VoIP solutions selling, but adoption still small

By 2010, at least half of all enterprises will be using voice over IP (VoIP) for their basic phone, data and video services, predicts one expert.

Right now, enterprise adoption rates of VoIP technology are in the single digits, said David Yedwab, executive vice-president of The Eastern Management Group in Bridgewater, N.J.

However, about one-third of new enterprise telephony equipment sold in North America is VoIP-enabled and this may reach 50 per cent by the end of 2004, he told a Wednesday morning crowd of CIOs at a VoIP forum in Toronto, presented by CIO Canada, an IT World Canada publication. With growth like this, Yedwab predicts that 40 to 60 per cent of large business will be on board before the decade is out.

For example, in the U.S. there are more than 160 million business phone lines; 55 million in PBXs; 36 million in Key/Hybrid; 18 million in Centrex and about 50 million in plain old telephone service (POTS). As of 2003, about seven million VoIP lines were in service.

The switch from analogue to digital started in the mid-1970s and took almost two decades to complete, Yedwab said. But VoIP appears to be penetrating the enterprise twice as fast than that. Yedwab labels 2001 as the year where VoIP really started to gain marketshare.

One reason it will take time for VoIP to take over is because PBXs generally have a seven- to 15-year life so companies will wait until their PBX systems die before they move to VoIP, he said. There was a huge surge of telecom equipment sales in 1998, he added.

Additionally, prices of VoIP solutions have declined to a point where they are comparable to the cost of time-division multiplexing (TDM) products, making companies more likely to buy VoIP gear, Yedwab explained.

Analyst reports saying that two out of three companies plan to implement VoIP in the next two years are misleading, he said. This is because most firms are not deploying VoIP across their entire organizations but are favouring pilot rollouts in one office or division so they can assess business benefits before migrating.

Allen Gates, director, systems infrastructure of Morneau Sobeco, a human resources consulting firm based in Toronto agreed. His company is considering deploying VoIP at its call centres in Toronto, Montreal and Pittsburgh, Penn., but will definitely engage in a small-scale deployment before taking the full VoIP plunge.

Morneau Sobeco has a VoIP-capable TDM from Avaya Corp. and is currently working with the vendor to determine the best strategy to bring VoIP into its call centres. Gates said the firm already manages data and telephony in the same structure but is looking to VoIP to enable easier back-up for multiple locations and for running business applications.

But there is market resistance to VoIP. Not only are IT people in general averse to change because change often causes problems, Yedwab said, but poor market conditions have contributed to the slow early adoption of VoIP. The IT market took a dive just as VoIP became widely available, he added, so lack of capital and the risk-averse nature of the IT industry slowed VoIP growth.

Also, Yedwab said VoIP vendors took the wrong marketing approach with VoIP. They initially touted VoIP as a way to save on long distance but since most companies pay very little right now, on average three cents a minute, this was not a compelling reason to change over.

Gates agreed. He said Morneau Sobeco pays very little money for its long distance at present.

The biggest cost benefits for VoIP come in the moves, adds and changes, said Paul Rowe, vice-president of marketing for Bell Canada in Toronto.

Yedwab noted 20 per cent of the workforce changes location every year, leaving companies to swallow costs for cancelling phone lines and adding new ones. It doesn’t cost anything to change the location of a VoIP phone compared with a traditional phone.

Rowe said other savings come from the convergence of voice and data networks because it is cheaper to manage one network than two.

For companies currently using Centrex, Rowe said Bell will have an IP Centrex service ready for Q3 2004 with an easy migration path for its current Centrex customers.

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