Strategic Profile

By Gary Bolles

Technology: Voice Over IP


The Technology

The Technology

Voice over IP is really a variety of services.

The vision of voice communications carried over a packet-switched data network is hypnotic, promising compelling services such as a single inbox for e-mail and voice mail, easy call transfer around the block or around the country, user-controlled feature changes and simple remote systems management.

Often used as a catch-bin label, VoIP actually refers to a number of completely different approaches. The most basic system uses two or more on-site VoIP switches with a digital network connection running between them. Functioning like a Private Branch Exchange (PBX) and supporting standard phones and phone lines inside the company, these switches take internal phone calls, dice them into packets and ship them over a digital connection to the other VoIP switch, where the packets are decoded back into analog voice. Some existing analog PBXs can be upgraded to support such point-to-point VoIP phone calls.

Things gets more interesting when merging separate voice and data networks into one. You can then attach "smart phones," each with their own IP address, to the data network in a corporate office. These so-called IP telephony systems meld voice mail and e-mail into one, allowing voice and data messages to be forwarded around the network with ease. Traditional phones and phone networks disappear, along with their separate wiring and proprietary hardware. Each phone can be configured to provide customized services such as easily changing voice-mail prompts, and remote management becomes far more cost-effective.

VoIP can also be used in the phone system fabric. Some telcos will take a VoIP call from a user's switch and continue to transmit it as IP packets deep into their own network. Because it can be more cost-effective for the carrier, the cost of such phone service is coming down.

The full value of VoIP will come when every employee in the company—and the people at other companies they want to call—are all using smart phones, and the phone carriers can transmit all the calls as IP connections from one end of the call to the other. That will allow everyone to enjoy data-enabled calling features such as phone-based instant messaging and easy portability. But that day is still far in the future.

Ask your in-house networking guru:

What would it take to upgrade our network to support VoIP?

Ask VoIP equipment vendors:

How can I currently support VoIP at the lowest possible cost?

Ask your voice carriers:

What kind of services would you offer if I could bring you my voice calls as IP?



The payback from VoIP in fancy phone features can be elusive.

Making the case for VoIP based on features alone is a tall order. End-to-end VoIP systems are high-ticket items. In-house network upgrades usually involve new cabling, routers and switches. IP-enabled PBXs aren't cheap. Depending on features, smart phones can run as much as a low-end PC. And communication lines typically need to be reconfigured and tested.

All that makes it tough to explain to a CFO why his company should take the leap if all it means is that employees can program their own vacation messages. According to Jeff Pulver, founder of Pulver.com and widely regarded as VoIP's loudest cheerleader, "I don't think users give a damn about [VoIP] functionality. They care about ROI." That's seconded by Jeffrey Snyder, vice president and chief analyst for enterprise communications at Gartner Dataquest. "The vast majority of businesses out there are waiting for a true and credible ROI," he says. "And the vendors are hard-pressed to deliver that to the client."

Pulver and Snyder are mostly talking about end-to-end installations, however. In many cases, strategically chosen VoIP installations can make sense. Though legacy communications systems are usually rock-solid reliable and fully depreciated, it's not uncommon for IT departments to have to jump through lots of hoops to keep their aging gear alive, thanks to hard-to-find parts and lack of expertise. Some legacy PBXs can be connected to VoIP-enabled equipment that lets companies send voice over digital connections between two or more corporate locations in hopes of reducing costs and without having to dedicate a leased line to voice alone. But when overcoming the limitations of older systems is no longer possible, replacing PBXs with VoIP equipment may be the most cost-efficient alternative.

VoIP is also worth considering when the addition of new facilities or big changes in a company's communications costs forces IT to search for alternatives. Analysts maintain that the 40 percent of a company's communications fees that typically go to access lines is projected to increase to 60 percent within two years. "If that's the case," says David Willis, vice president of global networking strategies at analyst firm Meta Group, "then people are going to want to reduce the number of circuits going into a facility." One of the best ways is to eliminate separate communication lines for voice and data, since VoIP can let users more efficiently manage bandwidth by moving all-or-nothing voice channels to shared voice-and-data packet transmissions.

Finally, even though the cost of making long-distance calls keeps going down, VoIP can also make sense for companies with high call volumes. Some carriers are offering lower rates when customers send them their voice calls as IP packets. Some users report savings of up to 25 percent on their monthly phone bills, even over the carriers' already low rates, by sending VoIP to their phone companies.

Ask your business units:

Is there real value for you in such features as one-stop customer dial-in and unified inbox?

Ask your communications team:

How much could we save if we consolidate voice and data lines between our offices?

Tell the CFO:

Unless we can quantify the value of increased customer or employee satisfaction, we probably can't justify VoIP on new features alone.



If you're thinking about rolling out VoIP to the desktop, think twice and think small.

Using VoIP on the back end, either between facilities or to communications carriers, often doesn't require any changes to employees' phones. But companies looking for more features such as a single inbox or user-managed services should take their VoIP rollouts one step at a time. Users and analysts recommend beginning with a limited number of seats and rolling out in stages. In fact, VoIP systems today tend toward the small and focused. Meta's Willis says his company's recent analysis of Cisco Systems Inc.'s VoIP customers showed an average of just over 100 phones per installation.

You'll first need to do a health check on your internal network. Inside the firewall, poky, "latent" packets mean unacceptably choppy voice calls, so your network sleuths have to ferret out and fine-tune the system's throttle points. With some networks, that may require no more than reconfiguring equipment to remove points where packets regularly slow down. For others, it can require a wholesale upgrade of hubs and routers to make sure they can provide the kind of performance VoIP needs.

With that done, concerns about the quality of VoIP service can be laid to rest. Some IT execs report that the best way to test a new VoIP offering is to simply avoid telling users when they switch over from the regular voice system. Few users, they say, will notice—but woe betide you if the bulletproof phone service they're used to suddenly deteriorates or dies.

When businesses go all the way and roll out VoIP to the desktop, they report that most users are satisfied with the additional features. Moving an office is as simple as plugging an IP phone into a new wall jack. And IT departments like the fact that they can manage IP switches from remote locations using a Web browser alone.

Ask your voice specialists:

What kind of life is left in our current communications gear?

Ask your network guru:

How likely is it that we can remove latency in our existing network?

Ask the company's facilities planners:

Are we planning on moving or opening new offices within the next few years?



VoIP stability and interoperability is pretty good, but don't expect features to be shareable anytime in the near future.

VoIP has been coming for years, with the first products showing up in the mid-1990s. But it hasn't been until recently that the standards have solidified. Until recently, concerns about the reliability of IP-based voice networks have kept many companies from jumping into VoIP. But most of VoIP's stability problems have been resolved, say both analysts and users.

In fact, because they let users plug their phones directly into an Ethernet network, VoIP networks can turn out to be even more resilient than standard voice networks, no matter whether users are on the local network or working remotely. "IP-based communications lets a mobile worker have all the functionality of the corporate office," says Pulver.com's Jeff Pulver.

Carriers insist they can offer the same reliability for VoIP services, too. "The reliability of [carrier] IP networks is now as good as the standard voice network," maintains Hossein Eslambolchi, president of AT&T Labs.

As to interoperability, connections between VoIP switches also get good grades, allowing systems from different vendors to set up and transmit calls easily. But you won't usually find the exact same features on two different vendors' switches, and you can't ordinarily use one vendor's smart phones on another vendor's switch. That's why most users prefer to roll out single-vendor installations until those problems are resolved.

However, a solution is on the horizon: SIP, or Session Initiated Protocol, an industry scheme designed to homogenize a wide range of VoIP call processes. SIP allows smart phones to set up calls using standardized requests. "As SIP gets more penetration," says Eslambolchi, "customers will start seeing a huge amount of value" from VoIP. In the meantime, IT departments would do well to question vendors' support of standards such as SIP, and to ensure that they're getting the level of interoperability they need.

Ask VoIP equipment vendors:

With whose equipment have you tested your equipment, so I can be sure my gear will work in harmony with theirs?

How complete is your support of SIP today, and what's your roadmap for tomorrow?

Ask communications carriers:

How can you convince me that your IP voice services are 100 percent reliable?

Strategic Profile

: Cray Inc.">

Strategic Profile: Cray Inc.

Moving to a new location can provide the impetus to consider voip, in hopes of reducing costs and increasing the features offered to phone users. Cray's decision to switch facilities led to the realization that a network could be designed from scratch to support both voice and data, for the same cost as a data network by itself.

PRECIS A Seattle-based manufacturer of supercomputers with an expected $150 to $160 million in 2002 revenues and 800 employees worldwide on three campuses.

CIO Nancy Soderquist

PROJECT MANAGER Tom Stephens, manager of network and hardware support

PROBLEM A new location in Mendota Heights, Minn., and an existing installation at Chippewa Falls, Minn., required both data and voice services.

GOAL Install a new system with maximum functionality and minimum cost.

STRATEGY Run data and voice using Cisco Systems Inc. equipment on a single Voice over IP network at each location; run VoIP between the two locations and use smart phones at each location (about 650 handsets to date).

CHALLENGES No major problems reported. "It pretty much plugged in, and it worked," says Stephens.

ROI The costs of installing voice and data equipment were about the same as data alone. Saved about $2,000 per month on calls between Chippewa Falls and the Minneapolis area.

ASSESSMENT "If you're thinking about buying a PBX, especially for a new facility, rethink the decision," says Stephens. "The paybacks for VoIP are there, and the technology works."

This article was originally published on 10-02-2002