Voice over Internet Protocol has buzz: VoIP saves large enterprises serious money, and small companies can now take advantage of comparable savings. But if a company’s network isn’t robust enough to handle the voice traffic, part of the phone savings can be eaten up by network upgrades — of either the necessary or the needless variety.
Moving to VoIP requires rethinking telephones. With VoIP, there are no “telephone lines,” just bandwidth on the company’s network supporting voice packets. The traditional private branch exchange (PBX) is replaced as the center point of the office telephone system by a voice-specific IP server, called an IP PBX, somewhere on the office network or hosted elsewhere on the Internet. Calls to a remote office in another state are no longer long distance. Instead, internal phone extensions can be scattered across the country or the globe. Best of all, the telephone system becomes intelligent, tracking employees and connecting their calls no matter where they are, and integrating telecommunications with other vital business systems such as customer relationship management systems.
But this capability comes with a price. VoIP requires rethinking a company’s local and wide area networks. Routers and switches must support Quality of Service (QoS) settings to allow voice packets to flow smoothly, even if that means delaying data traffic. Some companies will require a network upgrade. And many VoIP service providers don’t have the track record of old Ma Bell, particularly some that target small businesses. Companies can get burned by an inexperienced provider.
Eric Ashman, director of technology for Proteus, Inc., a wireless software and content distribution company, says his firm has had to deal with some hiccups in its VoIP service. But the Washington, D.C.-based company has enjoyed the promised cost savings, which were a key driver in its move to an Internet telephone system. “If we could lose the six hundred to seven hundred dollars per month in long distance charges, the other costs of a switch to VoIP would be a wash,” Ashman explains.
Its long distance costs have dropped to zero since Proteus switched to VoIP at the start of the year. The IP phone system supports three-way conferences, meaning the home office in Washington, D.C., and the two-person offices in New York and Santa Monica, Calif., can have conference calls without the costs of an outside service. Yet the firm’s savings will go toward paying off the cost of running new wiring in every office, unnecessarily duplicating the existing data wiring, Ashman says.
America’s Growth Capital (AGC) in Boston had a similar problem with a hosted VoIP provider when it first moved to Internet phones a few years ago, recalls Bob Lamoureux, former chief technology officer and still a technology adviser to the boutique investment bank. “They were growing so fast to keep up with demand, it affected their call quality,” he says. “They weren’t ready for prime time.”
After a less-than-flawless pilot, AGC brought the system in-house and bought Cisco hardware and software: a 60-phone system for its 55 employees. The firm has enjoyed both hard and soft returns on its investment. “We expected a two-year payback, and would accept 30 months,” Lamoureux recalls. “We got a 13-month payback. Our monthly expenses were reduced by about 30 percent.”
But the soft returns in productivity gained from new telephone features, plus the integration of phone and data systems, are what impressed the investment bankers at AGC. “We get great ROI with instant feedback about who was calling and who we called, so we track our time and show clients how we’re working, without waiting 30 days for reports from the phone company,” Lamoureux explains. Now the managing partners get a daily report of all call activity, enhanced by data culled automatically from the firm’s customer relationship management software.
Aside from its data integration, the IP phone system offers enhancements to standard telephone features, such as call forwarding, which also impressed AGC employees. A feature called “find me/follow me” lets users specify a sequence of phone numbers at which calls to their phone number should be routed until the call is answered. Faxes can also be intelligently routed to one of multiple machines.
“Clients call one number for an employee, and it routes the call to the employee’s home or cell phone, even on the golf course,” laughs Lamoureux. Conference bridges can be set up with a few mouse clicks, even on Saturday when AGC used to struggle to schedule its AT&T conferencing service. And moves, additions and changes to the phone system through its Web interface take only a moment.
The ease of adding lines, speed-dial numbers, access restrictions and internal user groups, known as “hunt groups,” are key benefits of Cisco’s VoIP system recently installed at UniPath LLC in Denver. “Our old system cost us up to $300 [for] a service call for changes like these,” says Jeff DeHaven, manager of information technology at the provider of anatomic pathology services.
Like many new VoIP converts, UniPath’s choice of Internet phones was driven less by its desire to migrate and more by an aging legacy phone system that had to go. “Our existing Executone system was from the ’80s and used an IBM [PC] XT for the voice-mail system,” DeHaven laments. “We looked for a low-cost solution with lots of flexibility.”
In addition to the 75 Cisco IP phones in UniPath’s office, DeHaven ordered “softphone” licenses for employees when traveling or at home. The software lets employees log into the office phone system from a headset-equipped home computer or notebook with broadband connection to the Internet and costs much less than equipping them with extra IP phones. “The Cisco phones cost over $200, but the softphone license is only $50,” he notes. “And employees like making office calls through the free wireless connections at Starbucks.”
In fact, DeHaven says some of his users’ favorite features are the “goofy ones,” such as using cell-phone-style ring tones. But easy conferencing and large LCD screens showing call information are also a plus, he adds.
UniPath avoided the extra expense of duplicate office wiring because its switches and routers can handle the traffic, and the Cisco IP phones plug into the existing data network connection (the desktop computers then plug into the phone for network access). One problem that did arise was the IP phone system’s inability to support incoming analog modem calls still needed by a piece of older medical equipment to receive updates and maintenance. “We couldn’t get the analog to digital gateway working for everything, and had to break down and order an analog line for one piece of equipment,” DeHaven admits.
Unless a business has older equipment to accommodate, newer IP PBX systems can now eliminate the need for local telephone lines altogether. Earlier systems linked to the traditional telephone network at the IP PBX through a Primary Rate Interface (PRI) gateway to the phone company’s network. Newer systems, including some software-only implementations of VoIP, eliminate the need for this gateway by connecting directly to the Internet using a protocol called Session Initiation Protocol (SIP), a close relative of the HTTP and SMTP protocols for transmitting Web pages and e-mail, respectively.
Voice traffic needs about 100Kb/sec of bandwidth for every active conversation, so companies must estimate their peak concurrent phone usage to determine whether they have enough bandwidth to spare in their existing Internet connection. Older routers and switches that don’t support QoS settings will have to be upgraded or replaced, though the cost of new managed switches are rapidly dropping in price, making such upgrades less painful.
“Your networking equipment will need to be up to snuff to ensure that the quality of VoIP phone calls never suffers because of a computer virus or spam swamping your network’s capacity,” agrees Ted Wallingford, author of “Switching to VoIP.” But rarely are the necessary upgrades as expensive as traditional telephone system vendors claim in selling against IP phone systems, he notes.
The marketplace seems to support his contention. Last year, small- and medium-sized businesses spent $1.4 billion on the IP telephone systems and converged applications, according to market research firm InfoTech, which forecasts an average annual growth rate of 19 percent to a total of $3.3 billion by 2010.