One of the most exciting developments in the telecommunication industry
over the last year has been the emergence of the software-based
Class 4 and Class 5 replacements -- collectively known as softswitches.
This last year alone we have seen literally dozens of vendors offering (or
claiming to offer) a softswitch. And with good reason -- softswitches
represent a tremendous opportunity for service providers interested in
offering voice services. These devices are generally 40 to 50 percent less
expensive than traditional Class 4 or 5 switches, and are based on a
distributed design so that they can be placed throughout the network or
located at a centralized NOC (Network Operations Center), depending on the
needs of the service provider. In addition, softswitches can scale to meet
new service demand much more easily than a traditional circuit switch.
However, the most exciting attribute of the softswitch is its ability to
leverage a service provider's broadband access network to create and
deliver new, revenue-generating services while taking advantage of the reliability
and ubiquity of the PSTN.
Simply put, a softswitch is a software platform that provides call
routing and call state functions, and controls connectivity between broadband
IP networks and the PSTN. A softswitch platform generally runs on a
carrier-grade server (such as the Netra family from Sun Microsystems) in
the service provider's NOC or data center, and works in conjunction with
media gateways from vendors like Cisco, Lucent, Sonus, or Tellabs.
Why Service Providers Like Softswitches
One of the primary reasons many service providers have been so enamored
of these new offerings is that they have found themselves under
intensifying competitive pressure, as the market has become extremely
crowded. At the same time, transport and dial tone have become commodities
and overall voice revenues are shrinking, leaving margins too small to
make a reasonable profit. Since 80 percent of overall industry revenues
still come from voice services, this has raised significant questions
about future profitability. Combined with the extremely high number of new
entrants into the market over the last few years, this presents service
providers with an extremely formidable competitive landscape. In order to
avoid being left behind, as well as being able to provide a return to
their investors, most service providers are searching for ways to stem the
tide of eroding voice revenues and bring the value back to voice services.
To acquire and protect market share, as well as quickly penetrate new
markets, providers need access to new voice applications and services that
attract new customers, reduce customer churn and, most importantly,
generate revenue. Generating revenue is the only thing that will help
them survive this hyper-competitive market.
Several service providers have already deployed these softswitch
systems. However, early softswitches have primarily been used for
Internet call diversion (also known as Internet offload), which in essence
provides a means to cost-effectively re-route data traffic (like dial-up Web surfers)
over the service provider's network in order to free up
the PSTN for voice calls. In that role, they act as a cost-reduction
mechanism, rather than revenue-enhancing or service-producing system.
While this is a much-needed function, there are significantly more exciting ways to
implement softswitch technology.
Future Applications
Perhaps the most promising trend is softswitch
vendors that are focused on offering alternatives to Class 5, rather than
Class 4, switches. (In particular, softswitches that are already applications-enabled with what is frequently called "end
office functionality" and more.) While this type of functionality is
much harder to develop, these softswitches signal the real
revolution that will bring about a new breed of hosted telephony and
related services for businesses of all sizes.
Application-enabled softswitches support an
ASP-like, network-hosted model for business telephony that can finally
offer service providers and end users alike a cost-effective alternative
to traditional phone system models -- while including new value-added
services. These application-enabled softswitches are offering a range of
capabilities that encompass typical business telephony functions such as
Class 5 switch features, call forward, call conference, call hold, call
transfer, and more. Other versions offer additional functionality with new
services such as cellular-like features that are not available on a
typical business phone (missed calls, inbound and outbound call logs, and
the ability to click to return calls), as well as taking advantage of a
business phone's LCD display to walk users through previously challenging
procedures like call transfers or conference calls. Some go even further,
offering all of the aforementioned items with a suite of directory-enabled
applications that even support some non-telephony related functions, such
as sending an e-mail response to a missed telephone call.
These new solutions are especially exciting for service providers
targeting small businesses and branch offices since, for the first time,
they can effectively offer these customers the ability to outsource their
phone system, while retaining control of their communications capabilities
through a browser-based interface. Hosted telephony and its related
services finally provide businesses a robust alternative to PBX
and key systems that would otherwise cost $20,000-$50,000 up front to
purchase. This allows businesses to avoid these significant costs, as well
as the management hassles and burdens of typical PBX/key equipment. In
this business model, service providers (emerging telecom ASPs) have the
ability to offer an ASP delivery model where their customers rent voice
services on a month-by-month basis, and can add or subtract users,
specific features, and services with the click of a mouse.
Another feature found in some of these applications-enabled
softswitches is a communications portal that allows the end user to
provision, manage, and order their telephony and voice services via the
Web. For the end user, this means a whole new level of access to and
control over their own telecom services. Through this
service provider-supplied Web site, users can customize their phone, order
new services, change button functionality, click-to-call on recently
called and received numbers and have calls forwarded to any number they
choose. In addition, managing their telecom
services is much easier when compared to the incredible number of steps
required to change features through a PBX or key system. Anyone who has
had to spend hours programming a phone using obtuse codes or assign new
features on a PBX understands the full value of being able to e-program
individual phones with just a few clicks. Since the delivery mechanism and
applications reside on the network, the new application or feature is
available instantaneously on the phone.
This network-hosted communications portal concept has many real
benefits for the service provider. All of the new services provide
the personalization that makes a customer less likely to switch to another
service provider than with a commodity service like Internet access or
less expensive dial tone. In addition, most application management burdens
are placed where they are less prone to errors -- in the hands of the
customer. The communications portal also becomes an alternative selling
channel offering excellent branding opportunities, especially for carriers
like CLECs that are trying to protect and build
market share. This network-hosted
model allows providers to attack markets that have previously been out of
reach, such as the small and medium-sized business market -- a market that
analyst firm IDC estimates to spend $46 billion on telecom services
annually. Since there is no extra customer premise equipment or client software, all the business
customer needs is a broadband connection to their service provider's
network -- whether fiber, DSL, fixed wireless or cable -- in order to take
advantage of these network-hosted applications.
And take advantage they will. Business customers have shown a
tremendous willingness to outsource functions unrelated to their core
competencies, as well as a strong affinity for broadband connections. When
these trends in business and technology are taken together, the bigger
picture becomes clear. For those service providers looking to realize the
potential of their investment in a broadband infrastructure, as well as
generate the services and revenue that will allow them to compete,
applications-enabled softswitches will be the key to future success.
Pete Bonee is president and CEO of Sylantro
Systems. Sylantro is a software company supplying an
applications-enabled softswitch. Sylantro�s �Applications Switch�
offers pre-packaged, advanced business telephony applications and also
serves as a service creation platform for communications applications
without the need for a Class 5 switch. Sylantro�s
"revenue-ready" solutions give service providers a way to offer
ASP-like services, which render today�s Centrex and PBX offerings
obsolete. Sylantro is backed by premier investors including Mayfield Fund,
Vanguard Venture Partners and Accel Partners. |