs to be performed with care, to bring the skills together without causing any staff alienation so that the new whole is greater than the sum of the parts. For most, this means a planned and steady transition.

What Next For Telephony?

The IP revolution is beginning to have a profound effect on what we have come to know as the telecoms equipment market. In the future, there is likely to be less voice switch manufacturers in the market, these manufacturers will need to have embraced IP telephony to say alive in this ever-evolving arena. New names may become dominant players with once dominant players becoming known only in niche markets. By the use of standards based technologies smaller players may be dominate in IP telephony without the costly development cycles of past legacy based equipment manufacturers. Where once the concern was reliability of IP telephony, now network infrastructures are being built to cope with their increased importance to the organisation both telecom and datacom will benefit from this creation of a stable and robust network infrastructure. With the infrastructure in place, attention then turns to software packages that will drive the data and voice call access, administration, control and distribution within the network, as well as intelligent messaging, mobility, number portability. These modern standards based applications, will continue to enhance users experiences and help reduce businesses TCO.

This promise represents a change of direction in how companies think about their telephony systems, as the challenge moves on from squeezing differentiators out of a rigid technical and operational environment to designing and developing applications that drive competitive advantage in their own right. IP telephony may not yet have secured complete trust across the enterprise, but it is gaining acceptance at such a pace that it is now only a matter of time, particularly as the cost savings become ever more apparent and the risks keep shrinking.

Special industry update by:

Kate Davidson
Logical CSI