Vox Popular

Voice-over-IP technology still has problems, but now may be the time to buy.

By Robin Gareiss,  InformationWeek
Oct. 28, 2002
URL: http://www.informationweek.com/story/showArticle.jhtml?articleID=6503666

It happens during a heated conversation when someone raises a tough question--that uncomfortable, lingering silence, when everyone's waiting for someone to speak up. During a teleconference, it's even more apparent when only the barely noticeable sound of static fills the void.

Turns out, people actually like that static--one of the many lessons business-technology executives are learning as more switch their telephone systems to voice-over-IP networks. When inChord Communications Inc. installed VOIP technology, calls became so crystal clear that employees thought they'd been cut off every time a conversation hit a lull. It got so irritating that inChord actually added static into calls, says Tony Jerig, VP of technology services at the $100 million-a-year marketing communications company.

That was one of the few problems inChord experienced after deciding two years ago to shift its voice traffic from a circuit-switched network to an IP data network. It's a move most companies will follow. Slightly more than one-third of companies consider converged voice and data networks a priority this year, according to InformationWeek Research's 4Q Priorities survey of 300 business-technology executives. Almost 90% of large international companies plan to use voice over IP within three years, according to a recent Meta Group study.

Today's adopters of voice over IP don't give one dominant reason for using it. Some cite cost savings, but plunging phone rates have made that less of a benefit. Some like the consolidated management it allows, or specific applications. But for many, the appeal comes down to a vague notion of future-proofing: They don't want to sink more money into conventional phone systems where innovation has dried up, and they want to be prepared when high-value VOIP applications arrive.

What's emerged from the early adopters are general rules about when the technology makes sense.

Businesses have only a few options for setting up IP telephony. They can buy IP phones and IP PBXs from equipment vendors such as Avaya, Cisco Systems, and Nortel Networks, which means connecting to existing leased-line data networks and managing the systems themselves. Or they can buy services from carriers such as AT&T, Global Crossing, Sprint, and WorldCom, and let the carriers manage calls, similar to today's Centrex PBX services.

Telecommunications carriers and equipment vendors offer IP networks for integrated voice, data, and video communications. AT&T pledges to deliver all its future voice and data innovations over an IP backbone. Sprint and WorldCom earlier this month unveiled VOIP services for businesses, and WorldCom is running trials with Microsoft to let customers use XP as the IP telephony interface to WorldCom's network by early next year. And in unveiling its strategy to land sales from small businesses next year, Cisco this month identified IP telephony as one of three key growth areas, along with wireless and security.

Businesses moving to or opening new offices are prime candidates for IP, because they're generally buying new phone systems and wiring buildings. InChord examined voice over IP because it was creating a 400-person office and had outgrown its old PBX system. It had voice-capable Cisco Catalyst 5000 switches in its frame relay data network. By leveraging that design for voice traffic, the company realized some quick and significant cost savings.

InChord cut 40% off the $120 to $150 it costs to wire a single desktop because only one wire runs to each station. The desktop computer plugs into the 10/100 switches built into the IP telephones. What's more, inChord used to pay a contractor $85 in reprogramming charges each time someone moved into a new office with the old PBX system. With VOIP, that charge was eliminated because inChord's IT staff can handle all changes from headquarters. InChord also eliminated 20 analog phone lines, saving $400 a month. And it designed the voice network to allow up to four simultaneous calls to its London office, which saves on international toll charges because the calls are part of the fixed monthly frame relay costs.

Cost savings from IP telephony aren't always so easy to identify--or even necessary. In some cases, business-technology managers give voice over IP the green light just to prepare for the future. "IP telephony is the direction where technology is headed," says Pete Carroll, network administrator at the Minneapolis Clinic of Neurology, which rolled out IP telephony earlier this month. "We wanted to leverage the phone system as more than a phone system," he says.

The clinic also needed to upgrade from its PBX system and didn't want to invest a lot of money in yesterday's technology. That's a major reason managers consider IP telephony. "As equipment depreciates, people decide it's a dumb decision to buy another core PBX," says Johna Till Johnson, president of research group Nemertes. "People expect there will be future services that will require voice and data integration."

Mortgage company Fannie Mae decided to scrap a Centrex PBX service when the contract expired last year in favor of VOIP. So far, the company has eliminated voice circuits at about one-third of its sites, switching voice traffic to an existing leased-line data network. But the IP phones it needs cost about $400 each, and there are few new apps or features to justify the cost. "We're looking for future opportunities," says Andy Anderson, a Fannie Mae senior consultant. "We should be looking at technology for opportunities. If we sit and wait for applications to arrive, they'll never arrive."

The University of Notre Dame's Business School uses voice over IP to connect students in its distance-learning program, director of IT Yeh says.

Many early adopters implement voice over IP selectively. The University of Notre Dame's Business School uses the technology to connect remote classrooms in the school's distance-learning program. "I don't think that the telephone is going to go away," says David Yeh, director of IT for Notre Dame's Business School. "You don't take VOIP to an extreme and replace everything, but it's a strategic technology in certain places."

No one knows what will convince droves of companies to switch. Some promising applications are emerging, though, particularly involving mobility. With IP phones, an employee can travel to another office within a company, log on to a phone, and the network automatically knows to route that person's calls there. Unified messaging, although still in its infancy, is another. Users can get their voice mails via E-mail and vice versa, and when they click on E-mails, the computers or connected IP telephones dial the senders' phone numbers. Or they can view a list of voice mails on their phone screens and scroll to the most important ones. That's gold for anyone who's ever waded through dozens of voice mails to hear the one he or she needed.

Businesses are getting creative about how they use the technology, too. The Minneapolis Clinic of Neurology plans to tie its phones into its billing and scheduling software. When patients call in, their account information, based on their phone numbers, will appear on the screen when staff members answer the calls. "We needed to be able to link the phone with the applications," Carroll says. "We'll need to custom-develop the app now, but eventually software vendors will provide such applications."

Switching to voice over IP isn't a slam-dunk based on cost. Most implementations have a two-to five-year payback. Once the network is up and running, businesses typically see a 10% to 12% annual operating cost savings, says Stephen Leaden, president of consulting firm Leaden Associates. It would take savings in the 15% to 20% range to make the return on investment widely compelling given the risk in switching systems.

Cheaper long-distance calling provided an incentive in the mid-to late '90s, but that argument faded for large businesses now that their long-distance prices are 2 to 4 cents a minute, down from about 8 to 10 cents. However, international calling rates haven't dropped as dramatically, so companies that do a lot of international calling save the most money. Organizers of the World Cup soccer tournament use Avaya's VOIP equipment and say they save about $200,000 per month on long distance.

Converged networks also aren't necessarily cheaper to manage, thanks to higher personnel costs. People with voice and data experience command a 10% premium over data-only experts, Nemertes' Johnson says. InChord's Jerig considers himself lucky to have hired someone with a telecom background shortly before the voice-over-IP implementation. "Don't get rid of your voice person," he warns.

Telecom providers are developing business models they hope will make the financial return more appealing--lower up-front costs and no equipment to manage. Such models treat voice as another application on an IP network. Customers plug IP telephones into standard LAN jacks or directly into their computers, use the same data-access lines, and send voice traffic to carrier servers that route internal calls over their IP backbones and calls to the outside world via gateways. WorldCom charges $300 to $2,000 per month per site, which includes router management, a quality-of-service device on the customer premise, and unlimited internal calls.

The quality of voice-over-IP calls isn't the obstacle it was a few years ago, when customers had to accept spotty performance. Now, the delay on domestic VOIP calls is about 100 milliseconds to 120 milliseconds on a good network, down from as much as 500 milliseconds in the mid-'90s. Today's performance isn't noticeably different from the 70-to 80-millisecond delay of a circuit-switched voice call.

But the transition to voice over IP can be difficult. Routing problems caused inChord occasional one-way voice connections. The company discovered that the main servers were losing track of the IP phones, causing them to receive packets but not send them back. Fannie Mae, which runs voice over a Cisco-based private data network, had similar problems and has delayed its rollout until the IT staff can reduce jitter, the change in delay from one packet to the next.

As momentum builds around IP telephony, developers will harness its power and create more compelling reasons for businesses to adopt the technology. "It's a crisis of creativity, not a crisis of technology," Nemertes' Johnson says. Who knows? Maybe developers can even think of a creative way to fill that dead silence during the next argument on a VOIP call.