First Quarter 1998

Value Added Resellers Embrace CTI And Voice Over IP

BY STEVE GLEASON & JOE SERRA

Certain aspects of computer-telephony integration (CTI) have long been a distant prospect for Value Added Resellers (VARs). Now the business opportunity is within reach, and the time is right for a reseller channel that truly understands CTI (in all its guises) to emerge. The distant prospects have turned into tangible technology at practical prices. While breaking into this market may require a new mindset for the typical data VAR, as well as a long-term commitment, the rewards are well worth the effort. For VARs eager to discover new profit opportunities, few markets offer margins as attractive as those associated with CTI products and services.

IT'S TIME TO MAKE SOME MONEY
The value to resellers reaches far beyond initial installations. CTI solutions usually mean greater account control with ongoing sales and service possibilities throughout the network. Resellers who commit to CTI are glad they did; those who don't explore this pioneering field will likely regret not taking a closer look.

Recent technological developments provide the most compelling reasons for resellers to enter the CTI market today. Services are being introduced that enable CTI in LAN environments -- providing open, scalable architectures that can be expanded as the end user's business grows. These products can work independently or in conjunction with existing PBXs.

Software advances based on Windows 95, NT, UNIX, and NetWare platforms are also making CTI viable for businesses of all sizes. A growing number of prepackaged applications are becoming readily available, and independent software vendors (ISVs) are discovering a more developer-friendly environment for the creation of custom CTI solutions. With CTI, VARs have an opportunity to add more value to their customer relationships. The technology exists today to deliver remarkable cost savings and dramatic time savings.

MASTER DISTRIBUTORS ADD CTI & VoIP
Because these multiple CTI application areas involve such a wide range of products and require such a breadth of expertise, the primary suppliers to VARs -- the national master distributors -- have created independent CTI business units to focus on supporting VARs with CTI solutions. These master distributors are now bringing their traditional advantages to the CTI market, including:

• One-stop shopping, offering extensive products and services.
• Technical support.
• Education and certification programs.
• Configuration design assistance.
• Extensive credit services.
• A full range of electronic commerce solutions.

The addition of VoIP has broadened the appeal of CTI to both the WAN and LAN VARs. The VoIP gateway sits between the branch office's PBX or Key Telephone System (KTS) and its LAN, moving voice and fax to and from its LAN and PBX/KTS. The value of the gateway, however, is primarily in reducing the cost of intracompany, interbranch phone and fax communications. The cost savings arise as voice and fax packets ride "for free" amongst and between branch offices and headquarters over the company's enterprise IP WAN. Although the gateway is a LAN device, its primary appeal is remote communications.

VoIP IN THE ENTERPRISE IP WAN
By overlaying voice and fax on top of IP data and LAN traffic, a company can cut its intracompany voice and fax costs to an average of 1 to 2 cents per minute, far lower than the typical 6 to 12 cents per minute most companies pay using the public switched telephone network (PSTN). This convergence of wide-area voice and fax with IP LAN and data communications is made possible by today's incredibly powerful and low-cost digital signal processors (DSPs). The current generation of DSPs can compress voice from its normal 64 Kbps pulse-code-modulation (PCM) PSTN format to around 8 Kbps without degrading voice quality, at end-user pricing of $600 to $900 per voice/fax port for gateways built on a PC chassis Usually two-port gateways are used. Two ports will handle 3 to 4 hours of intracompany voice/fax traffic with dial-tone availability over 93 percent.

With IP packet overhead, bandwidth consumption is about 15 Kbps. The same DSP can also convert fax signals into their original digital format at 9.6 Kbps, down from fax's normal 64 Kbps PSTN PCM format. This amounts to an effective reduction in voice/fax bandwidth consumption by about 4:1.

BUT WAIT, THERE'S MORE
In fact, there is a much larger average bandwidth reduction. Because voice and fax communications are half-duplex (one talks, the other listens), and because of the natural pauses between words in a conversation or pages of a fax, actual bandwidth consumption averages only 40 percent of the typical 15 Kbps, or about 6 Kbps. This average develops over a 20 to 30 second period. Over a longer period, about 20 to 30 minutes, this figure drops to about 1.5 Kbps, because a voice/fax port is usually engaged only approximately 10 to 25 percent of the time. So, for the average remote office, with two voice/fax intracompany voice-over-frame relay ports, intracompany voice and fax consume an average of only 3 Kbps throughout the day.

The peak bandwidth consumption for a single port is about 15 Kbps, so a 56 Kbps network connection will handle three (four, in a pinch) active voice/fax connections. The amount of average bandwidth consumed by, say, two ports is 3 Kbps, so the average bandwidth available for the IP LAN and data traffic is 53 Kbps. Note that the minimum available for LAN/data is 26 Kbps [56K-(2 x 15K)] while the maximum available is 56K (both ports unused).

VOICE & FAX COMPLEMENT LAN & DATA
The reason real-time voice and fax work so well with LAN and data is the background nature of most branch office LAN traffic. The typical traffic is comprised of e-mail, file transfer, and Web access -- none of which is real-time. After all, who would notice if their e-mail arrives 1 second later?

If there is real-time data, such as SNA, the peak bandwidth requirements for voice/fax and SNA traffic should arithmetically add up to no more than the speed of the access line. For example, SNA at 19.2 Kbps peak and 2 voice/fax ports at 15 Kbps peak each, adds up to 49.2 Kbps peak bandwidth consumption. The average consumption, however, is 9.6 Kbps (SNA is rarely over 50-percent utilized) plus 3 Kbps voice/fax, or about 13 Kbps total, leaving 43 Kbps average for background LAN traffic, such as e-mail, file transfer, and Web access.

VOICE/FAX COST SAVINGS ADD UP FAST
By putting voice/fax traffic on top of the IP WAN, a company can typically reduce their intracompany, intersite voice/fax costs by 70 to 90 percent. In North America, this savings, after paying for the VoIP gateways (one per remote site, with a larger one at headquarters), usually amounts to $10,000 to $20,000 per remote site over a five-year period. The effective toll rate usually falls in the 1 cent to 2 cent per minute range (the reason it's not 0 cents per minute is the cost of the gateway). These figures assume no added charges for more bandwidth, that is, that the extra 3 Kbps per typical remote site needed for voice/fax IP bandwidth is available on the existing IP network.

VAR CONCERNS ABOUT VoIP
A concern some VARs have when adding voice/fax to their customer's IP network is how to provide a backup solution for the customer's intracompany voice and fax in case the customer's IP data network, now also carrying voice and fax, breaks. The simple answer is, plan for the customer to use the PSTN. The tougher problem is backing up the IP data, not the voice/fax. Of course, this problem has already been addressed with well-known solutions.

Another concern VARs have with VoIP is making sure the quality of the IP voice communications is good enough so their customer will not complain or, worse yet, sign-off on the install. The key here is to start with a well-managed corporate IP network - not the Internet - using WAN routers that can be programmed to prioritize the WAN voice/fax packets ahead of any data or LAN packets in the router's output queue.

In addition, for WAN access lines slower than 256 Kbps, it is important to program the router to segment the packets so a long data packet does not hold up a newly-arrived voice/fax packet. By taking these precautions, VARs can have confidence that their customer will accept the quality of their IP voice.

CTI + VoIP = VAR PROFITS
By offering a broad lineup of CTI/VoIP solutions, backed up by the training and support of a CTI/VoIP-focused master distributor, a VAR can significantly increase product revenues and operating margins. The VAR can capture the customer's ACD, IVR, call-center, and even telephony equipment business, as well as its VoIP Gateway and WAN router business. The on-going service and support profits can as much as double a solution-sale's profit margin. And VARs can further improve their profits while enhancing their value to their customers by reselling or brokering telephony and WAN services.

CTI enhances a customer's telephony functionality and reduces equipment costs. VoIP saves on long-distance communications and brings remote offices closer to corporate headquarters. The VARs who embrace CTI and VoIP will strongly differentiate themselves from their competition. It amounts to a strategic play with tactical profits.

Steve Gleason is vice president, North American sales for MICOM Communications Corp., a Nortel (Northern Telecom) company. MICOM manufactures two main product lines which enable companies to dramatically reduce company-wide communication costs: networking solutions that integrate data, voice, fax, and LAN over public frame relay and private line networks; and phone/fax IP gateways that add a voice/fax overlay on top of any IP network. MICOM is recognized among the worldwide leaders in providing data/voice network integration products. For more information, visit the company's Web site at www.micom.com.

Joe Serra is director of marketing at Tech Data Corporation, a leading distributor of microcomputer hardware and software products to value-added resellers (VARs) and computer retailers throughout the United States, Canada, Europe, Latin America, and the Caribbean. Tech Data purchases its products directly from manufacturers, maintains an inventory of more than 45,000 products and sells to an active base of over 70,000 customers. For more information, visit the company's Web site at www.techdata.com.

Tech Data has established a dedicated CTI unit with expertise in all facets of CTI, and has recently expanded its product offerings in the VoIP arena with the addition of MICOM's V/IP phone/fax IP gateway product line.