First Quarter 1998

BY MIKE KATZ

Here's a prediction for 1998: It's the year that intranet telephony takes off.

Intranet telephony is the application of IP telephony gateways to carry telephone traffic between multiple corporate sites using a data network. It is the beginning of an evolution that will affect corporate telecommunications from the mid-size distributed business to the largest multinational conglomerate.

Intranet telephony is part of the larger IP telephony market space that includes Internet telephony, which -- depending on your view of how the Internet performs -- can be either good or bad. Intranet telephony makes use of the same technology originally developed for IP telephony solutions, PSTN interfaces, speech compression, IP packet protocols, and standards like H.323 to help interoperation of disparate solutions. The major difference is how the end IP Telephony gateway applies these technologies and the capabilities of the corporate Intranets, in terms of managed bandwidth.

The value proposition is also different. Today's corporate telecommunications needs can be met with a combination of IP telephony gateways and servers that enable PBX-like features. The separate value propositions of computer-telephony integration (CTI) and IP telephony can be linked together, creating a new, more valuable proposition. This proposition is based on a corporation's desire for better internal productivity, customer satisfaction, and corporate cost savings delivered through better use of existing facilities and new applications. This year's crop of intranet telephony solutions promises this and more.

COST CONTROL
Let's examine some of the basic tenets of this argument. Why are major corporations seriously examining the benefits of IP telephony use within their corporate intranets? It's simple: Cost containment. Let's assume you're managing 50 separate manufacturing, research and development, and corporate sites -- all with phone systems that need to be connected together. Today you've got two networks connecting each site: one is a data-oriented intranet, and one is a voice-only network. It is obvious that running two parallel networks -- one for data and one for voice -- is not cost effective. You need only look at the current cost for a long-distance call across the PSTN of $.08 per minute; that rate may not appear high, but it's no match for free or -- at minimum -- a constantly declining rate as more calls are made.

However, to reap these cost savings, corporations must spend money on purchases of new IP telephony gateways. Currently, some vendors claim that the investment can be paid off in less than 3 months. There are products on the horizon that are expected to drive the rate of return for intranet telephony to less than 1 month. Major PBX manufacturers such as Siemens, Nortel, and Lucent; major internetworking vendors such as Cisco and Bay Networks; several large Internet service providers (ISPs); 80 percent of the PTTs; and 100 percent of the IXCs: They have all announced their intentions to field a product, a service, or a series of IP telephony trials.

MANAGED NETWORKS
Internet telephony (as opposed to intranet telephony) has been around for over two years. Derided for poor voice quality and annoying delays, its biggest shortcoming has been that data networks break speech into little packets so it's possible for some packets to arrive out of order or too late to be included in a conversation. Another issue is the lag time inherent in the Net. Speech packets have to travel through a dozen or more routers, which direct them toward their destination, and each router takes a split second to do its job. In general, intranet telephony overcomes all of the negatives mentioned via the application of a managed network.

A managed network is one that has predictable performance measured in terms of Quality of Service or Quality of Transmission guarantees. These guarantees are usually made around latency (that is, the time it takes to pass an IP packet from one point in the network to another point) and the ability of the network to move large amounts of packet traffic without dropping or losing packets. QoS or QoT as these performance guarantees are referred to, are the backbone concepts in a managed network. Managed networks will provide IP telephony applications the predictability of performance that they need to be successful within a corporation. A managed network can be created out of existing network infrastructure; for example a corporation's data network backbone. These networks are usually frame relay, circuit switched, or ATM-based. The facilities cost is fixed, the operating performance guaranteed, and the savings are greater than creating the same network using the traditional PSTN.

CALL TRANSPARENCY
For this to be the year that intranet telephony becomes a truly viable product, call transparency or robustness must be a feature of IP telephony gateway solutions. Corporate users must not know the difference between an IP telephony call and a PSTN call. The intranet IP gateways must be able to gracefully fall back to the PSTN while a call is in progress. The current crop of IP telephony gateways do not yet have this capability, which means that callers must hang up and re-dial over the IP network or else move the call to the PSTN by dialing another number. From the caller's perspective, this is both inconvenient and annoying.

APPLICATIONS
This year will see intranet telephony solutions introducing a new set of applications to the market, such as call completion and control applications as well as extensions to intranet telephony such as the addition of unified messaging. Advanced applications could include intelligent call management and routing, telecommuting, and meet-me, page-me, and follow-me applications. While these applications may not be new to the market, their delivery via an IP telephony gateway would be.

Real corporations are implementing intranet telephony solutions today. Take as an example a large agricultural equipment manufacturer that believes in IP telephony technology. The company is using it to improve communication internally and with other divisions and connected suppliers. If a supplier ships a faulty part, an employee can call the supplier, discuss the situation with the supplier, and explain what needs to be changed - all over the same corporate intranet/extranet.

Intranet telephony is going to be big business this year because it has real business rationale, guaranteed customer payback, and it is technologically sound.

I'd say it's intranet telephony's year.

Mike Katz is vice president of marketing and business development at NetPhone, Inc. Headquartered in Marlborough, Massachusetts, NetPhone is a leading provider of computer telephony solutions for small business environments. For more information, contact the author at mkatz@netphone.com.