Expert Commentary:
Why Voice over IP, and Why Now?
By Steve Leaden, April 21, 2003 - as it appears at www.availability.com

A recent META Group survey found that almost 90 percent of large international companies plan to use some form of Voice over IP (VoIP) within three years.

The driving force behind the numbers is convergence: both technological and organizational.

From a technology perspective, anything IP is perceived these days as "new and improved." The Internet is driving everything, as it has since the mid-'90s, and VoIP is the next big thing.

All the hype aside, VoIP really is a good idea -- many aspects of the technology are well proven, and the long-term cost savings can be substantial. More importantly, the operational benefits to the business can be impressive. Which brings us to the other convergence -- organizational.

It used to be that the people who managed the telecommunications network reported to the facilities department. But now, with its strategic value widely recognized, telecom is more likely to fall under the auspices of the IT department, creating a cultural merger between the voice people and the data people. The resulting common ground is prime real estate for convergence, as both of these groups recognize there are gains to be made in merging voice and data.

Makes Sense, But Why Now?

For several years, most large telecom networks have been migrating from circuit-switched to IP technologies. All the major telecommunications carriers are now routing calls through IP backbone networks, and many large companies use IP-based WANs to carry voice traffic between sites. This is proven technology.

One factor driving additional interest in VoIP is the emergence of technology that enables true integration of voice and data. Until recently, integration was accomplished by taking a portion of the pipeline -- usually one out of the 24 channels standard on a T1 connection -- and dedicating it exclusively to voice. That ensured voice calls wouldn't experience the delays, jitters and latency that sometimes otherwise occur. But it also tied up a significant amount of bandwidth that could be used to transmit data when no voice traffic is present. New technology allows voice and data to travel over the same pipelines without causing problems for voice traffic.

Taking VoIP technology even further, local PBX implementations are bringing IP voice technology right to the end user. Essentially, this level of integration treats voice as just another application on the data network -- albeit an extremely important one. Using tools such as "soft phones" that plug right into the desktop computer, and "hard phones" that link directly into the company's data network, this level of IP telephony brings the newest advances to the edge of the network.

This distinction becomes hugely important as we move forward. On the Public Switched Telephone Network (PSTN), the network has to be reprogrammed every time a new service is offered. With IP technology out to the network's edge, adding a new service is as simple as installing the software on the servers.

The Right Time for VoIP

There are a number of factors to weigh in making the decision to migrate to VoIP. Perhaps the most important consideration is the state of your existing telecommunications network. If your company is chockablock with outdated PBXs that are ready for replacement, migrating to VoIP sooner, rather than later, is probably warranted. Conversely, if you've recently spent a small fortune upgrading your telecom network, you might have a harder time cost-justifying the transition.

One thing to keep in mind as you move through the decision-making process, though, is that the future of voice communications lies almost certainly with the Internet. Even if you won't realize a positive return on investment for the short term, it inevitably makes more sense to put your infrastructure dollars into a technology that's on the rise, as opposed to one in decline.

Go Slow with Immature Technologies

Another important consideration is quality of service. While VoIP on the WAN has been around for several years, much of IP telephony is essentially in its infancy. Although enormous gains have been made in the past year, there are still significant issues to be considered -- especially the issue of expectations.

We expect phone service to work -- all the time. Reliable phone service is generally viewed as an inalienable right. There's always dial tone, calls always go through, and you can always hear the party on the other end.

We have somewhat lower expectations of digital technology. We're used to computers crashing with some regularity, to Internet connections that go down now and then, to software being released before all the bugs are worked out.

Applying acceptable standards of IP technology to phone service simply doesn't work. No company is going to tolerate such a high level of unreliability in its telephone network. So it should be reassuring to note that IP telephony, if correctly implemented over controlled Internet backbones or an enterprise's own private network, can provide quality matching that of the PSTN at a price.

Another issue is the feature set. Some IP telephony systems offer call waiting, caller ID, conference calling, etc. -- and some don't. Some vendors over-promise and under-deliver, so it's a good idea to check references and get everything in writing before you sign on the dotted line.

A recent report by Gartner Group found that IP PBXs typically lack several of the richer features offered on circuit-switched PBXs. Gartner notes that even if IP PBXs offer an impressive 90 percent of the features available on traditional PBXs, 100 percent of users are likely to be dissatisfied. People simply aren’t satisfied with a new product that provides a lower level of service than the product it's replacing.
Ultimately, it comes down to dollars. It is possible to implement an IP telephony system that meets the high standards your organization is accustomed to -- if you've got deep enough pockets. As with most things, you generally get what you pay for.

First, let's talk about the actual costs of using the public telecom network. With per-minute charges for long-distance calls hovering around the three-cent mark, it takes an awful lot of calls to justify implementing a VoIP network. But keep in mind that your company's telecom costs probably go way beyond simple voice calls. For example:

• Fax calls. Yes, they're billed at whatever low per-minute rate you're paying for your calls, but don't forget to figure them in when you're toting up costs;
• Conference calls. Let's say you're paying a pretty standard 20 cents per minute, per person, for each conference call. A one-hour call with eight people costs $96. Multiply that by the number of conference calls your company holds every year, and the total may exceed your basic long-distance bill.
• Videoconference calls. To hold a videoconference call with ISDN service, you have to rent three ISDN lines for the sending end of the call, and connect them to three more on the receiving end of the call. Not an inexpensive prospect.

If you calculate the one-time cost of purchasing these technologies and integrating them with your data network, compared to the recurrent costs of renting them as services from the phone company, you may well find that VoIP pays for itself sooner rather than later.

You might also keep in mind that, in the case of a new office or a new group of employees, installing VoIP can be less expensive than traditional telecom. For example, with VoIP you only have to run one cable to each desktop, not two -- a savings in equipment and labor.

The bottom line is there is no hard and fast rule for determining the right time to implement VoIP. Evaluate the needs of your business, the expectations you have for the technology (and whether your pockets are deep enough to meet them), and the benefits you'll gain with VoIP. If you approach VoIP with a clear view of where you are, where you want to be, and how VoIP can help you get there, you've already done the hardest part.

Steve Leaden is the founder of Leaden Associates, a Telecommunications and information technology consulting firm specializing in VoIP technologies for the enterprise.