The big shift is that IP is becoming the voice platform of preference for future business communications and PBX the hub for switching a range of data-centric applications along with voice and video.

The latest research suggests most enterprise voice systems purchased over the next few years will be IP-based but rather than rushing to rip out the old systems, the majority of PBX vendors in New Zealand are offering hybrid IP PBX upgrade paths.

That means customers can retain their existing investment and migrate to converged voice and data over IP as the business case is proven. The trend however is clear, as the market shifts from digital circuit-switched voice communications to IP and packet switching technology, traditional PBX line shipments will plummet while IP PBX numbers head toward the roof.

The challenge is coming from two directions, vendors who have evolved from switch and router functionality into the voice market, and those with a history of PBX development who are rapidly adding data streams to their traffic mix.

But not everyone wants or needs to integrate everything on a single network - in fact many small to medium enterprises struggle to see where the payback is.

Rob Spray, Australia and New Zealand manager for Nortel Networks admits there are still more ‘common or garden’ PBXs being sold globally than IP PBXs or VoIP systems.

Transition going on

Admittedly those PBXs are typically computer based or IP hybrids capable of handling both standard voice and IP. "Even the zealots are still leaving in place some standard trunks – there’s transition going on."

Mr Spray was at a conference recently when a Nortel expert asked 40 chief information officers whether they would chose an IP phone or a standard analogue phone if they only had minutes to live and needed to call a specialist? No-one opted for the IP phone.

"It’s actually pretty hard to engineer VoIP technology to be as reliable as traditional phone systems. The technology is ‘mature-ing’ but most data networks and LANs have been designed with a view that 4-8 hours of downtime a year is acceptable."

Most of us have come to accept an average 12-24 hours downtime a year on our PC but that will never be acceptable with the telephone, says Mr Spray.

He says many early adopters of IP telephony found their networks couldn’t cope because of the high level of failures and downtime. "Now people are seeing they have to spend about four or five times what they planned by rethinking and upgrading their local and wide area data network infrastructure. "

The pragmatic business approach he says is to leverage existing investments with a hybrid PBX which, depending on the application and the industry, has a 5-10-year lifespan.

Initially it was believed moves, adds and changes would deliver a good business case as phones can be plugged into an IP network without additional cost, whereas it might cost $200 for a traditional PABX extension.

"Now it appears the real value is in business efficiency and productivity gains – getting an extra 5 per cent out of people’s time is more important."

Mobility compelling

The most compelling business case is mobility - simply entering your name and pass code into an IP phone or softphone on a PC can enable calls to follow you to an extension, a cellphone or PDA.

"Wherever I go, whether I’m at a customer site, at home on my DSL line, Starbucks on a hotspot or overseas in a hotel I still get the call whether it’s through the internet or the company network. Our catchphrase is business without boundaries which tries to remove the geographical issue of being locked to a location," says Mr Spray.

He says mobility has a very high value for salespeople, managers, customer service or other employees who move around a lot. "It’s a powerful business case to hand-off to mobile and still get email, SMS or link to instant messaging capabilities. Through IM you give contacts permission to be in touch so you can know when you’re available to each other."

Through IP PBX systems you can have desktop sharing, voice, video, text and applications popping up including databases and CRM screens. "This is about making employees more efficient," says Mr Spray. Internally Nortel has been using its Multimedia Communications System (MCS) for some time and is currently in the process of making it available to customers

The concept of ‘presence’ is about true mobility and availability and managing wait time and can change the whole workgroup or customer-supplier relationship.

Roy Wakim, convergence solutions manager at Avaya South Pacific agrees the floodgates are about to open on a raft of new applications based around mobility, especially with the widespread adoption of SIP (Session Initiated Protocol).

"With IP PBXs you give functionality to the system and the organisation and some mobility, with SIP you are adding more functionality to the user and reducing time wasted playing voice mail tag."

Smart use speeds ROI

Mr Wakim says the risk of remaining with traditional platforms is that all the developments are going to IP. And while many traditional key phone systems are still being sold, IP comes into its own as organisations need to distribute calls across distributed offices.

Even at the low end though the traditional keyphone market is under threat from mainstream players like Avaya which itself has a four user IP-based system which can handle traditional handsets, incorporate SIP and add additional users.

He claims the return on investment for an IP PBX can be three years to 18-months. "If you decide to implement smart applications in your call centre you can even have a return in 12 months through improved customer service and reducing the idle time of agents."

Toll bypass is also seen as an area of savings as WAN links come down in price enabling closer communications between cities and countries.

Mr Wakim says its natural there have been fears as technology moves from analogue to digital and now to IP. There were also concerns about support, management issues and price. However he says there’s now greater understanding of the benefits and the cost of digital and IP handsets are now identical.

"You don’t lose any functionality in fact you get much more flexibility including better features around distribution, centralisation, administration, performance, management and mobility."

Mr Wakim says the right level of security is essential with the move from proprietary and closed networks’ to an open IP environment. However he believes its time traditional data networks took the lead from the voice market and became more robust and resilient.

At the high end – particularly where disparate sites are linked together - the ideal is to integrate voice and data on a single highly robust and secure network, using architecture so stable that adding a phone or a PC is simply plug and play.

No simple transition

Dave Lutterman, sales manager for Zintel’s Ericsson Enterprise Systems (EES) division says the key benefit of moving to a single network architecture is maximized investment in data circuits and architecture.

It is as more efficient to manage a single network rather than having a voice network running in parallel but you can’t suddenly turn off your PABX and turn on an IP infrastructure without expecting some issues.

Mr Lutterman says the key is the ability to centralize applications on a core platform regardless of transport mechanism, rather than decentralising hardware out at the edge of the network.

And he suggests IP makes little difference to the operator or receptionist. "In some ways it’s still catching up to where we are in a traditional TDM environment. The efficiencies are still at the core not at the edge yet."

Mr Lutterman says the PABX doesn’t disappear it just evolves. "Yes they’ve become software based, are rack mounted and go out over IP but they’re still there handling all voice functions the way they used to, they just look slightly different."

And he says you don’t have to go to a complete IP environment from day one. "With a hybrid IP PBX you can put IP extensions in where it makes sense and still use plain old analogue or digital phones around the office with TDM communication or add mobility into that," says Mr Lutterman

End of life upgrades

IBM sees itself as a VoIP provider competing against traditional PABX products and claims it’s selling an average of 500 seats a month with the majority of sales openings occurring when a PABX is at the end of its life or people are moving to a new building.

"That’s where the investment really pays for itself quickly. If they’re in the middle of a contract all we can do is make sure their network is IP ready so when it reaches the end of its life they’re ready to convert to VoIP," says IBM-Logical sales and marketing manager Verdon Kelliher.

IBM-Logical sells a managed service, security and wireless capability as well as the networking technology. "Instead of having two platforms for voice and data we converge into one – we either manage it for you or give you enough skills to manage it yourselves," says Mr Kelliher.

"VoIP is a big mover from government departments right through. We even had a car sales yard go with VoIP. Essentially the technology sells itself and we compete on the services we wrap around it," he says.

"The reason people go to converged data is not so much the network but the applications that run over it. Video over IP for example, is as simple as making a phone call." And while its still in its infancy – he believes the recently released Cisco Advantage and Tanburg 5000 videoconferencing technology being demonstrated a couple of times a week "is going to be big over the next year".

The company is the largest Cisco gold partner and has sold solutions into the Ministry of Social Welfare, Waikato District Council, Environment Waikato, Ministry Agriculture and Fisheries, Housing New Zealand and more recently Peter Jackson’s Weta Studios.

Options for the future

Panasonic PBX product and sales manager Paul Schroder says few of Panasonic’s customers have any immediate value in a purely IP PBX system and most efforts to move voice onto the data network have been about providing options for the future.

He believes extremely reliable voice communications can be maintained by keeping voice separate from data but still within a structured cabling system.

Unless the network is optimised for handling additional voice traffic issues such as degradation of voice quality and lack of reliability can impact on customer service. "When you email someone you don't expect a response immediately but when you phone someone you tend to expect to talk to them almost immediately," says Mr Schroder. 

Increasingly he says the need to integrate into the data network starts with the question ‘how can I get Outlook or other CRM type applications to screen pop when I receive a call? And this can often be However this can often be confused with VoIP. 

"The most popular requirement for VoIP is in networking multi site or branch office situations combined with CTI (Computer Telephony Integration) using software applications that can interact with the phone system which can add significant value to a customer’s voice," says Mr Schroder.

"VoIP customers can leverage their hybrid IP system to enable transparent desk to desk dialling but the method by which this is provided must be cost justified."

He says Panasonic in partnership with Talking Computers, can install additional software for more advanced call centre, remote branch applications and centralised operator functions while the PBX retains the traditional reliable voice communications to the desk. 

Panasonic's new range of hybrid IP PABX's introduced in September last year ranges from 30 to over 200 ports - entry level without the bells and whistles  can start from as little as $3000.  These systems, based on a hybrid architecture are scalable and include IP gateway functionality. 

Business case essential

Rather than just selling PABXs Cogent has become more of a solutions house, configuring systems to meet specific business needs. "We go back with a solution which shows what they’re getting back for their investment not a quote for a PBX system. They want to see the ROI and with the PBX today that’s a lot easier to show," says general manager Stephan Goodburn

His main suppliers NEC and Samsung have delivered a lot of new technology this year, much of it enabling customers to upgrade by bolting additional equipment onto existing switches. "It’s reasonably easy to validate taking the upgrade path if it’s structured in the right way and fits into the business model."

However he says a strong business case needs to be made for major shifts in technology including some companies who have held on to the same system for 12 years. "To move them up to the next technology can be difficult when what they have is still working well. They need to be convinced there’s a better return."

However he admits IP is not for everybody. "There’s got to be a substantial business case to ensure it makes sense. The biggest cost saving is to have it run over your own internal network across several locations and save on your telecommunications costs."

The marketing push to integrated IP telephony and IP PBX glows with neon light promises of a new era in communications. Better management, seamless communications, flexibility, mobility, plug and play, text to speech and remote agents. It’s viewed by some as the harbinger of rich video, data and voice communications and sharing of applications across desktops, branches and nations.

Business cases range from reduced costs for adding and changing connections to improved efficiencies, better use of time, greater productivity and improved responsiveness to customers. However the shift to integrating voice and data comes at a cost.

The fact is much of the market is still waiting for the killer application which may simply be about doing a more efficient job with voice.

Breakout box

IP PBX upwardly mobile (389)

After virtually flat-lining for the past year the global enterprise telephony systems market is showing signs of vibrant life with overall line shipments for the first quarter of 2004 up 8.4 per cent and shipments of IP-enabled lines up by more than 50 per cent.

Fgures released by UK-based Canalys in June show the IP-enabled lines market led by Cisco with Nortel retaining the overall global lead increasing its share to 14.9 per cent with Siemsn in second place with the highest growth, Avaya in third and Alcatel in fourth. Ericsson also received an honourable mention for its performance.

Other key players in the New Zealand market include NEC, Samsung, 3Com, Atlas Gentec, LG and Panasonic.

The situation began to improve towards the end of last year, with the majority of growth coming from the hybrid-IP (up 55 per cent) and pure-IP (up 69 per cent) segments, at the expense of the traditional voice PBX (down 35 per cent). All the major vendors tracked by Canalys now offer converged solutions representing around 70 per cent of all lines shipped in the first quarter this year.

While only a small minority of the lines shipped on hybrid systems are IP-enabled today, these, combined with the pure-IP shipments of vendors like Cisco and 3Com, mean that IP lines already represent more than 10 per cent of the total market and are growing at more than 50 per cent year on year.

"The growth in the IP telephony segment is indicative of the fact that vendors have addressed issues of scalability and reliability - IP is more than a niche market now," says Canalys research analyst Matthew Ball.

"A raft of applications, including rich media conferencing, as well as an increasing choice of handsets, is beginning to stimulate more interest. Enterprises are developing greater understanding of the benefits of integrating applications into the corporate network. SIP will further encourage adoption and we expect the number of IP-enabled lines to grow significantly quarter-by-quarter."

Mr Ball also pointed out that IP-based telephony is no longer being targeted just at large enterprises, with Cisco and many other vendors focusing attention on the small to medium business segment too. The increase in residential broadband penetration and home working means even smaller companies, can see operational benefits from deploying an IP telephony solution.

Ends

Mobility and smart features
convince Police to go IP (breakout box)

New Zealand Police is mid-way through a project to move all its internal communications to IP, including shifting off its Centrex telephony to remote areas, based on upgrades to its Ericsson MD110 PBX systems.

"We are futureproofing the telephonic platform so we can bring in additional features and grow with various business drivers. We need to be flexible so we can reconfigure, make adds moves and changes centrally and make things easier to maintain," says Police Information and Technology Group network manager Rohan Mendis..

Police have a robust nationwide Cisco network which carries both data and voice traffic. A couple of years ago when it was still considering its options there was a likelihood it might have chosen a complete IP solution from Cisco.

However the need for a highly flexible mobile environment and the fact that this would have meant throwing away the existing investment tipped the decision Ericsson’s way with the signing of a $10 million 10-year contract.

"We are a mobile workforce and mobility was an important part of the decision - mobility is critical but we also had a working Ericsson base platform so it was a natural migration. We didn’t want to throw away the investment when we already had a maintenance arrangement with Ericsson," says Mr Mendis

Just prior to 2000 Police replaced 55 PABXs across the country with Ericsson PBXs which were expected to last for another three years. As part of a standard upgrade these digital systems are being moved up to IP telephony.

To date just under 3000 extensions have been replaced with IP PBX connections, now its converting about 3500 Centrex lines which have been servicing over 450 rural offices and locations where there’s no direct network connectivity.

Mr Mendis says the shift from Centrex was "cost neutral" with the cost of Centrex rental offset by the additional bandwidth required to move these areas into the IP network.

Centrex extensions also have a lower functionality. "They can’t transfer calls, get access to a common voice mail or directory platform or provide the functionality we needed for all our rural police stations."

However Mr Mendis says the move to IP from a voice point of view will deliver nothing extra, it’s simply a move from analogue voice. "It’s the features such as a common telephone directory, common voice mail, call transferring and other PABX features."

The next big milestone will be the migration to Ericsson’s OneBox Unified Messaging which will enable a common email, voice mail and fax platform which is currently being researched.

Mr Mendes says he’s also evaluating the One Number concept which Police plan to pilot.

"If someone rings me only I know where I am not the person calling. With this you programme the system and if I’m in a meeting it goes to voice mail, if I’m at my desk or on a cellphone it reaches me there. We have the capability to do it but it requires a change of mindset. Technology is one thing but getting people to adopt it is another," says Mr Mendis.

Once the PBXs are all upgraded to IP, Police will look at the next generation capabilities of the major carriers with a view to moving off ISDN between PBXs to IP trunking which is expected to result in further cost savings.

Ends…

In its Asia Pacific market overview International Data Corporation (IDC) believes IP telephony, long the subject of much hype, will gain traction, particularly in the enterprise from this year onwards.

It says feature-rich intelligent IP PBXs solutions are finally able to deliver on the promise of ubiquitous access from a single system resulting in long distance call savings and remote access convenience. "Carriers will also have to keep pace with the development of the IP PBX market and it is expected they’ll start pushing IP Centrex solutions."

IDC says significant opportunities exist within the small and medium sized market, which gives them access to the features, functionality and cost savings offered by today's IP PBX solutions, without the same level of infrastructure investment.

According to a Forrester report in August, most companies have plans to upgrade to IP telephony over the next five years, based on their requirements for PBX replacement.

However Forrester warns investments in IPT are major capital expenses, and companies need to consider new strategies for evaluating and implementing IP systems to avoid problems.

"This represents a major shift in managing voice communications. To ensure high-quality voice communications, IPT companies must consider the impact of voice on the data network, as well as additional costs that may be required to support quality voice transmissions including site preparation, emergency backup procedures, and organisational realignment," says Forrester.