Leap to IP a

By Baselinemag  |  Posted 2005-12-14 Print this article Print

Today's Internet-protocol telephony systems have grown into dependable workhorses, though many enterprises still use the technology sparingly.

Tough Call">

Internet-protocol telephony can be a difficult sell, because its major advantages are often invisible to employees—from the rank-and-file up to the CEO.

IP phones may not appear to work any better, or differently, than the old ones. As a result, few companies view the technology as a bust-the-budget innovation that will give them a jump on the competition.

"For the most part, IP phones have been used as just another phone," says Zeus Kerravala, an analyst with Yankee Group.

"The value proposition for IP telephony right now isn't strong enough that companies will take a two-year-old legacy phone system and throw it out the window."

He points out that the growth of IP telephony sales closely matches the rate at which organizations replace their old circuit-switched systems.

Another inhibitor: Wide-scale rollouts require big capital outlays. Average IP telephony hardware costs for companies with 1,000 or more employees were $488 per user, according to a 2005 survey of 65 information-technology executives by Nemertes Research, a business and technology consulting firm in New York.

So where does IP telephony make sense? Such systems can, and do, save money. They can cut telecommunications bills by eliminating the need for separate voice lines from a service provider.

Other operating costs can be reduced; for example, moving, adding or changing an IP phone is simpler than with traditional switches, because an IP phone switch automatically reconfigures itself whenever a new set is plugged into the network. (To figure your own estimates, see "Calculating Costs," p. 74).

Also, because IP phone systems run over standard, ubiquitous Internet-protocol networks (including the Internet itself), the technology lets phone systems extend way beyond corporate offices.

For instance, a salesperson in a hotel room hundreds of miles away from headquarters could set up a phone to make and receive phone calls from his own extension—and also avoid running up long-distance charges.

For the Clark County School District, which covers 7,900 square miles in Nevada and includes Las Vegas, moving to the new technology has helped keep a lid on costs while giving more teachers access to phones.

The 291,000-student district expects to spend about $15 million on its three-year IP telephony project, slated for completion in early 2006, which will use 27,000 Alcatel phones.

Chief technology officer Phil Brody first considered IP telephony when the school district decided to roll out a fiber-optic network with gigabit-per-second feeds to 317 schools.

The idea: Run voice over that network, eliminating phone charges among schools. "We were looking to expand our phone system," Brody says, "and we said, 'You know, the best thing for us to do is ride this huge new network we're building.'"

But IP-based phones, which include processors to convert audio into data packets, can be pricey—at least $100 each.

To keep costs down, the district has deployed mostly traditional circuit-switched phone sets (typically one-tenth the price of IP models). Gateway switches at each school convert calls to IP before sending them off-site.

The assumed savings have been borne out: Brody says the district has reduced monthly charges from its phone provider, Sprint, to $3 per phone from $14.

Plus, the district is increasing its phones to 27,000 from 9,000, with most of the new units going into classrooms for teachers to use.

The other big area of savings, according to Brody, is in support.

The district's staff of 12 field technicians can service three times as many phones because most management tasks, such as reassigning phone extensions to teachers, can now be handled remotely:

"We don't have to send someone out in a van to the school as much as we did previously," he says. Brody estimates total annual savings on communications and labor costs at $1 million to $2 million per year.

Story Guide:

  • Talking Points: After years as an also-ran, VOIP is in the front ranks of business tech.
  • Leap to IP Is Still a Tough Call Despite advantages in cost and maintenance, it still takes a leap of faith to migrate, and a lot of determination to sell the idea to decision makers.
  • No Killer App, But Lots of Small Enticements Smallish efficiencies and the increasing number of apps aimed at particular businesses build up to make a good case for VOIP.
  • Boeing's Jumbo Phone-System Overhaul: Boeing moves 125 phone switches to IP, in what may be the largest corporate migration to date.
  • Non-Trivial Migration: 35,000 Users, 125 PBXs, Clusters, Servers…
  • Cutting Costs; Admirable ROI: 49 percent over seven years.
  • Unsupportable Optimism? Some analysts say Boeing and other companies may be ignoring potential downsides.
  • Cost Analysis: Functionality aside, do the costs justify a migration to VOIP?

    Next page: No Killer App, But Lots of Small Enticements

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