Special Report
Virtual phone system
Should you be routing your internal calls through your LAN?
By Todd Shryock
Smart Business Cleveland | March 2000
Voice and data are converging not only in cyberspace, but also on your desk.
Nearly 90 percent of companies with multiple locations will begin switching from their conventional phone systems to Internet Protocol telephony over their LANs within the next five years, according to a study from The Phillips Group-InfoTech.
This study also foreshadows an all-out battle between incumbent equipment leaders, including the likes of Lucent Technologies, Nortel Networks and Siemens, against data networking leaders Cisco and 3Com, along with a host of start-ups.
“Research of nearly 500 multisite enterprises revealed that Internet Protocol telephony is the technology that will finally bring about the ubiquitous convergence of voice and data in the enterprise environment,” says Terry White, a senior director of The Phillips Group-InfoTech and lead analyst for the study.
“Decision-makers tend to see the solutions emerging from this technology as the natural evolution of the existing PBX and smaller key/hybrid telephone systems market. Most are convinced that current obstacles surrounding reliability, quality of service and scalability will evaporate over the next 18-24 months.”
The research found that 10 percent of enterprises have begun trials of IP telephony over the LAN, and that this penetration will increase to 44 percent by the end of 2000. Actual implementation will begin slowly, with 13 percent indicating “very high likelihood” of implementations beginning in 2000, but increase sharply to where 60 percent of enterprises will have begun replacing their PBX or Key systems by 2002.
Only 7 percent of enterprises researched indicated that they were unlikely to install this new technology before 2004.
“Customers perceive real cost savings will result from the integrated management of one premises network, based on IP telephony over the LAN, rather than two separate premises networks, a PBX and a LAN,” says White. “Although average price per line for IP telephony solutions have started out higher than traditional PBX systems — $821 vs. $498 per line — these prices will drop to parity levels in 2002 and continue to drop steadily, forcing traditional systems to keep pace.
“As a result of this crossover, sales of IP telephony solutions are forecasted to lift off in 2002. Enterprise users also feel that IP telephony will enable them to more quickly and easily introduce and empower future e-business applications.”
Resellers and other data channels are able to position this technology as an upgrade to the LAN, adding servers to support voice and traditional telephony applications. PBX distributors can position these systems as an evolution of the PBX architecture, enabling the PBX to support IP and operate as a LAN.
This technology also introduces the opportunity for competitive local exchange carriers, Internet service providers and other service providers to configure the equipment as an extension of their network, thus making it easier to provide better network maintenance, support and premium services to their customers.
At stake is the installed base of more than 86 million PBX and Key telephone lines, with a value of approximately $100 billion. The surprisingly positive customer attitude towards this new IP technology indicates that this installed base is at risk.
“The impact of this transformation from proprietary voice systems to open converged networks will be to force every manufacturer, applications provider and distribution channel currently playing in the $16 billion voice Customer Premises Equipment market to re-evaluate their business and marketing strategies in response,” says Eric Schmiedeke, vice president of Phillips Group-InfoTech. “By 2004, nearly half the shipments of traditional CPE lines will have shifted to this new technology.”
The research further revealed that enterprise decision-makers were split as to their channel preferences for future IP telephony purchases; 48 percent indicating strong preferences for their traditional CPE vendor, and 40 percent preferring their data vendor or reseller. This split means hefty competition between incumbent CPE vendors, leading data networking vendors and a variety of start-up companies.
Todd Shryock (tshryock@sbnnet.com) is SBN’s special reports editor.
