March 2004
Success With Hosted IP Telephony
BY TROY HERRERA
The migration to IP-based telephone systems and VoIP is beginning to heat
up after many years of hype and lack of action among businesses and
consumers alike. The attractions are many: �free� office-to-office, on-net
calling over Virtual Private Networks (VPNs); very low flat-rate residential
calling; the ability to automate instantaneous Moves, Adds, or Changes (MACs)
to telephones; and the idea of having the latest and coolest looking IP
phone that can plug into any Ethernet port and work just fine. If these
incentives are not enough, the fear that major PBX vendors are no longer
investing in their TDM-based Private Business Exchange (PBX) systems and
pouring future investments into the emerging IP PBX technology and markets
is helping to accelerate the migration as well.
Given this heightened pace of adoption and the growing potential for loss of
revenue for the traditional wireline telephony service provider, many
traditional providers have begun to announce their own flavor of VoIP
services. These services, like traditional Centrex, are hosted by the
service provider; yet they are quite different from the traditional Centrex
service offerings we have seen in the past. The secret to success in hosted
IP communication services is in the details: the what, how, where, and when
of the service offerings are the crucial questions to enable a service
provider�s success in the hosted communications market.
WHAT?
The �what� is the detail of the product offering. In the business market,
the hosted communication service can be very much like an enterprise-owned
IP PBX solution without the required capital expense of owning such a
system. The service can support a low flat-rate office-to-office, on-net
calling option over VPNs and can be built to support automated Moves, Adds,
and Changes (MACs) through a Web graphical user interface. This level of
service emulates what is possible with IP PBX systems. Furthermore, voice
and data application integration can occur with voice integration into
Microsoft Outlook and other desktop applications.
The service can easily mirror the capabilities and features of the IP PBX,
but part of what sets it apart from IP PBX systems is the financial model.
Very small upfront capital expenditures (or none at all) may be attractive
to many businesses. This allows the business to invest its cash wisely where
it can make the greatest return on that investment. But is this service just
a �me too� to the IP PBX? Simple answer: No. The service, with service
provider network economies of scale can go much farther and beyond the
capabilities of an IP PBX-based system.
To start, service providers have the capability to add IP-based media
services to provide voice recognition, enhanced Web collaboration, group
multimedia conferencing, large data storage, and many other applications.
For most businesses, these features are just too complex and costly to
implement for their own benefits. However, when you combine the technical
expertise of the service provider and their economies of scale, these
services can be delivered to a large number of small to medium and large
businesses. Even residential and SOHO (Small Office, Home Office)
subscribers can benefit with a subset of these service offerings.
The new services sound great, but perhaps you have an existing phone system
that works well and is not yet fully depreciated? No problem. The hosted IP
communication service, unlike an IP PBX, does not have to replace the
existing PBX system. Rather, a hosted communication service can provide
trunks to the existing phone system while supporting the addition of
enhanced services for the business. Furthermore, businesses can cap their
expenditures of continued investment in legacy PBX phone systems and begin
to migrate to VoIP applications and benefits as the office grows with
additional personnel. This enables a cost-effective migration to VoIP and
allows the business to determine when to cut the cord from traditional TDM-based
phones systems and switch completely to hosted IP communications. Even when
this switch is made, the enterprise is not required to upgrade to the more
expensive IP phones, but may rather implement a combination of IP phones and
low cost or existing analog phones while enjoying the benefits of the hosted
service enhancements.
HOW?
The �how� determines whether a service provider can actually make an
attractive profit with the service while meeting the market-based needs of
businesses and residential customers. The service delivery platform that
provides the hosted IP communication services must support traditional
telephony and VoIP simultaneously. In addition, the platform must be able to
host IP phones, analog phones, softphones, desktop applications, and trunks
with VoIP conversion and WAN transport.
For those businesses and residential users that are ready to switch directly
to IP phones, the service delivery platform must provide the proper Quality
of Service (QoS) to support packetized voice. Furthermore, for cost
justification, it is essential to converge both voice and data network
access to a single WAN. In doing so, assurances must be made to provide low
latency, jitter, and packet loss for voice applications while allowing data
to use the available WAN bandwidth. In some cases, data may require levels
of quality above best effort as well. To add to these requirements, standard
IP data networking features and capabilities such as firewall, VPN, router
redundancy, routing protocol options and many other data networking features
must be present in the service delivery platform to make this solution
complete.
If these robust data networking features were not enough, the platform must
have a reliable provisioning and management platform that is intuitive and
easy to use. This is essential for the service provider model in order to
provide mass-market deployments to a large audience while keeping with a
deployment model that is manageable. Multiple truck rolls to correct
installations, add voice lines, or to respond to alarms that can be
addressed remotely will ruin the service provider business model.
Lastly and most importantly, it just goes against good business management
and economics to replace properly working traditional phones and modern PBX
systems. The required capital to make this transition can usually be put to
better use towards building the business. As such, the service provider must
offer a solution to host the existing telephones and PBX systems used by
businesses and residential consumers while delivering new applications and
driving the traditional communication equipment with the VoIP softswitch
network. To do this, the service delivery platform must have an integrated
line gateway function that terminates VoIP traffic to and from the WAN, and
deliver digital T1 voice or analog voice to the business and residential
consumer.
Combine all of these requirements, and the service provider is now probably
considering two or three platforms at the customer site. The cost of these
multiple platforms disrupts the business model and cost-effectiveness the
service provider is able to deliver. Hence, a new product category is
required that combines the capabilities of a high-performance data router,
voice QoS, remote provisioning and management, and an integrated line
gateway functionality. With this platform, service providers have the �how�
to deliver hosted communications problem solved with a solution that
cost-effectively meets market and service provider requirements.
WHERE?
The �where� is the go-to market strategy to sell and profit from hosted IP
communications. A blind approach to the market can lead the service provider
astray, chasing businesses that have already made the decision to go with an
IP PBX system-based solution. Or, the approach can lead service providers to
compete on price in the residential market and miss the opportunity to
up-sell enhancements that can be hosted by the service provider and generate
new revenue. Finally, a fixed product offering strategy that does not
customize to meet business needs misses the mark as well and will generate
little success.
Large, distributed, and cost-conscious business customers are the most
attractive account opportunities. These include healthcare institutions with
remote office clinics and university campuses or public school systems. This
market segment is ideal from a multi-site data networking capability and
enhancement opportunity as well as from a cost savings perspective. As such,
healthcare and education have been two of the early adopter markets for IP
PBX systems, and are prime candidates to benefit even more from a hosted
communications service offering.
Although the large account opportunities are the most attractive from a
single account revenue standpoint, a much larger market is the small to
medium-sized business (SMB) with millions of these businesses across the
country. Not only do the SMBs have much to benefit from in terms of
cost-saving enhancements of an IP voice solution that offers very low or
flat rate on-net calling, but there are added values in features and
capabilities that are now made readily available to the SMB that were
previously beyond imagination. It will take a well trained sales force and a
decent product demonstration to enable SMB owners and managers to step
beyond their preconceived concepts and previous experiences with Centrex
services to fully comprehend and realize the benefits of hosted IP
communications. Many customers still may not fully understand until they
begin using the service and implement its many benefits to improve internal
business operations, customer contact, and improve business efficiency.
WHEN?
With all the recent announcements from emerging voice application service
providers and traditional RBOCs regarding hosted IP voice and data service
offerings, the time to gain early market share in the burgeoning market is
now. For several years, the market has been pushed by innovative IP PBX
vendors who have tried to promote VoIP and their IP PBX solutions as an
emerging technology and platform for the business. Finally, the market is
shifting towards early adoption and we are witnessing the beginnings of
mass-market acceptance. The technology works, and service providers now have
an opportunity to realize benefits not only from the technology but also
from the early marketing efforts provided by IP PBX vendors to accelerate
market adoption.
The technology saves money. Not only is it more cost-effective for the
service provider to transport voice over converged IP data networks, but
service providers have been doing this for years within the core of their
networks. The difference with the hosted IP communications model is that
service providers are moving the economic benefits to the edge of their
networks, all the way to their customers.
Hosted services deliver real value to the enterprise. From point-and-click
MACs with complex back office transactions that are made to look simple, to
a consolidated single bill for the business or consumer�s total
communication services; these are just the beginning of what will truly
emerge as a class of new hosted IP communications, business services, and
customer relationship management integration. Ultimately, this will converge
into an assortment of pick and choose hosted applications to deliver mass
customization for every SMB.
Conclusion
The what, how, where, and when of hosted IP communication services have been
answered. The services must support emerging IP phones as well as the
traditional communication interfaces. A unique and new brand of service
delivery platform is required. The market has a chance to reap many benefits
that bring both economic and good business practices together. And lastly,
the technology is ready and proven to support both residential consumer and
industry-strength, business-class services. Service providers that implement
this service strategy with a diverse and capable platform can achieve wide
scale and profitable success in the market. c
Troy Herrera is market manager at Carrier Access. Carrier Access is an
equipment manufacturer that helps more than 1,800 telecommunications
companies accelerate service revenue, lower operating costs and extend
capital budgets by applying high-performance access and service creation
technologies. For more information, please visit www.carrieraccess.com.
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