Customers Calling for VoIP?
Here's answers to your frequently asked questions about Voice-Over-IP

By: Lisa Terry, Contributing Editor

What exactly is VoIP?

VoIP refers specifically to sending calls via digital packets using Internet Protocols (IP) over any network: Internet, intranet, WAN or LAN.

IP telephony, the general category, encompasses all the hardware and applications that enable and benefit from the convergence of voice and data network technologies, such as accessing customer relationship management files on the same network used for customer support calls, or unified messaging (which integrates e-mail, faxes and voice mail in one place). One proposed hospitality solution marries frequent guest files with room phones to enable personalized service. Another example cited by Jayne McLachlan, product manager, IP office solution management for Avaya’s Small and Medium Business solution group, show the caller visuals of a vacation destination while discussing it via voice.

IP PBXs (Private Branch Exchange) offer PBX functions like call management without the cost and proprietary nature of most PBX solutions, making many processes simpler and cheaper.

According to Cisco, a comprehensive, end-to-end IP communications solution includes: the converged IP network infrastructure, end-point devices such as IP phones, telephony applications such as unified messaging, call processing software to extend telephony features and functions to the converged IP network, and management software to support IP applications.

Who needs VoIP?

Organizations with multiple sites and a lot of inter-organization calling benefit from the technology. IP telephony is great for multi-channel companies such as retailers, or any company operating call centers. Catalyst Telecom has seen users as small as three locations and 10 employees. Tech Data predicts small and large businesses will implement first. Businesses with virtual workforces can also benefit.

“Most retail chains have a network made up of PBXs at a few of their main offices and distribution points and key systems scattered throughout the rest of the organization,” says Lyhn Haller, president of Unified TelData, a San Francisco Telecom VAR. “In most cases, the systems don’t network. This results in higher costs for system administration and intra-office voice and data traffic. IP technology is an excellent way to bring down the ever increasing costs of interoffice communication.”

According to Cisco, targeted customers also include those with multiple budgets for data and telephone network support, PBXs nearing end-of-life or -lease, near-term expansion plans, robust data networks, and, lastly, an acute need to stay connected with employees.

What are the benefits?

VoIP saves money on toll calls, enabling four or five-digit dialing among locations, which some say makes employees more likely to collaborate. It also centralizes control of the voice network, easing maintenance and reducing network support headcount. Some users replace traditional PBXs with IP PBX telephony, blend traditional and IP, or use one to back up the other.

IP telephony enables some new applications and makes integration between voice and data applications smoother, such as the screen pops that bring up a customer file based on caller ID data for calls coming in from a public network.

“Applications are really what’s going to change things,” says Mike Ferney, sales manager for Paracon, the converged communications division of ScanSource. Applications are just now catching up to IP telephony. ROI tools are focused on the applications one can implement with IP telephony, notes Avaya’s McLachlan.

What’s the opportunity?

IDC says IP telephony equipment sales are forecast to jump from $3.5 billion this year to $15 billion by 2007. The U.S. voice market is much larger—$12.4 billion this year, and is dominated by PBX systems, most of which are ripe for replacement.

“Multi-branch retailers are embracing this technology,” says Roy Applebaum, VP and general manager, network product and marketing, for Tech Data. “The market opportunity is huge.”

The service provider who deployed a retailer’s key applications, and perhaps also its data network, is in a prime position to incorporate telephony into the network. John Gaillard, director of business development for Catalyst Telecom, says ScanSource VARs “are well positioned in vertical markets to take advantage of being a total solution provider.” SMBs prefer smaller local providers, adds Avaya’s McLachlan.

“We’re finding VARs from different areas of expertise getting interested,” says Tech Data’s Applebaum. “They see opportunity to sell to their existing customer base.”

Major vendors in the space include Alcatel, Avaya, Cisco, Intel, Mitel, Nortel, Siemens, 3Com and Vertical Networks.

How are the margins?

The old saw, where there’s mystery, there’s margins, applies here. Tech Data’s Applebaum notes that VARs from a data background tend to be more aggressive on hardware prices and are accustomed to making margins on services, whereas telephony VARs might have the opposite history.

“The margin richness is in applications,” says Catalyst Telecom’s Gaillard.

What are the service opportunities?

Saleable services include:

Note: Most projects involve the solution provider, hardware vendor and bandwidth provider.

How can VARs get more information?

Distributors and vendors have geared up to get more VARs onto this technology, and have created Websites, road shows, conferences and training programs offering business development, sales and technical data.

They also support VARs through quotations, configuration services, staging, direct shipping, certification programs, pre- and post-sales support, lead programs, ROI calculators and other services.

What skills and training are required to take on VoIP?

Vendors insist the technology is no longer for specialists only. Familiarity with networking technology will help VARs acquire IP telephony knowledge.

But it’s not a dabbling technology. Vendors say VARs need to dedicate resources including staff and equipment to IP telephony and voice-over-IP. Vendors offer technical and sales training to VARs who have a commitment to the technology.

“You need to specialize in it, but it’s getting much easier — the reliability and quality are improving, the knowledge base needed to deploy,” says Unified TelData’a Haller. “It’s becoming relatively easy to maintain.”

Catalyst Telecom’s Gaillard estimates a $25,000 investment for demo equipment and travel, training and certification of two people in technical and sales skills. VARs need to assess the need among their customer base.

For VARs uncertain about going that far, some vendors match VARs to network specialists that can handle the IP telephony portion of implementations.

What are pitfalls and customer concerns?

“There are always ongoing concerns with configuring applications and security issues, just like when you’re deploying any new technology,” says Tech Data’s Applebaum.

Proper analysis of how the network will be used and how needs will grow is essential to the network design process. Bandwidth needs are often underestimated. Analysis also prevents support burdens for the VAR, notes Unified TelData’s Haller, and help VARs meet service level agreement requirements. Post-support following a proper assessment is half that of one without, says Avaya’s McLachlan.

Technology has evolved to the degree that call quality is much like traditional networks, but testing is key to ensure quality.

While reliability and call quality have improved greatly, customers will still be wary, warns Catalyst Telecom’s Gaillard. “Most will not trust it 100 percent and will deploy it in areas,” and will want to blend traditional PBX and IP telephony while positioning themselves for future full usage.

Who’s the competition?

Like the technologies, voice and data network service providers are converging on the IP telephony market.

With the clear fit between the needs of hospitality, retail and similar organizations and the capabilities and benefits of VoIP, application VARs are advised to consider pursuing this business before a network or telephony VAR does it for them.