Cash in on VoIP

If anyone is still in any doubt as to the impact voice over Internet is having on the local enterprise telephony market, they need only look at recent statistics from IDC.

In the December quarter last year, 60 percent of new telephony equipment sales were in the IP sector, with IP PBX units significantly outselling traditional PABXs.

This figure is tipped to grow to 69 percent by 2007. CRN rounds up 10 industry leaders together for a roundtable discussion at the beginning of August to find out just what is driving this market growth, where the market is headed and what products and evolving business models offer the best potential returns for resellers in this evolving market.

Major growth drivers

The VoIP market is clearly having a huge impact on the Australian telephony market at present.

Many recent studies have extolled the virtues of the technology, not to mention the cost savings possibilities the service offers. New service providers are jumping on the bandwagon at a ferocious pace.

According to a report from market research firm Market Clarity, there were 245 IP voice providers in Australia at the end of June this year.

So what is it that is actually driving this growth in VoIP customer uptake? Is it merely the ability to save on phone call costs or are there other more major factors at play?

Matt Farmer, national sales manager of residential and SMB VoIP provider engin says that from his company’s point of view, growth at the lower end of the market was definitely being driven by customers wanting to save money.

“In our segment, cost savings are paramount, followed by functionality,” he says. “Applications are important, bust cost justifies those applications.”

Rob Hayden, director of SME VoIP solutions and equipment provider ISPhone is less convinced, however, arguing that there is no one particular thing that could explain why voice over IP had taken off.

“IP is the core infrastructure that allows a whole range of applications to be integrated. Companies contemplating an IP upgrade may do so for a whole host of reasons. Moreover, if service providers want to be really competitive in the current market, they need to be able to offer compelling functions.”

Gary McLaren, marketing director of IProvide, AAPT’s IP networking and voice services provider for the SME market, says a recent phenomenon is the availability of new features across multiple sites for SME customers that had previously not existed. This, he says, is definitely acting as a major market driver.

engin’s Farmer agrees that the IP market had now reached the point where it was feature advanced. “Once SMEs see that they can do what larger organisations can do they get very excited about the applications being offered.

“Before we were selling plain old telephony. Now we are talking about and selling applications. “The fact that you can make or take a phone call is almost irrelevant. I’m selling screen pops, virtualisation – we’ve fundamentally changed what we used to call telephony. What we’re now talking about is interactions. As an industry, we still haven’t made that distinction,” Farmer says.

Ross Cochrane, managing director of distributor Express Data, says it is easier for larger corporations to find justifications for the technology on the basis of the depth and breadth of applications that they can leverage through a major VoIP implementation.

These applications can include CRM, call centres and help desks. Additionally, having multiple sites and wanting to get visibility across those sites, knowing who’s online, having a centralised receptionist, even for small businesses, can give a very professional appearance for whoever is ringing in, especially for smaller organisations.

Chris Luxford, CEO of systems integrator 3D Networks, believes the key driver for the market right now as a whole is unified communications, with the ability to unify all sites with products such as instant messaging. “This is a major selling point for us,” he says.

“No one’s buying TDM today. Even at the smaller end, people want feature-rich applications like the big corporates have. They don’t even see the difference between TDM and IP because the pricing is not that much different. It’s almost like there’s no differentiation.

“Often they don’t even know if they’re getting IP or TDM. What they’re getting is a functional solution that meets their requirements. The underlying infrastructure is almost irrelevant,” Luxford says.Others agreed that, whilst IP comes up in large IT departments, for the average customer at the lower-end of the marketplace who is not that technically skilled up, they don’t particularly care whether their telephony system is IP or not as long as it gives them the reliability and functionality they want.

Peter Dillon, chief operating officer of IP networking vendor and equipment provider Avaya says when it comes to the higher-end of the market, when enterprises already have systems that allow them free calls between sites, selling large IP upgrades has to involve functionality such as increased productivity, ease of management and network consolidation.

“Instead of having to have a different relationship with your voice and your data guys, your data guys can take ownership of your one network, making the whole thing far more cost effective,” he says.

Farmer adds that he still believed the driver for every market segment was still different. “Despite the features that may be available, when it comes to the bottom line, the lower end is saying cost, the middle end is saying functionality and the key corporate end of the market wants investments that show efficiencies.”

Craig Neil, managing director of medium to higher-end level VoIP provider NSC, says it is more about the benefits of the actual solution. “At our end of the market, it’s more about applications, centralisation and virtualisation. I can’t think of a single instance where we’ve done an implementation based purely on core cost savings. It’s more about presence, mobility,” Neil says.

“It’s worth remembering that, when it comes to PABXs, it used to be the case that the one in head office wasn’t compatible with the one in a regional centre. Things like centralised architecture and software portability between sites, meaning the same application is available wherever you are (including the call centre) are the real drivers. Call costs come into it, sure, but it’s not the major driver at the medium to higher end of the market.”

Tony Warhurst, director of SMB VoIP services and equipment provider Zultys Australia, says cost is still an important market driver at the lower market end, though that situation is slowly changing.

“Of course cost is important. We launched our products with that in mind. It’s value for money and we’re not talking about business-functional products per se.

“However, even at the small end, businesses are starting to get some functionality and some business products that they can use. Once businesses see the benefits they can garner from increased functionality, they want more and more.

"Sometimes demand is driven by home users doing things with their residential VoIP services and then asking, ‘why can’t I do that with my business as well?’. True, it’s often a case of them seeing their home phone bills drop and then wondering how they can do the same thing at work.”

Cochrane says it’s worth remembering that, in the mid to high-end corporate space, the whole IP platform required a huge investment in network infrastructure.

“Voice cannot be looked at in isolation. It’s impossible to separate it from data functions such as security, storage and a whole range of other applications.

“One needs to take a holistic approach to what features and functionalities are going to be incorporated into a unified communications platform. To look at IP telephony, as part of a broad network upgrade, purely on the basis of cost, is not a realistic proposition.”

Generally, the consensus seemed to be that, whilst every business case was different and that the motivations for going down the IP telephony path differed from organisation to organisation, the larger the company, the less pertinent the cost of implementation and the ability to make savings on calls is.

Conversely, the larger the organisation, the greater the demand is for rich applications and functionality.