What You Need To Know About IP Telephony

It makes sense—why run multiple sets of cables to each desk, maintain multiple sets of networking hardware, and manage multiple support staffs when data, voice, and video communications can share one network?   Especially when one converged network improves service for everyone? That’s the thinking behind Internet Protocol (IP) telephony, a technology that presents an opportunity for companies to get more benefit from their existing network infrastructures.

Whether it’s called packet telephony, voice over IP (VoIP), converged networks, or IP telephony, the technology presents an advantage. The term IP telephony best describes the technology in the enterprise environment because it encompasses telephone features that business users expect as well as productivity-enhancing applications.

The IP telephony business continues to grow despite overall corporate belt-tightening. Research firm Frost & Sullivan notes that although many segments of the telecommunications industry have been affected by the prolonged economic downturn, the VoIP equipment market is retaining its momentum. Infotech reports that 44% of enterprises have already begun to implement IP telephony. And the phenomenon is worldwide. Research firm IDC reports that unit sales of IP telephones grew by 111% in Europe between 2000 and 2001.

The Basics

Converged data and voice networks can lower an enterprise’s total cost of ownership by eliminating redundant infrastructure, simplifying administration and maintenance, and consolidating IT staffs. This is especially true if an enterprise runs three networks—one for voice, one for teleconferencing, and one for data—as many companies still do. IP telephony can consolidate all three networks. IP telephony also offers lower application-hosting costs, integration between data and voice applications such as e-mail and voice mail, and employee flexibility with ease of mobility and remote connectivity.

The basic idea behind IP telephony is that it can send a telephone call over the same networks that carry data throughout your company, whether it be a local-area network (LAN), a corporate intranet, a wide-area network (WAN), or even the public Internet. To do so, the technology breaks the sound into tiny digital units called packets, then sends those packets over the network and reassembles them in the correct order on the receiving end.

But not all calls are internal. To connect with external users, an IP telephone network needs to interface with the standard telephone network, also called the Public Switched Telephone Network. Gateways are another important piece of network hardware because they connect and translate IP-based telephone calls between the IP network and the public telephone network.

Making this technology viable was not as straightforward as it may seem, for a few reasons. First, telephone calls are latency dependent, meaning people want little or no lag time between when one person speaks and when the other person hears what was said. (Not so long ago, standard international telephone calls had considerable latency. One person would speak, then wait a second or two until the person at the other end heard them and replied.) Second, telephone calls are full duplex, meaning that both parties on a phone call—or all parties in the case of a conference call—can speak and listen at the same time. But IP was initially designed for receive-and-respond communication: A user sent a request to a server and the server responded.

Third, early on, not everyone had the necessary equipment to handle IP telephony. In the early days of home-based Internet usage, several companies touted free Internet phone calls, but both parties on a call had to have equivalent software and up-to-date hardware.

These obstacles have now been solved, and IP telephony is a hot technology. According to Infotech, approximately 80% of the enterprises that have already implemented IP telephony have indicated that the quality resiliency and scalability of the technology has either met or exceeded their expectations. Frost & Sullivan reports that companies selling IP telephony equipment generated more than $1 billion in revenues in 2000 and expects those revenues to exceed $14 billion by 2006.

And IP telephony is now gaining momentum in the enterprise. David M. Cooperstein, research director at Forrester Research, says this change is driven by two factors. "Quality has improved, and we’re seeing new applications that include voice capabilities," he says. "You can click on three names and have conference calls set up automatically. These kinds of features make the use of voice as a communications tool easier."

IP telephony also can save enterprises money on toll calls, voice circuit costs, and on telephone system installation, maintenance, and use.

Solutions

Telegeography, a telecommunications research firm, reports that international IP telephony traffic rose from 1.6 billion minutes in 1999 to about 10 billion minutes in 2001 and now constitutes about 6% of all international telephone traffic. Developments in protocols, network hardware, and IP-ready telephone handsets have contributed to this growth.

Early IP telephony products suffered from an annoying delay or echo caused by the latency delay of older networks. But industry groups have developed standard protocols including Session Initiation Protocol (SIP) and H.323 that make IP telephony sound more like traditional circuit-switched telephony. These protocols help an IP network provide Quality of Service, prioritizing the voice traffic so it is delivered as efficiently as possible. Although these protocols are young, they’re mature enough to reach the consumer market.

In fact, Microsoft has included SIP in its Windows XP operating system.

Most people would rather use a telephone than a computer to make phone calls, and most likely, phone users don’t care what kind of wires carry their calls, as long as the calls go through reliably. In the corporate setting, IP telephony needs to be invisible to the user, meaning that for the most basic functions of making and receiving calls, it should operate just the way a user is accustomed to using a regular telephone.

On an enterprise level, companies are installing IP telephony systems for use within a single campus or within portions of a geographically extended enterprise. If the company maintains a WAN to route data between its headquarters and satellite offices, it might be able to route telephone calls across the existing WAN, thus saving money on long-distance service.

Implementing IP telephony for internal calls requires voice-enabled routers.

"It’s often cost-effective [for companies] to put telephones on a router where they already have data connectivity," says Elizabeth Ussher, vice president of Global Networking Strategies for IT- industry analysis firm META Group. "For example, if an organization has frame-relay [service] from corporate headquarters to branch offices, the unused bandwidth can be used for internal calls."

Enterprises using IP telephony can also deploy special telephones that allow them to offer employees more features and functionality—access to online directories, speed-dial numbers, calendars, stock quotes, network status, and unified-messaging features—than are available on traditional phones.

One of the benefits of IP telephony comes with simplified maintenance. For instance, moving a person with an IP phone to a different location is as simple as unplugging the phone and plugging it back into the network at the new location. Because the phone’s unique IP address for the network is encoded in the phone, all of the user’s IP information and preferences travel with the phone. This feature is especially useful for offices that have flexible schedules, overlapping workforces, or employees who often switch desks.

For example, an employee can plug in his or her laptop and IP telephone in cubicle 1A on Monday and cubicle 10Z on Tuesday and have the same phone number, voice-mail messages, and features, without intervention from IT or telecommunications staffs. Traditional office telephones require technicians to change the wiring and offer none of these mobility benefits.

What to Watch For

In addition to increased employee flexibility and productivity, IP telephony allows enterprises to offer valuable new services to their customers. For example, interactive voice response (IVR) applications will merge voice and data systems, transforming from today’s simple "press 1 for yes, 2 for no" systems to robust, useful applications.

"There’s a protocol called VoXML that lets you use markup language based on voice inputs rather than text inputs," says Forrester’s Cooperstein. This makes enterprise data services like flight information and stock quotes available literally for the asking. "United Airlines and Charles Schwab are using IVR, and AT&T Wireless is using it for content access. These are voice interfaces to IP services."

Many corporate purchasing managers were burned by start-up service providers that vanished when the dot-com bubble burst. Therefore, they are casting a wary eye at newcomers to the IP telephony market. Less-established vendors are especially susceptible to this perception, and they risk being driven out of the market as the number of providers deploying gateways dwindles.

"Many providers are too small to offer vendor financing, so their options to remain in this market are fewer than [their] larger, top-level competitors," says Jon Arnold, industry analyst with Frost & Sullivan. "The likely scenario is for them to either be absorbed by larger vendors or to exit the gateways altogether and move in a different direction."

Bottom-Line Impact

IP telephony could change the very definition of a telephone call, since it converges data, voice, and video services into one network and even into a single multipurpose device.

META Group surveyed 435 companies about their potential uses for IP telephony. "The No. 1 application they’re expecting to enable with IP telephony is teleworking," says Ussher. "The technology is there. It works very, very cleanly." Unfortunately, high-bandwidth availability—for DSL service, for example—is geographically spotty, according to Ussher.

IP telephony can also help companies reduce their monthly phone bills and minimize their dependence on long-distance carriers. Larger, more dispersed companies have a greater potential to take advantage of these types of savings. Far-flung enterprises with teleworkers or remote offices can use IP telephony to cut travel and courier costs, for example.

"Many of my large global clients who have deployed wide-area Voice over IP have realized cost savings of up to 40%," says Ussher. "Most of this is a result of international calling. The savings are definitely there."

Not all of the bottom-line impacts of IP telephony are available today. "Enterprises are just getting to the point where they can begin to measure the true value—administrative savings—now," says Ussher. "Most of the cost savings have been measured as productivity increases, which is basically a soft cost."

Ussher expects that firmer numbers from these soft costs will be available over the next 18 to 24 months.

"Certainly, all of my clients who have deployed IP telephony are tracking that today. Unfortunately, we’re still in a lot of mixed environments, so it’s hard to pull [those numbers] out."

In the Real World

As a fast-growing metropolis—the fourth largest in the United States—the City of Houston has more than 400 separate facilities that support the city’s 2 million inhabitants. The City initially installed standalone phone systems throughout its facilities for telephone communications. As that network system grew to include 23,000 phones from multiple system vendors, however, the City began experiencing inefficiencies, including network outages, expensive maintenance, and productivity barriers.

The City of Houston chose to transform its data network and standalone phone systems into a single, converged voice-data communications system based on Cisco AVVID (Architecture for Voice, Video and Integrated Data). This system will help the City resolve a critical emergency 911-dialing safety issue and will enable greater efficiency and productivity through a centralized call-processing architecture.

In addition, the new network is expected to generate $6.2 million in annual savings for the city and its tax payers, which converts to a payback term of less then one year. Cisco Systems uses IP telephony exclusively to connect its 37,000 worldwide employees together in a seamless fashion. Employees can use IP telephones to search employee directories, check stock quotes on Yahoo Finance, and log calls.

Cray Inc., the world leader in supercomputing, has been using IP telephony for more than 16 months and has realized substantial infrastructure savings as well as a 33 percent improvement in the productivity of its network support staff.

Hong Kong cable TV provider i-Cable Communications Limited is rolling out IP telephony services to 45,000 subscribers this year. Users will be able to attach a regular telephone to a special connector on their cable modems to access the service.

What to Do Next

Companies across industries are already considering or testing IP telephony. Among companies shopping for phone systems for their corporate campuses, Ussher says that all of the requests for proposals she sees or conversations she has about voice include IP telephony considered as an option. "It’s always a point of discussion—always."

But with the soft economy, Ussher says that some of her clients are hesitant to make any additional capital investments, including those required to take the IP telephony plunge.

However, this climate could provide an opportunity for enterprises that want to test the technology, train employees, and strike favorable deals with IP telephony providers. It’s also an opportunity to evaluate many of the productivity tools, according to Ussher. As budgets become available, these enterprises will have more choices, will have already done the business case, and will be ready to go.

IP telephony also provides several "sweetspot" applications. Companies can significantly reduce the costs of networking new facilities by only having to purchase and install a single converted network, rather than separate voice and data networks.

Implementing a centralized call-processing environment allows an enterprise to consolidate its network infrastructure and support staff into a central facility and then extend network capabilities to branch sites, which also reduces the overall cost for infrastructure and administration.

Ussher says she generally sees clients deploying IP telephony in two situations: in brand-new "greenfield" installations, where the company is opening a new building or campus or retrofitting an existing facility; or when the company deploys IP telephony in branch offices of 20 to 50 phones while also keeping corporate headquarters on a traditional PBX network. Both deployment strategies minimize disruption for the largest number of people, while letting the enterprise develop the skills and experience it needs to deploy IP telephony throughout more of the organization.

The decision to deploy converged data and voice networks isn’t just about hardware and software. Deployment also affects staffing. The skill sets required of telephony and IT managers and professionals blur when it comes to IP telephony.

"New staff that is more adept at managing racks of servers and UNIX boxes will replace those who grew up operating proprietary switches," predicts Cooperstein.

Ussher says that people who usually work on data networks have to learn from their telephone colleagues and vice versa. "It’s a different type of expertise than these people are normally accustomed to, both on the voice side and the data side," she says. "What’s certain is that they’re converging."