Transferring your call

By Yan Barcelo
Illustration: Sandra Dionisi

More businesses are switching  to IP telephony networks. The cost advantages are obvious, but that’s just one reason why they choose it

When telephone consultant Richard Comtois was called in to set up an Internet protocol (IP) telephony network for a small Quebec software company, the advantages of the new technology rang crystal clear. Not only would a new dedicated phone link between the company’s Montreal and Quebec City offices improve quality and reliability of service, it allowed for a huge savings in employee salaries. While the cost of upgrading added up to $24,000 a year, it allowed the company to provide the same level of customer service with fewer software support specialists, an annual savings of $160,000.

Last year, many US corporations discovered similar hidden benefits as they adopted IP telephony, the process by which phone calls travel over Internet technology rather than through the traditional switched networks. However in Canada, even though the country can claim at least some paternity for phone technology thanks to Alexander Graham Bell, many companies seem reluctant to get off the POTS (plain old telephone service) lines. But we’re getting there.

“We believe this is one of the fastest areas in technology,” says John Mather, chief administrative officer at Manulife Financial Corp. in Toronto. Last December, the company signed a seven-year $140-million contract with Bell Canada to integrate Voice over Internet Protocol (VoIP) and to implement an outsourced IP telephony solution. After carefully studying the possibilities VoIP offers, the insurance company chose the technology to link its 20,000 employees across offices in 19 countries.

Many smaller companies, such as Trans-Pro Logistic, a transport broker based in Montreal, have also embraced the technology to gain a competitive advantage. More than a year ago, Trans-Pro implemented 3Com’s VoIP system for its 50 employees, linking its three Montreal-area locations.

Meanwhile, in the US, “2004 is the year VoIP took off in business,” says Keith Nissen, senior analyst for global VoIP research at market analysis firm In-Stat, in Scottsdale, Ariz. “VoIP is ready for prime time. In 2003, approximately 3.5 million IP PBX lines were shipped and, even though final numbers are not in yet, it seems 2004 will meet our forecast of five million lines. That’s a 44% year-over-year increase, and next year we anticipate it will continue at a 27% rate.”

Mind you, the numbers tell us only how many IP-enabled lines have been shipped in the United States. They don’t tell us how many companies have begun to implement IP telephony. Iain Grant, managing director of Montreal consultants SeaBoard Group, claims there is a similar trend in Canada, for the simple reason that most of the production of all major telephony manufacturers is now IP-based or IP-enabled. Furthermore, he says, Canadian companies are just as willing as their US counterparts to move into IP territory.

Are they as advanced? That’s hard to say, but the general direction is unmistakable. “Many companies are looking at the technology and preparing their data networks to receive IP,” says Comtois who, as a partner with telecommunications consultants Comtois & Carignan in Montreal, is involved in many projects.

Manufacturers and IP gurus have proposed countless reasons to prompt companies to switch to IP telephony. At one time, long-distance and administrative cost savings were touted as the main drivers of VoIP. It’s true that long-distance savings are important in many cases, especially when companies can link offices that have high call volumes between them. But with rates constantly falling, savings on long distance has become less of a deciding factor.

As for administrative cost savings, they are linked to the rationalization of infrastructure that VoIP can bring by melding a host of different telephony networks that corporations, especially large ones, often drag along with them. “Bringing together all these networks can save countless maintenance expenses related to specialists in ATM, frame relay or any other telephony protocol technology,” says Grant. “In such a context, moving to an IP solution can pay for itself in months, not to say in minutes.”

ABC of VoIP From the early days of VoIP technology in the early ‘90s, the driving force has been to meld data transmission and voice transmission into a single Internet protocol-based digital network. Typically, each of these communications modes circulated on networks where a disconcerting number of protocols abounded, exhibiting an equally disconcerting jungle of acronyms such as ATM, frame relay, X.25 and countless others. Stamping out these protocols and the armies of technicians required to maintain them promised to bring huge savings and efficiencies. There was a small obstacle: the IP protocol did not fit well with voice. When you transport data to a specific destination, bits and pieces of it can tolerate lags. Not so with voice: all the bits and pieces must arrive on time at the right place, otherwise you won’t understand what the other party is saying. The challenge was therefore to fine-tune the IP to make it voice-friendly, a task companies carried out successfully. Today, VoIP is as clear and as trouble-free as traditional phone conversations on dedicated POTS (plain old telephone service) lines. Well, most of the time. Large corporations usually rent from carriers exclusive channels on dedicated IP networks, thereby ensuring impeccable conversations. Smaller companies may not have the budget to do this, which forces them to send their VoIP conversations over the general Internet, causing voice quality to be spotty, though generally very good. The VoIP equipment companies can purchase is now standardized. It essentially involves an IP server (a computer dedicated to IP telephony, often running on the Linux operating system) that replaces the old PBX. Add to that routers and switches distributed through the computer network to channel calls, and IP phones. In hybrid implementations, gateway modules ensure the old PBX-based phone network interfaces with the IP part of things. For the large infrastructure elements, such as servers, routers and switches, prices are now very similar to their equivalent parts in traditional telephony. In a majority of instances, a VoIP implementation costs neither more nor less than a traditional telephony setup, with one exception: IP phones, save for the basic models, can be much pricier, ranging from less than $200 to more than $1,000. IP telephony requires a few additional adjustments. Network capacity usually requires upgrading, and to keep your phone network from turning silent when the first power outage happens, you need to back up routers and switches with batteries. Finally, since IP phones also require electric current, you can either install Powered Ethernet over your computer network, which is the option most frequently used, or you can simply plug your device in the wall outlet.

But an overarching reason to adopt VoIP has more to do with productivity gains than with cost savings: companies can find advantages to computerizing their telephony and dealing with it as with any other computer application such as accounting, word processing or financial simulation.

Denis Deslongchamps, IP consultant and president of Alcani Inc. in Montreal, puts it in a nutshell: “VoIP is a real-time application on a computer network, period. It is information technology pure and simple, and a company should contemplate the productivity gains it can bring as it would for any other IT application.”

A general word of caution. According to Allan Sulkin, the foremost US VoIP specialist, there seems to be no overwhelming argument to justify migrating to IP telephony, except the fact that IP systems are the default product manufacturers increasingly put forward. “When all capital and expense outlays are considered [including network upgrades], no guaranteed cost savings can be attributed to IP telephony,” wrote Sulkin earlier this year in Business Communications Review. “And gains in knowledge worker productivity [output divided by input] are difficult to assess and quantify. Whenever someone claims that IP telephony will cut system administration expenses, reduce carrier costs or cure baldness, it is always prudent to ask for more specifics.”

But Sulkin’s observations must be put in perspective. Cost-benefit studies have seldom been conclusive in relation to major computerization projects. Take for ex- ample the enterprise resource planning frenzy of the 1990s. Companies invested billions of dollars in such all-encompassing enterprise management systems that take care of accounting, inventory, production scheduling, human resources and everything else. Yet there was scant proof the technology met the countless benefits it promised. But it would be difficult to deny that many companies gained from their enterprise resources planning projects — while others may have lost. As with any technological project, cost and productivity benefits don’t materialize spontaneously. Managers have to set quantifiable objectives and systematically work toward attaining them.

As for VoIP systems, there is much anecdotal evidence suggesting companies and organizations can profit from them. As with any technology, features have to be considered case by case, and one company’s key application will be meaningless to another.

Anecdotal evidence
Four years ago, the Montreal-area Affluents school board spent $1.3 million to implement an IP telephony system, reducing the annual phone budget to $300,000 from $700,000. That means the new phone system paid for itself in a little more than three years. “That colossal economy comes from the fact that we replaced 450 lines that we originally needed in the old phone system with only 120 lines,” says Bernard Lemonnier, IT director at Affluents. “Furthermore, instead of buying individual lines, we now buy T-1 lines [an aggregate of 24 digital lines that give a transmission capacity of 1.5 megabits per second] for which we can have a lower price than for the previous lines, but which give us a much superior capacity.”

However, those savings don’t take into account the fact that the Affluents school board had previously put in place a private fibre-optic network linking its 74 schools and administrative buildings. Two-thirds of the $1.5-million implementation cost had been subsidized by the Quebec government. Having to meet the full cost of that deployment would have significantly reduced the return on the investment.

Lemonnier still thinks the financial equations line up in his favour. At that time, the school board was considering renting high-speed DSL lines (digital lines aimed at home and small business users) that would have cost $400,000 a year. The one-time purchase of a fibre-optic network undercut this recurring cost. Furthermore, the new computer network, which the IP-telephony system sits on, has contributed considerable savings. Where the school board previously needed one computer server and one PBX, or traditional phone switching module, per school, it now only needs one central computer server and a single central IP server. This translated into significantly reduced technical personnel costs. Last but not least, these savings came with an important educational benefit in the form of a massive 100-megabit link to the Internet for each individual school. Could you quantify that? Never.

Companies taking the VoIP path have been attracted by two of its key benefits: integrating scattered call centres and unifying administrative offices. In regrouping call centres, IP telephony allows the central management of all call stations, achieves better balance of call dispatching and can shave away the salaries of a few call agents.

It’s this kind of saving Quebec City-based SSQ Financial Group was after when it recently installed Avaya VoIP systems. Its purpose was to centrally manage all its call-centre functions, distributed between Quebec City, Montreal and To-ronto. A major advantage, the company claims, is the system’s capability to deal with rapidly changing client call dispatch priorities.

“We take advantage of the full flexibility of IT systems to manage our call flow,” explains Gilles Mourette, senior vice-president of technology at SSQ. “Of course, the older technologies gave us a rough equivalent, but would have required many more lines and the whole project would have cost a lot more.” The bill, involving 800 employees, came in at $450,000, “which is not enormous,” Mourette says, “and quite easy to justify when you consider the flexibility and management capability we’ve gained.”

In the case of unified offices, VoIP allows a uniform distribution of the same services in every office. “You don’t find yourself with four autonomous phone systems and four separate messaging systems,” Comtois points out. “You don’t have a receptionist in every office, but only one serving all offices. And one office can transfer calls to any other in a totally transparent way. It’s as if employees were all sitting in the same work space.”

 These are features Trans-Pro intends to take full advantage of once it completes its VoIP project. A single receptionist will pull its three offices into a single unified whole. And in the future, by channeling all its calls to the US through an office in New York State, “the company intends to save substantially on long-distance charges,” says Mathieu Messier, IT manager at Trans-Pro.

For Manulife, linking offices around the globe meant saving on equipment and maintenance costs. “Like most companies, we see the phone system as a commodity, and the lower the price, the better,” Mather says. “We have benefited on three counts: capital expenditure, maintenance costs, programming costs.” Interestingly, Manulife implemented the systems of two suppliers, Cisco and Avaya, whose integration did not cause any glitches.

According to some industry consul-tants, most supplier systems resemble each other and have similar functions. A study by New Jersey firm Miercom, to which Deslongchamps refers, compared systems in three categories addressing large, medium and small companies. The evaluations of systems by leading suppliers such as Cisco, Avaya and Siemens typically showed a spread of only a few percentage points between the highest ranking system and the lowest.

Most of the advantages mentioned until now are network-related. Surprisingly, few companies push their VoIP implementation to take advantage of the more specific telephony-related functions by handing their employees IP phones. Yet these functions are numerous, and their number will increase substantially in the coming years. One reason is that VoIP is “nomad friendly,” that is, a user can walk up to any IP phone in the network, punch in an access code and redirect all calls to his or her present location. Another reason: unified call management. A user can have his or her phone calls appear alongside e-mail or can insert excerpts of phone conversations with clients into a sales management software.

SSQ passed on these more exotic VoIP functions. “Given our company culture, they would have appeared as gadgets,” Mourette says. “I couldn’t have justified them. However, we could move to them with minimal investment.”

Manulife did implement a few of these functions by equipping 1,200 employees with IP phones. “Those users now benefit on their regular phone from many functions they have on their cellular,” says Mather. “For example, they have a complete function menu on-screen rather than programmable buttons, they can see the last 10 calls that they missed, and their phone is fully integrated with their desktop computer.”

Migration path
That projects deliver few identifiable results, according to Sulkin, depends on the fact that many companies stumble into VoIP more so than deliberately entering it. “Companies find themselves with a traditional system that is too old or inadequate for their new needs,” says Comtois. “Since they don’t really have a choice, they move to the new technology, but without really embracing it.” It’s often only later they discover some of the advantages VoIP can bring.

But a more concerted and planned effort would deliver better results. As any veteran technology consultant will tell you, the key with VoIP as with any technology is to make sure the implementation enhances the company’s business plan. From there, what is required is careful planning and execution.

One crucial element to consider at the outset is the upgrading of the existing company local area networks (LAN) and wide area networks (WAN). Neglecting this aspect proved to be an obstacle many early adopters faced after the fact. Once their VoIP installation was in place, they discovered that they could not pull out of it the expected quality and functions because network capacity was too weak. As Christian Bazinet, marketing director for Cisco Systems Canada, points out, “You need to enhance network capability by installing Ethernet 10/1000 cards or, ideally, by moving to gigabit Ethernet. [Ethernet is the prevalent computer data transmission protocol for computers.] It’s the only way for the network to give priority to voice without having other data flows deteriorate conversations.”

While some clients choose to jump wholly into VoIP, especially when they move offices, most prefer a gradual approach and opt for “hybrid” solutions.

Such installations typically involve linking a company’s existing telephone network to a new VoIP server. Whilst a “pure play” solution replaces all existing phones with IP devices and paves the way to all VoIP functions, a hybrid solution keeps the old phones in place. The hybrid path is less costly but restricts the availability of VoIP functions and advantages, such as the capability to “hot connect” a phone to any network port, or to turn a phone into a mini-computer station.

Some clients choose a “big bang” approach and deploy VoIP companywide in a single operation. But again, most prefer the gradual approach and will typically implement VoIP at the periphery of the company, in regional offices, making their way toward the company’s critical installations. In some cases, they will IP enable only a few departments and give IP phones only to selected personnel who can profit from the productivity advantages of the technology.

Comtois recommends staying with an existing supplier. If a client does business with Nortel Networks, for example, better to move to IP on Nortel equipment. “It causes less changes for users,” he says, “since most of the codes and functions remain approximately the same on the new system.”

Security is one issue that should be high on a client’s agenda, if not at the top. Unfortunately, says Michael Albertson, president of Montreal’s Secur’IP, “it’s a problem many companies prefer not to think about too much.” With VoIP, the crucial telephony tool that used to be rock-solid reliable and essentially secure, suddenly becomes open to many frailties and threats, all characteristic of computer networking environments.

First, there is the simple task of making sure your IP telephony software will sit well with your other applications. Then, there are the downtime problems that still plague many networks. But above all, there are the internal security threats that come from employees and the external ones from the Internet.

For example, Albertson says, a disgruntled employee, using relatively easy-to-find software on the Internet, could put the president’s telephone out of use or secretly record phone conversations. External threats well known in the Internet world, such as viruses and spyware, can have an impact on the integrity of your phone system.

And when IP telephony recruits armies of users, it will inevitably give rise to SPIT, the spam of the phone world: voice-mail boxes will fill with countless unwanted messages, some bearing viruses. Will the voice recognition techniques to filter them be ready when the threat becomes a reality? No one can say at this point. There is however an advantage in having the time to prepare for the threat before it materializes, something the spread of spam did not give us.

Apart from what will be required to confront SPIT, all the techniques and procedures are already known and accessible to address the security threats that VoIP involves: firewalls, intrusion detection systems, authentication of users, etc. The challenge is to think hard about them and be serious in their deployment.

“At the very least, clients should be aware of what they’re getting involved in and should understand that security will be part of the cost,” Albertson says.

If nothing else causes a potential VoIP candidate to reflect on the issue, Albertson cautions, he or she should consider this: yes, converging your data with voice can bring significant savings and productivity advantages, but remember, practically all your communications capabilities will now hang on the same single thread.

Yan Barcelo is a freelance journalist who specializes in high-tech issues. He is based in the Montreal area.