Although Canada is one of the leading regions of IP telephony uptake, “the installed base of private branch exchange (PBX) is not going anywhere fast,” says Jon Arnold, voice over Internet protocol (VoIP) program leader at consulting firm Frost & Sullivan in Toronto. The firm predicts the Canadian IP telephony market will grow to $450 million by 2006. Arnold says it will take over the dying PBX market but not until the current installed base of PBX reaches end of life.
An estimated 18 per cent of new lines in Canada in 2003 are IP telephony-based, adds Ronald Gruia, the firm’s program leader for enterprise solutions. This is up from 13.7 per cent in 2002.
Certainly, VoIP technology vendors claim it is out of the early adopter stage and earning the confidence of mainstream users. Cisco reports its IP phones displace about 5,000 circuit-based, traditional phones each business day, compared with 2,000 per business day a year ago. Jerry Gushue, regional account manager for Atlantic Canada at 3Com Corporation, says their sales in eastern Canada have grown 60 per cent over last year.
Some of that growth can surely be attributed to 3Com customer Maritime Steel and Foundries Ltd. whose enthusiastic Sean Green, manager of information systems, probably inspires every prospect the vendor brings to this reference site. Without a doubt, Green is totally pumped about the VoIP experience at this bridge and steel supports manufacturer. He has been maintaining the 3Com NBX 100 system that his predecessor had selected a few years ago and which he says paid for itself within two years. When company growth prompted the purchase of more capacity, he didn’t hesitate to repeat the selection which was initially chosen with the intent of building on it. In late 2002, the company decided to integrate a second NBX 100 system.
Maritime Steel has five divisions in three cities – Alberton in PEI, and New Glasgow and Dartmouth in Nova Scotia. Green reports their first NBX 100 system replaced a Nitsuko PBX that the company had been using for 10 or 15 years. He recalls it was typical of PBX systems: big, hard to maintain, difficult to administer.
“A steel company goes through a lot of changes on a daily basis,” he explains. “We’re hiring and firing and changing positions and titles. All these IT devices have to follow them. I want a system that is going to be easy to take care of and something that we don’t have to pay someone else to come in at $200 a visit to change things.
“Your ROI is immediate, whether it is coming in dollars or time,” he adds. “As soon as you put this in, you can notice the difference the first morning you use it.”
Green uses a Lucent wireless bridge from the head office in Dartmouth to connect to the nearby structural steel division about 1,000 metres away. Both buildings have rooftop antennae with the phone going through a wireless LAN. He reports that the voice quality is excellent.
“I’m one IT person for five divisions in three cities,” he summarizes. “You can imagine what I have on my plate. We run Oracle Financial and I take care of personal computers and copiers and everything. I spend very little time taking care of the phone system now whereas before, I’d get a call and somebody’s down and I’d have to go figure it out or pay someone to figure it out. The NBX system is an amazing asset to the company.”
Another IP application
Allied Domecq is another firm that has enthusiastically embraced IP telephony.
Three years ago, the North American data network of Allied Domecq was a mishmash of systems from different vendors and just not meeting the needs of the world’s second largest – and still growing – publicly traded international spirits, wine and quick service restaurant company. “We had trouble getting data across our computer room, let alone North America!” jokes an obviously exaggerating Mark Whittle, senior manager for global communications at the Windsor location of this firm. Allied Domecq’s brand portfolio includes Kahlua, Beefeater Gin, Courvoisier, Canadian Club, and the Dunkin’ Donuts, Baskin-Robbins chains. The company has almost 12,000 employees and operates through over 50 businesses worldwide.
The company’s data centre, located in the Windsor suburb of Walkerville, was based on 16MB token ring until an upgrade just over two years ago. “As the database centre continued to grow, the demand for a reliable, expandable, enterprise-class infrastructure became a necessity,” explains network architect Kelly Craven. “By placing Cisco 6500 series switches in the core, and expanding with 7200 and 3600 series routers out to the remote sites, Allied Domecq’s North American data centre quickly became a 99.99 up-time success. More importantly, an infrastructure was in place that Allied Domecq could build on. And build we have…SAP, Citrix, and VoIP are just a few of the successful implementations in the past two years.”
The move to VoIP was prompted when a senior executive at the spirits and wines division in the U.S. requested a phone system where he could send out a single message to all users. He had seen this add productivity at a previous employer and wanted that at Allied Domecq.
The networking team presented three options: a private branch exchange (PBX) system with that capability, an outsourced 1-800 voice mail type of system where people would dial a 1-800 number to pick up a voice mail, and Cisco IP telephony. When each option was number-crunched with one-year, two-year and three-year perspectives, the three-year perspective on the Cisco system presented a justifiable ROI.
Certainly the decision to incorporate VoIP was facilitated by having in place the upgraded routers and switches. Keeping future needs in mind at the time of the initial upgrade meant they could readily layer IP telephony on top without major additional expense. “Knowing where you’re at from an infrastructure standpoint and having the right investments in place is an absolute pre-requisite for IP telephony,” Whittle adds.
The Windsor data centre IP telephony implementation serves six smaller sites, primarily sales and marketing operations, which are located from California to Florida and include Chicago and New York. Craven compared what a couple of these sites were spending at that time with what it would cost to have VoIP there. “It really came down to no question that we were going to save money, probably within the first year of doing this,” he recalls.
The savings largely arose from consolidating each site’s individual contracts for leased PBX, maintenance agreements and ordering the POTS (plain old telephone systems) lines and tie lines that go with it. It helped that the timing was propitious. The phone systems at these offices were coming off lease and were pretty much end of life.
Another benefit was the elimination of the expense of having to contract externally for moves, adds and changes (MACs). Gaining that independence was also well timed. Last year’s reorganizing of the firm’s spirits division meant 100 executives moved within a couple of weeks. “If we had the older PBX system there, we would have had to hire an outsourced company to come in and physically go through every single change for each one of these users,” says Craven. “Now, they just pick up their phone and move it to a new desk.
“We’ve set up a model where we have a single cluster based in Walkerville that supplies all of North America,” he continues. “When you look at the cost benefit of that, there is simplified management, simplified communications, everybody using the same phones at all these sites, reduced operating costs for that reason – not to mention that we now have an infrastructure in place that we can add services and features to and push that out to all the users.”
“From a financial analysis, it was a no-brainer to go with an IP technology versus a traditional PBX technology,” Whittle says. “In addition to that, we get the added benefits – the voice distribution capabilities that our sales executive team found compelling so that they could stay in touch with all the people in their organization.”
Whittle says they did not factor into their ROI the people savings in their various business units in North America who might typically have spent 15 to 25 per cent of their time administering the PBX. “Those people have clawed back that time and are now able to focus on other business-based initiatives,” he says.
Many of those initiatives are now on a global scale. The company has been working for the past year or so bringing its IT infrastructure from a regional level to a global one. Now that the data network is global, “we’re just starting to look at the overall voice infrastructure, not only from a technology standpoint,” says Whittle. “If I have 160 locations, chances are I have 160 PBXs and probably 20 different vendors engaged around the globe. I have different voice communication contracts at each one of these locations because they handled it themselves. We have a commercial team looking at these contracts and helping us analyze the opportunity. IP telephony will just be part of that overall initiative.”
Taking it global
On Nov. 5, 2003, Allied Domecq announced that it had selected a global data networking solution from AT&T, replacing four network providers serving the company’s locations on five continents. The three-year agreement valued at more than US$18 million requires AT&T to deploy an Internet protocol virtual private network (IP VPN) for all locations. Whittle reports that the project will be implemented over the next year with some sites up and running “in the next few weeks.”
AT&T’s IP VPN service is described a global infrastructure based on multi-protocol label switching (MPLS) and offering inherent reliability, quality and security with the flexibility of any-to-any data communication. The new corporate network is expected to carry and provide real-time access to Allied Domecq’s transactional, supply chain, reporting and other proprietary, mission-critical applications. The new global, integrated IT networking infrastructure is expected to provide a high level of security and support Allied Domecq’s business continuity plan.
“MPLS, which is a pure IP network, is a great enabler of VoIP,” Whittle continues. “People like Cisco, AT&T and IBM are coming to the table to help us with that and further refine that model.”
Identifying where the ROI truly is and applying it at specific business units is the challenge now. “When I propose IP telephony, that project competes against all other projects around the globe for funding. When I go to the table, I want a compelling story that is not strictly technology based, but business-based.
Frank Ritacco, manager of global networks, stresses that “projects such as these will compete with other projects within the organization and I think we have to be very clear about the value it brings back to the business. Often in our business, you’ll hear the expression: ‘if we do this, how many more cases are we going to be able to sell?’ We’ve got to extend the value back into the business so that all of that benefit is not just IT related.”
Green rhymes off the advantages of their VoIP system
— Eliminates service fees and travel charges that telco companies typically charge to add lines, create new extensions or change the phone system. “If I had the knowledge to take care of a PBX system in New Glasgow and I’m stationed in Dartmouth, every time I need to make a change I have to drive 2.5 hours away. Whereas I can hit a Web-page now and make a change for somebody 10 seconds later and I’ve saved all that travel.”
— Offers the convenience of Web-based administration. “I can log on to an Internet page and I can hit my server from anywhere and make changes.” The NBX phone system required specific training.
— Saves $1,000 a month or more on long distance fees between New Glasgow and Dartmouth by connecting locations with an IP telephony line within the company network and a virtual tie line outside that network.
— Saves space. The NBX is rack-mountable and measures about two feet high and 18 inches deep. The system it replaced took up a whole wall with 12 different parts all working together.
— Facilitates communication. Staff can easily contact another location with just a three-digit extension number.
— Further eases communication by transferring voice into data. Voice messages left on someone’s extension can be turned into Wav files, the Windows digital audio format, and accessed by the person as audible e-mail. Since Maritime Steel runs Microsoft Outlook Exchange, their 20 or so executives can get to a Web page anywhere in the world and access all their messages, including voice.
— Eliminates separate phone hardware with ‘soft phone’ sets that turn a desktop PC into an IP-based phone.
— Is easy to install. Working with just a CAT5 cable instead of the traditional phone wires, “you can have someone set up in five minutes with all the features.”
— Has multiple features and functions. For example, a shop light comes on to alert staff on the shop floor that they need to go to the office to take a call that they might otherwise not hear.
— Is reliable. “3Com is a standalone unit with own motherboard and hard drive so if the server goes down, it stays up. It is not dependent on a server. Provided you can get power to it, the system will go.”
— Offers good ROI. “You spend $25,000 or so on the whole system with all your extensions and the whole kit and I’d say we’ll have paid it off in almost two years.”