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VoIP: The Right Call

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VoIP: The Right Call

June 22, 2004

By Charlotte Wolter

After years of hype and unfulfilled promises, IP telephony- also known as Voice over IP (VoIP)-has finally evolved as a true option for small and medium-size businesses. The technology of sending voice packets over data pipes has been refined and has matured, offering a number of benefits over traditional phone networks.

Not only do today's Voip systems match the voice quality of regular phone systems-based on the TDM (time division multiplexing) system-they're adding features that businesses never would have imagined. For example, with VoIP, callers can reach you no matter where you are by dialing your office number. And with a Web browser, you can retrieve your voice mail.

The main benefit, of course, is cost savings. Though initial equipment costs can be considerable, with most implementations of Voip the distinctions between local and long-distance calls go away almost completely. And when signing up with a hosted service, such as an IP Centrex provider, you can keep up-front costs to a minimum.

Voip calls made over a private network-for example, from a main office to a branch office-are free. And even if you're calling someone who is not on the network and doesn't have VoIP, you can still realize significant savings. Through deals with broadband service providers or other hosted services your calls are still carried either free via the Internet or at highly discounted flat rates-about 2 to 3 cents a minute.

Today, there is much more to Voip than the early consumer applications, which involved cumbersome Web interfaces and using PCs with headphones instead of handsets. In the early days of VoIP, there was also a lack of widespread broadband, a problem augmented by poor voice quality and the difficulty in finding people to connect with at the other end. Only over the past five years, since the introduction of the first IP gateways, has the technology been adapted for standard business phone use.

Enterprise customers have firmly grabbed hold of this new technology, and now manufacturers old and new are eyeing small and medium-size business markets. (We define small as having fewer than 100 employees and medium-size as 100 to 500.) The industry is heating up to the point where these businesses can choose from a dozen or more IP PBX (IP private branch exchange) systems and nearly as many service providers offering hosted Voip solutions.

With so many choices available, business owners need to understand their own requirements, the pros and cons of IP telephony in general, and the distinctions among the various solutions before deciding how to implement VoIP, if at all.

Cost Savings and Other Benefits

Voip can save small businesses significant amounts of money, averaging about 30 percent on phone costs. This varies tremendously and depends greatly on the type of system a company uses, but some amount of savings is just about guaranteed.

While larger companies have the most to gain by connecting their branch offices via VoIP, small businesses too can save on calls to and from teleworkers or partners-even if they're located in another country-when those calls are placed over the Internet. IP phones can talk over any IP network, including the Internet or a company's data network.

The quality may not be perfect if you are depending on the Internet, but companies may be willing to accept that in exchange for free calls around the world.

Most of the time, poor voice quality is caused by Internet congestion, which today is much more of a problem in developing nations. Such nations often have very little bandwidth going in or out, compared with the more advanced networks of Asia and Europe.

As an IP telephony switching system, the IP PBX controls all of the phones in its system via an IP network (which could be the Internet). Thus, just one PBX can control phones at multiple locations, even in other countries. That eliminates the need for multiple PBXs, which many companies have now with traditional PBX systems.

Enterprises can use this capability to provide extended office coverage. For example, calls placed to an East Coast office that has closed for the day can be routed free to a West Coast office. Likewise, IP telephony comes in handy in times of disaster; if an office becomes damaged and unusable for whatever reason, calls can often be forwarded to workers at home over broadband connections.

In the same way that it enables calls from any location, IP telephony can be a godsend for the frequent traveler. A Voip phone-or for more convenience a Voip soft phone installed on a laptop-can be used to make and receive calls from any location in the world, as long as there is access to the Internet. In many cases broadband access is not even necessary, though it usually helps considerably with voice quality.

Finally, a Voip system can mean significant savings in maintenance costs, especially when moving phones. There is no need to call in a technician and spend $200 every time an employee changes offices, since an IP phone will carry its configuration over to any LAN port it is plugged into.

But adding phones or changing a phone's configuration requires logging on to the PBX management console and likely requires an administrator or consultant.

Rich With Features

While the potential cost savings are what usually sells IP telephony, the cool features and the ease with which they can be managed are what keeps users happy.

Voice over IP systems offer features traditional PBXs and key telephone systems either don't offer or offer with a high level of complexity. Such features include unified messaging, in which all voice mail messages are stored as audio files and delivered as attachments to e-mail. This way, traveling employees don't need to make expensive phone calls back to the office to retrieve their messages.

Another feature that is proving to be hot with business is find me/follow me. This is a feature that knows whether a user can be reached and how (desk phone, e-mail, instant message, mobile phone). And though the browser-based interfaces are evolving and differ from one manufacturer to another, you can control what the caller is told. For instance, if a salesperson wants only the boss to know that she is reachable on her cell phone, that can be easily set up.

Surveys have shown that most employees of a company never use the majority of features a traditional PBX affords, because they're not easy to use. With IP systems, many advanced features are more accessible and easier to use.

Many automated applications are also available to run on or in tandem with an IP PBX, such as call-center applications, which assist with routing calls to appropriate employees or physical locations. In addition, auto-attendants-basically automated software-driven replacements for live operators-are becoming common.

If the many features that come with an IP PBX or IP Centrex system are not exactly what a company is looking for, they can be customized much more easily than with traditional telephony. A programmer who knows Java or XML can create custom applications that will run on an IP PBX or IP Centrex system. And some manufacturers are now supplying software development kits for this purpose as well.


Voip for the small office isn't perfect-yet. Most systems and services on the market have had a couple of years to work out the bugs, but there are still occasional performance issues, particularly with networks that are saturated with both voice and data traffic.

One of the often-cited advantages of Voice over IP is that the office telephone system moves onto the local area network (LAN), and you then have just one network to maintain, not two. Whether this is good news depends on how a company feels about its LAN. Local area networks are generally far superior to what they were even a few years ago, but a LAN may need a tune-up-upgrading its switches and making sure its WAN connection can support the bandwidth requirements to carry both its data and voice communications.

Most businesses contemplating such a move should contact a consultant or VAR (value-added reseller) to assess their networks and carry out preliminary planning.

Another issue to keep in mind is power. Every Voip phone has to have a power source, which means one more thing to plug in at each desktop. If the power goes out, so do your IP phones, unless you have power backup for the LAN. The new Power over Ethernet standard is simplifying these issues, but to get that capability a company has to install new LAN equipment, something most businesses are willing to do only when they move to new offices.

Finally, there's the issue of up-front costs. All these nifty new IP phones don't come cheap; they average about $300 each, with the highest-end models selling for more than $600. New models, as from snom technology (, can be had for under $200, but they remain the exception.

IP phones do provide many extras for their hefty price tags, such as soft keys, which can be programmed for almost any function the user chooses. For instance, a soft key can be set to open your Outlook address book at the touch of a button and then dial a selected number. These advanced features can be managed through the system's Web interface, which can be reached from anywhere in the world. Keep in mind that setting up these features still requires a telephony-savvy administrator.

Standards and Sticking Points

IP and the Internet represent the model for open systems, but the same is not always true for IP phones. Some vendors-notably the big ones, such as Avaya and Nortel-still lock customers into using their brand-name IP phones by relying on proprietary signaling between the PBX and the phones.

Although another manufacturer's phones can sometimes be used, you'll be left without any of the fancy proprietary features designed into the end-to-end solution.

Now the acceptance of a new international standard called SIP (Session Initiation Protocol) is putting pressure on manufacturers to be more open. SIP is still developing and has not yet implemented some of the more obscure PBX features. But SIP has a lot of industry momentum, and once it is widely adopted it will undoubtedly help bring down phone prices.

Beyond the battles over protocol adoption, IP telephony has other issues to be resolved. One worth mentioning is the current inability for 911 services to pinpoint the location of Voip users and dispatch help. Unlike traditional phones, IP phones are not necessarily associated with specific addresses. Many IP phones can be plugged into the Internet anywhere. This is particularly true when a company has several branches, all controlled by one IP PBX. Some of the phones will be in the physical office where the PBX is, and some will be elsewhere, but the PBX will see them all as local.

An organization working to find a solution to this problem by the end of 2004 is the National Emergency Number Association (, which has members from both government and the manufacturer community. Many possible solutions have been discussed, like tying GPS systems to phone locations or requiring hosted services and those with IP PBXs to maintain databases of physical locations tied to IP addresses.

The Flavors of Voip

If you believe your business is a good candidate for VoIP, you need to ask yourself how far you want to go with it.

Much of your answer depends on how much you're willing to spend on new equipment, and how much responsibility you want your business to take on with the deployment and upkeep of the system. There are three ways you can implement VoIP: a hybrid system (which combines old equipment with new technology), an entirely new IP PBX system, or a hosted Voip service.

Hybrid systems. A hybrid system allows you to stick a toe in the water without getting completely wet. This is best for businesses that are satisfied with their current, traditional PBXs or don't have the budget to buy whole new Voip systems. Several IP PBXs are designed to begin life as a kind of helper system to the main PBX, enabling low-cost calls between offices and adding some more features.
The big manufacturers, such as Avaya (, Mitel Networks Corp. (, and Nortel Networks (, offer a number of upgrade scenarios that ease into the new technology.

These solutions vary in cost, depending on the original equipment and the number of extensions served, but they start at an average of $800 per worker.

A small company called Citel Technologies ( makes software that enables some of the most popular analog phones, such as the Nortel Meridian, to talk to an IP PBX from another manufacturer like 3Com ( This can cut the costs associated with buying new IP phones, or at least allow you to purchase and roll them out slowly.

For the kind of business with a few locations that make most of their calls to each other, another strategy is to install gateways at each company location. The gateways then convert only calls within the company to Voip so they can travel over the Internet. Such small gateways, from companies like Mediatrix Telecom ( or Quintum Technologies (, can cost less than $2,000.

Finally, businesses with just a few employees who make the bulk of long-distance calls should consider buying a couple of phones from a consumer Voice over IP service, such as VoicePulse ( or Vonage . These services bill at a flat rate, and using one of them can result in significant savings.

Complete IP PBX systems. Companies that are setting up new offices from scratch or expanding significantly are ideal candidates for a full hardware- and software-based, on-site Voip system. The key advantages here are that a company owns and has full control over its voice system. In many cases this provides a great deal of flexibility to customize communications applications to meet specific needs. The one potential drawback is handling the complexity of an IP PBX. Either a knowledgeable IT staffer or a VAR or consultant must deploy and manage it.

The initial costs may be 10 to 20 percent higher than for a traditional PBX, but those costs are usually recouped within months if the purchaser can take advantage of the savings on long-distance calls. Those starting from scratch can also save when it comes to wiring their new space.

Going with Voip means installing one set of cables instead of one for voice and another for data.

Choosing a Voip manufacturer is much like choosing a traditional PBX or key system manufacturer, especially now that most of the traditional players have IP products.

The traditional manufacturers, such as Alcatel ( ), Avaya, Nortel, and Siemens ( www.siemensenterprise .com), all now have IP PBXs. And the company that pioneered the idea, Cisco Systems ( ), now has some scaled-down models, though it is not yet aiming at very small companies, such as those with fewer than 20 employees. (See the table at the top of page 147 for details on these offerings.)

Among small-system providers, one of the leaders is AltiGen Communications ( ), a longtime player in systems for small businesses. Among its several IP PBX offerings is the AltiGen AltiServ1, which is designed for 8 to 50 users and includes voice mail, an auto-attendant, unified messaging, an administration system, call-detail reporting, workgroup support, and analog extensions ($7,445 list).

Also widely deployed is the ShoreTel solution ( ), from a company that was known until very recently as Shoreline-another organization with a long history in traditional PBXs. One of its offerings is the ShoreTel Single-Site Enterprise Solution (for 100 phone users or fewer), which includes ShoreGear switches in 24-port and 12-port sizes, as well as a T1 interface for trunking. The products include a user Web interface, ShoreWare Personal Call Manager. A system for ten users is available for less than $10,000.

Other manufacturers offering products in this arena are: Anta Systems ( ), Artisoft ( ), Bizfon ( ), Comdial ( ), EADS Telecom ( ), FacetCorp ( ), Interactive Intelligence ( ), Swyx Solutions ( ), Toshiba (whose strategy has been to IP-enable existing lines; ), Vertical Networks ( ), and Zultys Technologies ( ).

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