By Keith Newman

In a few years the letters PABX will be just another cryptic acronym in the converged IT&T industry, understood only by weathered engineers from the good old days.

While the standard PABX (private automatic branch exchange) has remained unchallenged for over two decades convergence is knocking loudly at the door as PC-based systems, smart software and voice over IP come of age.

However as new players and products enter the increasingly competitive market and prices plummet customers are cautious, asking lots of questions about upgrade paths, flexibility and cost of ownership issues.

According to Global Information in its 2003-2008 PBX Market Opportunities report, the PBX market valued at $US13.2 billion in 2002 is forecast to reach $US17.9 billion by 2008 with integration of voice network and data and video applications delivering improved productivity.

Locally the most competitive segment of the market is for keyphone systems (up to 50 extensions) for offices that need to operate without a receptionist, enabling calls to be switched between internal extensions.

Forklift upgrade easier

While systems from American and European manufacturers generally have better migration paths, some legacy systems, including a number of Asian options, are difficult to integrate to IP-based or converged systems and the only option is for a forklift upgrade.

It’s at this level that a whole new style of call management systems with computer-based management, smart call routing and a smooth pathway to IP options are being pitched.

IP-based or converged networks until about 18 months ago were out of reach for most New Zealand businesses, now strong lower-end options are being marketed by, Nortel, NEC, Cisco Alcatel, Ayava, Samsung, 3Com, Aria from Atlas Gentec and Panasonic.

Most players have their own proprietary software for call management or call center operations but full IP integration remains a highly specialised field. While some customers opt for full automation most prefer a human attendant who can field basic inquiries and keep a running knowledge of where staff members are, ensuring calls are switched to the appropriate extension.

At the medium to large end (above 50 extensions) most major brand PABX vendors are able to scale to new levels of functionality with software or hardware add-ons. The top end of that segment is dominated by Nortel - largely through its arrangement with Telecom. It has about 100 of the top 200 enterprise sites followed by NEC with about 50 sites and Avaya, Ericsson, Panasonic, Samsung and LG in rearguard action.

European-based research firm Canalys expects the market for business telephony will undergo a more dramatic change in the coming five years than it did in the previous 25. It says increasing amounts of voice traffic will transition to IP networks inside the enterprise, within service providers, for mobile solutions and into the home.

Competition forces price down

Canalys says the total number of lines shipped in the first quarter of 2003 declined worldwide by 4 per cent largely because of general economic conditions but this has led to the average price per line dropping and mounting pressure on an industry accustomed to high margins.

"The pure-IP telephony vendors, notably Cisco and 3Com, in part due to their US-centric, internet-dominated view of the world, have consistently underestimated the competitive strengths of the more established PBX manufacturers, such as Alcatel, Siemens, Nortel and Tenovis," says Sandy Fitzpatrick, UK-based Canalys director and senior analyst.

He says the decision of the pure-IP vendors to focus on larger customers has not helped, as small to medium businesses are always faster at adopting new technologies.

Rob Spray Australia and New Zealand manager for Nortel Networks agrees costly high-end solutions have prevented the average SME from looking beyond a key phone option. Nortel itself is among the big names who’ve recently begun delivering entry-level computer telephony systema with high-end functionality that won’t break the bank.

Its server-based Business Communication manager (BCM) will handle networking, internet access, firewalls, and telephony needs including call centre capabilities and voice mail from one desktop sized box. The BCM unit is now available from Telecom and OneSource at an entry-level of $15,000 is a foretaste of things to come.

Three into one

"Mostly people don’t want to change existing systems or replace phones or wires but the problem is many smaller systems have nowhere to go. With our new offering they’ll be able to do away with about three boxes and have everything in one small unit," says Mr Spray.

While the integration of telephony and IT has been talked about for over a decade Mr Spray says price and the capability of the processors were the big obstacles. "We’re now at break point with all our systems able to be upgraded through software and our servers re-chipped to add more processing power."

Mr Spray believes it’ll be at least two years before the IT market is robust enough to take over all telephony requirements. Increasingly though applications will enable interactive electronic whiteboards and low end video conferencing to occur concurrently. However the business case, including the cost of bandwidth, first needs to be proven.

"With an Excel spread sheet a one second delay is acceptable but even half a second latency is a grim thing when it comes to telephony. It’s really about power," says Mr Spray. Meantime hybrid solutions that can handle both digital and analogue communications fill that gap. At the corporate end of the market where Telecom has been selling its Meridian range for 12 years, Nortel dominates in the top 200 companies with a 50 per cent market share.

Rival NEC, which maintained a stronghold across the keyphone and high end PABX market for many years, has just launched a new Xen entry level series which delivers IP from six extensions upwards with all the productivity features of larger enterprise systems. NECs installed base back to 1994 can be IP upgraded with software and hardware.

A lot of customers are interested in IP but NEC advises to only go with what you need today, even if its only for 10 per cent of your needs, for example an internal call center, centralised operator, billing, voice mail, CTI or connecting branch offices.

Know your vendor

NEC channel manager, Steve Bower suggests selling VoIP as a toll by-pass option is anomalous. "It’s by no means a priority – competition in tolls is very fierce in New Zealand and you get good value from the telcos anyway."

He says the big issue is quality and ensuring the company installing the solution has a good track record, good reference sites and knows how to re-architect for both voice and data needs. "The market has jumped onto this IP hype based on brochures and pamphlets as if it’ll be available over the internet tomorrow but I believe in the next 12-18 months a few players will fall by the wayside."

The big opportunities are for hybrid solutions from the traditional voice vendors including NEC . "There’s no compelling reason yet to pull out your existing phones and put an IP phone on your desk. In fact you may go backwards in functionality. The digital phone will do everything that you want any way," says Mr Bower.

He says it’s probably about 2-3 years away before IP telephony moves to the desktop. "When the telcos start offering cheaper bandwidth or their own IP offerings for point to point then IP will become the norm."

It’s recommended that companies making the transition first examine business and staff needs and the preferred means of communication with customers before focusing on technology. Having established a business case they’re in a much better position to negotiate a workable communications solution and decide between vendors.

Dave Mason, market manager for Agile which represents Avaya in New Zealand, agrees its important to focus on business drivers. "Do you have people out on the road? Have you considered remote working? Do you have a call center requirements and what are the main things that are driving your business?"

Automating phone functions

Bringing costs down by bringing voice and data into a single infrastructure is the main selling point but the other part of the converged story is applications. "Everyone in the office these days has access to a PC so there’s a growing demand to manage communications from their desktop. The majority of people are using Outlook or some form of contact software enabling them to dial immediately and have screen popping from databases and integrated messaging."

That means there’s a single point of storage and management for emails and voice mail which you can play back via your telephone or your PC. In the past this would have required considerable storage, server resources and high bandwidth - with the latest compression algorithms that’s no longer an issue.

Mr Mason says ‘soft phone’ applications also create a virtual office environment. "You remain totally up to date whether you are in Wellington or Sydney and don’t miss business opportunities."

While many businesses take the leap and completely replace their old systems with PC-based soft switches Avaya prefers a hybrid approach where the core switching is done by dedicated hardware and data applications running over a LAN. "If the network goes down you might lose one or two applications but you’ll still be able to pick up the phone and make a call. People still expect the telephone to be operate 100 per cent of the time," says Mr Mason.

Alcatel while pushing forward into the new world knows there’ll be an ongoing need to interface with the legacy world on which most public communications are based. "You have to have public network interfaces to get out onto Telecom’s or TelstraClear’s ISDN network and people still have legacy analogue handsets and fax machines which we connect between with media gateways," says enterprise business manager Andy Peart.

"Where we differ from most is that we still have the traditional time division multiplexer (TDM) interfaces combined with a native IP call server rather than being purely in one camp."

Alcatel is experiencing growing demand for PC-based ‘appliance servers’ operating on a Linux platform - the focus for IP for the moment remains on toll by- pass. With digital handsets already enabling seamless integration for those who move between offices its customers are ready for the desktop revolution.

"The trends is around enabling converged applications so they can be controlled from the handset to the desktop. You can use CTI integration to control everything from the desktop."

Alcatel manufactures a range of product from entry-level10-handset systems to its OmniPCX Enterprise and Office systems that handle thousands of users over multiple sites. It has thousands of systems installed around the country sold in conjunction with its business partners GDC Communications and Comspec. Its eCommunications Centre suite of products gives web portal access from any device including PDA or mobile phone with unified messaging.

To some extent this relieves the load on the operator and creates efficiencies, specifically for those with direct dial (DDI) numbers who can manage how they want to be contacted at various times of the day.

GTL Networks is pitching its Samsung keyphone and PBX offerings at the highly competitive market of ‘50 extensions and under’. General manager Dave Thompson says the SME space will hot up considerably as more players introduce affordable low end IP-based solutions and non-traditional distributors including computer resellers enter the voice space.

Conversely organisations such as GTL are going to move across to the traditional IT market with CTI and contract management solutions. "There’s some really smart selling going on but for a lot of smaller customers in particular the benefits of moving up to IP are difficult to see at the moment. It’s like telling people not to buy cars that won’t run on unleaded petrol 10-years before they stop making it. A lot of people don’t need it right now."

And its not only the traditional PABX players and network and IT companies who’re closing in on the emerging IP market, the telcos are making a bee-line to deliver their own products and services.

For example Telecom is rolling out a VoIP network-based call management service after in-house trials with Alcatel. Telecom’s IP Centrex, which operated like a virtual high-end PABX, can manage incoming and outgoing calls, deliver screen popping, contact centre software, web-based reporting and automated attendant services.

Telecom group marketing manager, business, Graham Walmsley says staff can have their calls follow them so they can hot desk from multiple sites. "Our customers want the advantages of an IP network without the risks associated with installing and managing this new technology."

Telecom began a staged roll out to Auckland, Wellington and Christchurch central business districts in July, and plans a national service from early next year.