April 2002

BY BYRON BATTLES AND SARA UZEL

A discussion thread in a recent online forum exploring next-generation services produced the following quote: �Voice over Internet Protocol (VoIP) has nothing going for it except in the case of very expensive overseas phone calls.� The skeptic who issued that statement was questioning whether IP telephony is a conspiracy from the information technology side.

Perhaps we could have written that statement some months ago. But, based on a recent client experience; however, we know that IP telephony is indeed a viable solution. It may not be the answer every time, but IP telephony, and all the money behind it, certainly does not amount to a conspiracy. Recently, The Battles Group performed an analysis for a real-life client that pointed to server-based IP telephony as a clear choice above Centrex for central office (CO)-based and private branch exchange (PBX)-based options.

Business Needs Came First
The aforementioned client occupies 33 physical buildings and has a variety of telephone systems on the main campus and remote buildings. They operate in a Centrex-based environment with various key systems and PBXs serving as terminating equipment. In contrast, the client�s data equipment is networked by a homogeneous, state-of-the art physical plant, mostly Category 5 or 5E cabling.

Inefficiencies in the existing system were costing employees� productivity and presenting a disjointed image to their customers. The client�s decision team wanted customers to get the image of a single entity, reaching the right person with a minimum of transfers and as little hassle as possible. Similarly, staff needed consistent dialing patterns. On the existing system, dialing patterns were inconsistent among four-, seven-, and even some eleven-digit dialing patterns within the main campus. The client needed functional applications, such as enterprisewide voice mail capability; simplified moves, adds, and changes (MACs); call center capabilities; and even natural speech recognition for some departments. The client also wanted to reduce or avoid costs and improve cost accounting and tracking.

Capabilities Were Comparable
The Battles Group performed a technical comparison of the three architectures by ranking the options as either good, better, or best according to criteria such as �ease of migration from current solution to new solution� and �scalability.� The results were similar among the three architectures, although each had distinct advantages. For example, the IP-based solution appealed for its promise of open architectures and interoperability. It got high marks for scalability because it could be incrementally increased one line or node at a time (a characteristic shared with the CO-based solution). The IP-based solution was strongest on management and administrative control because it uses the same network administration capabilities as the data network already in place. The CO-based solution was rated highest in reliability and availability. Together with the PBX-based solution, it won high marks for the maturity of the technology. Features, functions, and applications made the PBX-based solution stand out.

Life Cycle Costs Provide Differentiation
It was not yet apparent which recommendation was best for the client. We continued our analysis and performed a two-part business case analysis of the project cost and 10-year life cycle. In the project cost comparison, we included the option of keeping the existing system. Vendors responded to our request for information with details allowing a realistic project cost comparison. This involved capital costs and indirect project costs. In terms of capital cost (design and planning, common equipment, telephone sets, voice messaging, call center functionality, maintenance, installation, and integration), the IP-based solution was somewhat more expensive due to the upfront planning for converging the networks and ensuring that the data network could handle the required QoS. The comparison of indirect project costs (cabling, installation of PSTN facilities, PSTN recurring costs, staff, and dual operations service) resulted in similar costs for the IP-based and PBX-based solutions. The CO-based solution was slightly less, even with PSTN-related costs. In total, results of the comparison were similar among the three architectures, within $1.2 million, or about eight percent of the total project cost.

The next step was to perform a 10-year life cycle cost comparison. We assumed that about half of the project budget would be spent in Year One for project design and upgrades, primarily on the IP solution where network components, telephone services, and applications are important. In Year Two, we estimated that the client would expend about 40 percent of the project cost with continued upgrades of the network and deployment of phones and systems. The total deployment would wind down in Year Three. Normal operational procedures would really begin in Year Four and costs would level out at that time. After five years, the costs still appeared comparable among the options.

After 10 years, however, the IP-based solution was the obvious choice. This proved to be more cost effective than maintaining status quo, eight percent less expensive than the PBX-based solution, and 32 percent below the CO-based solution. The return on investment took place in Month 38. The IP-based solution required less replacement and upgrading in Year Six through Year Ten, resulting in significant cost savings during those five years. All the architectural alternatives had advantages, but the crucial 10-year comparison pointed to the IP-based solution.

Several assumptions were vital to the result. Among our many suppositions was one that the client�s new system rollout would be incremental, an advantage of the IP model, because the client could gain knowledge as it moves to increasingly critical areas. The most important assumption was that the client would adequately fund all post-implementation and operational activities. Past experience had taught us that working with the new architecture would be a continual process, just like maintaining a data network. The client could not just install it and forget about it.

If presentations at a recent industry event can be our guide, then there are numerous instances where ROI comes earlier than 10 years. For many businesses, particularly small businesses, the ROI can be earlier and easier. The Battles Group and other organizations are working through TIA�s Enterprise Futures Working Group, to analyze ROI issues like these.

Byron Battles is Principal at The Battles Group, LLC and a member of TIA�s Enterprise Futures Working Group. Sara Uzel is President of Technology Trends Group, Inc. TIA is a leading trade association serving the communications and information technology industry, with proven strengths in market development, trade shows, domestic and international advocacy, standards development, and enabling e-business. Through its worldwide activities, the association facilitates business development opportunities and a competitive market environment. The association provides a market-focused forum for its more than 1,100 member companies that manufacture or supply the products and services used in global communications. TIA represents the communications sector of the Electronic Industries Alliance (EIA). Visit us at www.tiaonline.org.

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BY DAVID OWEN

In mid-January the Telecommunications Industry Association (TIA) sent a letter to Governor Tom Ridge, President Bush�s handpicked head of the Office of Homeland Security, offering the expertise of the 1,100 member telecom equipment association in addressing the challenge of terrorism. Just as telecom companies had rallied in response to the massive service outage crises in New York City and the Pentagon in the aftermath of September 11, once again the telecom sector was prepared to step up, this time to tackle an even broader challenge.

TIA was especially interested in apprising Governor Ridge and his staff of the potential role that broadband could play in providing both proactive and reactive responses to terrorism. As TIA president Matt Flanigan pointed out in his letter, broadband �should be considered a natural candidate for inclusion in your thinking and planning for Homeland Security.�

Until September 11, the industry�s focus on broadband had been on its economic benefits and potential for re-energizing a recession-bound economy. However, the technical characteristics and robust capabilities of broadband also make it a potentially important tool as the nation mobilizes to reduce its vulnerability to terrorism and other securities threats.

To IT and telecommunications professionals, it had been obvious for years that broadband had significant potential applications in public safety, intelligence collection and analysis, emergency management operations, and other non-commercial activities. September 11 provided the jolt necessary to cause those same professionals to focus more sharply on what the actual role for broadband might be and how to realize it within the shortest amount of time.

The TIA letter to Governor Ridge offered a short and far from exhaustive list of what fast, interactive, content-rich broadband services capable of providing voice, high-speed Internet, and high-quality video could do to help either prevent terrorist attacks or recover from them in the event defensive measures failed. Among the potential applications mentioned were data-intensive biometric identification technologies linked in fully broadband-capable national networks to provide enhanced screening at borders, transportation hubs, and sensitive facilities. Broadband�s use in marshalling geographically dispersed medical expertise via telemedicine at the scene of an attack was also cited as was the potential role of teleworking in keeping both public and private institutions functioning during bio-chemical threats or attacks.

Although the TIA-supported effort to help bring this new technology to bear on the mission of better protecting the American homeland is still in its early stages, it has already generated an unprecedented level of interest, involvement, and commitment from telecom professionals and their companies.

David Owen is currently a vice president and general manager with Alcatel, chair of TIA�s Public Policy Committee, and a member of the TIA Board of Directors. Prior to his 15-year career in telecommunications, Owen served for 21 years as an Army officer.