Hosted IP For Service Providers: A Win-Win
BY DENZIL SAMUELS
The commoditization of telecommunication services has forced service
providers to seek out new sources of revenue. IP telephony is one of the
most promising ways to generate this revenue, as it enables service
providers to offer their enterprise customers hundreds of value-added
services, including unified messaging, instant messaging, Web conferencing,
While rapidly gaining popularity, IP telephony first appeared on the
market more than six years ago. However, at its inception, it wasnï¿½t mature
enough to be a viable option for carriers to provide to businesses, as the
challenges outweighed the benefits. Now, IP telephony solutions match the
voice quality and interoperability of TDM and carriers are ready to make the
The timing couldnï¿½t be better. Enterprises, particularly those with multiple
branch offices or a large percentage of mobile workers, are demanding this
capability. Todayï¿½s enterprises are eager to capitalize on the financial and
productivity benefits of consolidating voice and data traffic on one
network. IP telephony is quickly becoming a business imperative and even
hesitant enterprises will eventually be tempted by its benefits. As such,
now is the time for service providers to arrive on the scene with an
affordable, easily implemented, IP solution that will improve information
flow for enterprises ï¿½ both internally and in interactions with partners,
customers and vendors.
Why has IP telephony now become so attractive? The answer is multi-faceted.
First, as mentioned, the technology now matches the promise. Second,
enterprises are attracted by the productivity benefits of IPï¿½s value-added
features. With IP, branch offices and mobile workers can act as if they are
all a part of corporate headquarters, accessing the same information, and
being available at a momentï¿½s notice to answer a customer question.
Whatï¿½s more, IP telephony, particularly if hosted by the service provider,
offers clear financial benefits. No longer do enterprises need to buy
equipment and hire people to service it. Now, this burden can reside with
the service provider. Whatï¿½s more, pay-as-you-go pricing enables enterprises
to truly only pay for what they use. Add to that a comfort in knowing that
they will also have access to the latest equipment (versus buying something
that quickly becomes outdated), and IP telephony becomes the clear answer.
To Host or Not To Host?
Traditionally, IP telephony solutions have been sold directly to businesses,
requiring operations to manage the applications on customer premises
equipment (CPE). While this may still be a viable option for large
enterprises, the cost and commitment of CPE can be prohibitive for the
typical mid-size company. Not only does CPE require capital investment or
equipment leasing (different equipment for every location), it also requires
recruitment and training of IT staff, the need for software upgrades, having
to deal with technology obsolescence, and the pressure of meeting
application deployment deadlines.
This can be just too much of a commitment for most mid-sized enterprises, as
they simply donï¿½t have the technical resources, capital, or desire to host
and manage these solutions and associated networks. Itï¿½s critical to focus
on their core competencies. What they want is new application functionality,
provided under an operating expense model, with predictable, low monthly
costs and proven ROI. They also want these applications fast. And they are
looking for service providers to give it to them.
Unfortunately, service providersï¿½ use of circuit-switched technology, whose
proprietary nature hinders innovation, makes it hard for them to develop the
latest or most sought-after services and offer them to enterprise customers.
Whatï¿½s more, even if they acquire an IP network, they still need to maintain
their legacy systems to support existing customers. This is where the hosted
model comes in.
Third-party providers can install and manage IP applications on service
providerï¿½s equipment, then jointly market these applications to end
customers. This gives mid-sized enterprises access to best-in-class,
affordable applications previously available only to large enterprises.
These ï¿½outsourcedï¿½ applications are delivered over the Internet and other
service provider networks through the service provider ï¿½cloud,ï¿½ the
unpredictable part of a network through which data travels on its way to its
final destination. As a result, customers would know theyï¿½re using otherï¿½s
technology, but would not be running their applications directly.
With hosted IP telephony, the carrier has the responsibility for providing,
maintaining, and servicing network equipment, as well as providing upgrades
as necessary. With this in mind, enterprises can free up resources, as
workers who used to be responsible for maintaining PBX equipment can focus
on other activities.
In short, hosted IP solutions are a win-win proposition for all involved.
However, there are several key issues for service providers to consider
before selecting a partner in offering IP solutions to enterprises. Service
providers need to make sure their partner can provide them, and their
customers, with reliable, secure, and easily implemented solutions. These
are some of the ï¿½hot buttonï¿½ issues for service providers to consider:
Migration Strategy: Service providers need a partner who can offer
their customers a phased migration model, implementing IP communications by
the seat, department, or site. This enables customers to add IP telephony at
their own pace, instead of forcing a disruption in service. This also allows
enterprises to ï¿½test driveï¿½ the technology, getting a handle on the ins and
outs of the new technology as well as usage statistics.
Another important thing for service providers to consider when selecting a
partner is their ability to offer converged systems, giving companies the
ability to operate their existing systems in tandem with the new IP network.
This enables enterprises to only upgrade the units or remote locations that
will benefit from the value-added services provided by IP technology.
Speed: Once a service provider makes the decision to offer hosted IP
solutions, it will need to have the service up and running quickly (90 days
or less) in order to capitalize on the market demand and beat out their
QoS: Network quality is the difference between customer satisfaction
and a complete loss of productivity. Service providers need to ensure their
hosted IP solution gives the highest priority for VoIP traffic,
network-wide; incorporating dynamic jitter buffers at all critical points,
and limiting packet loss.
Reliability: Disaster recovery is the buzzword of the day. Service
providers should look for a hosted IP telephony solution that offers fault
tolerant server options and distributed architecture, taking things a step
further and making disaster avoidance a reality.
Recently, many people have linked the reliability of hosted IP with the New
York City blackout. Those with premise-based equipment lost voice service,
while those with the hosted service were able to switch over to another
location and/or generator and maintain business as usual. Hosted services
offer superior reliability because the network operator is off site and not
subject to the problems of one location.
Security: Voice conversations must be protected as effectively as
billing records. Advanced, end-to-end encryption technology and rigorous
administrative security measures are essential when selecting an IP
True hosting: Some companies claim they provide a ï¿½hostedï¿½ solution,
to be managed and sold by the service provider. However, many of these
products actually require servers and other networking equipment to be
installed on the customerï¿½s premises, defeating the major incentive for
customers to want the service in the first place. Service providers need to
find a solution where all server-side applications reside in their premises
on their computers.
Flexibility: Service providers must seek out partners that offer
modular and interoperable products, so they can pick and choose the parts
that enhance their customerï¿½s business models ï¿½ and minimize the need for
new capital investment.
Marketing Assistance: Because hosted IP telephony is something new for
service providers, they often need help marketing it to their customers. As
such they should look for a partner that will provide joint marketing,
including demand creation, sales training, go-to-market strategy
development, collateral development, and event co-sponsorship.
As competition within the telecommunication industry continues, IP-based
voice products have become a necessity to gain ground in the crowded market
space. IP-based voice products enable service providers to offer a host of
exciting new applications and capabilities, with minimal effort. A win-win
scenario, not only do IP solutions generate much-needed new revenue for the
service providers but they also positively impact customer satisfaction and
retention, giving todayï¿½s demanding customers access to the latest
technology. These hosted solutions are particularly attractive in the
current economic climate, as they provide businesses with an opportunity to
access advanced features without an up-front capital investment in
The only daunting task for todayï¿½s service provider is to weed through the
numerous IP solutions providers to select the right partner, making sure
their partner can give them, and their customers, reliable, secure and
easily implemented solutions. Once service providers make this decision,
they are on their way to gaining new customers and significantly increasing
Denzil Samuels is Vice President and General Manager of Avayaï¿½s Service
Provider Division. Avaya designs, builds, and manages communications
networks for more than 1 million businesses worldwide, including 90 percent
of the FORTUNE 500. Focused on businesses large to small, Avaya provides
secure and reliable Internet Protocol (IP) telephony systems and
communications software applications and services. For more information,
please visit www.avaya.com.
If you are interested in purchasing reprints of
this article (in either print or HTML format), please visit
Reprint Management Services online
or contact a representative via e-mail at
[email protected] or by phone at
Return To The March 2004
Table Of Contents ]