IP Telephony May No Longer Be a Cost Beater

By Tom Steinert-Threlkeld  |  Posted 2004-10-20 Print this article Print

News from Gartner ITxpo: Converting to IP telephony cannot be justified purely on cost as conventional long distance continues to drop. Implementing an IP telephony system is a good idea when replacing an aging phone system.

LAKE BUENA VISTA, Fla.—Suppose you chased a pot of gold—and found the gold was already taken?

That may be the case with transferring your company's telephone calls to the still-coming next wave of communications, Voice over Internet Protocol technology, according to a Gartner research analyst speaking at the company's 2004 Symposium and IT Expo.

With conventional long-distance calls to Europe already fallen as low as one cent a minute, converting to IP telephony cannot be justified purely on cost, said Jeff Snyder, Gartner vice president and chief analyst for enterprise communications.

Costs are a wash. Installing a new IP telephony system are the same as for a conventional company phone system; and so are the operating costs, he said.

The removal of the cost justification removes the main underpinning of the last five or so years for considering moving off conventional phone systems, which send voices over dedicated circuits on copper wires in waves of sound, to IP telephony systems, which convert voices to packets of data and squeeze them more efficiently onto digital networks.

More simply said: Voice calls placed over Internet protocols would avoid the toll charges of conventional long-distance phone calls.

But, with phone companies providing all-you-can-eat call plans for fixed prices and prices of individual long-distance calls plunging towards a penny a minute, that toll avoidance is no longer a big deal—at least for a corporation, with lots of traffic and investment in existing equipment.

"If you don't have compelling cost-justification or aging systems or are not going into a greenfield site or the applications are not compelling enough, there is no compelling argument at all to move" to a voice over Internet protocol system, he said.

Snyder says IP telephony, also referred to as VOIP, should not be considered a "killer application" for companies. Rather, it should be considered a "killer environment." And looked at for what the long-term or customer benefits can be.

The ability to consider voice calls as data packets, just like numbers and text, can give companies in arenas such as call centers clear advantages in routing, for instance, customers to service representatives that speak the same language or have the right technical skills to handle particular problems.

The digital nature of IP telephony also means that companies with mobile work forces may be able to take advantage of "one number" services that can send messages and calls to a person wherever that person happens to be, at any time.

But the costs of putting in IP handsets, switches and security; as well as the plunging cost of using existing long-distance phone systems means that cost alone can rarely be the justification at this point for implementing IP telephony in a corporation, he said.

More likely, the time to implement an IP telephony system is when it comes time to replace an aging, existing phone system; and get the benefits of digital manipulation, analysis and routing, along with it.

Tom was editor-in-chief of Interactive Week, from 1995 to 2000, leading a team that created the Internet industry's first newspaper and won numerous awards for the publication. He also has been an award-winning technology journalist for the Dallas Morning News and Fort Worth Star-Telegram. He is a graduate of the Harvard Business School and the University of Missouri School of Journalism.

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