The age of IP telephony has been predicted many times, but small and medium businessses have refused to heed the call. Until now.
"We used to sell TDM [phone exchanges] but we migrated to [internet protocol]. There wouldn't be too many SMBs not wanting at least IP capability," says Nick Touzeau, strategic alliance manager at Wavelink Communications. He has seen TDM systems finally take a back seat.
He says the percentage of PBXs sold with TDM cards has fallen from 50 percent to 30 percent in the past six months. In most cases it is deployed for redundancy when the internet connection fails.
He estimates that less than a fifth of TDM phone exchanges sold today have no IP connectivity.
The supposedly imminent death of PSTN phone lines and the telcos that owned them were clearly a little premature at the turn of the century. However, it looks like the tide is slowly - and irreversibly - turning. The technology, hardware and business models behind IP telephony provision and manufacture have reached a stage where every enterprise sale is now an IP system.
The conventional TDM or keystone systems favoured by small business are still around but their value is slipping against the feature-packed alternative in lower-end IP PBXes.
Eddie Mahdi, director of Centrix Solutions, has watched the ratio of IP to TDM handsets increase. Mahdi has been selling phone systems for nine years; he sold his first IP system in 2004. An interesting factor was the rise of open standards. When he began in IP telephony there were two competing protocols, one of which became the open standard, SIP, that led to the acceptance of IP telephony, Mahdi says, because it of fered companies flexibility and protection of their investment.
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| Eddie Mahdi, director of Centrix Solutions |
Most devices now are SIP compliant. Softphone clients for iPhones and Blackberrys can connect to a SIP-based phone exchange.
An early driver towards IP telephony was call savings. However, this is becoming less common in the business case to move to an IP system, Mahdi says. Aggressive pricing on calls and reduced rental fees from telcos have reduced the gap. And VoIP providers such as Engin give businesses lower call costs without requiring businesses to change from a TDM system.
"Coupled with the upfront investment on the IP systems [call savings] becomes a less attractive proposition," Mahdi says.
The biggest driver these days to move to an IP system is simplified management. A single set of wiring, the ease of moving devices and making changes without calling an expensive technician are attractive.Centrix resells Zultys, an all-in-one solution that has storage for voicemails, call recording and features which would require separate boxes in a conventional phone system.
"It's all in the one box, managed from the one console," Mahdi says.
Next: When IP isn't exactly IP
Vendors will say that 70 percent of their phone systems are IP but they aren't always telling the whole truth, says Paul Scanlan, managing director at IPL Communications.
Companies that buy a new PBX for an environment of TDM and IP handsets can later find that the PBX cannot take advantage of all the IP features. This is because some PBXs in the IP category are built on TDM technology and have limited, optional support for IP.
Scanlan claims a hybrid approach around an IP PBX is still more cost effective than rolling out an IP-only system.
"A lot of the software is available on both systems so the end user is getting full feature sets on hybrid and IP systems. The price of systems has come down quite dramatically and a lot of that advantage that IP had has been diluted by some pretty powerful hybrid systems," he says.
"You can start TDM and as your business develops you can attach IP. To the end user they don't care."
IPL Communications sells IP-only PBXs and hybrid systems; most vendors market both. It also sells analogue TDM systems to price-conscious customers. "They just want a box on the wall with a few handsets and they want it nice and cheap," Scanlan says.
He estimates that 60 percent of PBXs sold by the distributor were IP with TDM inputs, a quarter were TDM-only and 15 percent IP-only.
But the major carriers still dissuade their SMB customers from IP solutions, Touzeau says. He says Telstra still talks down IP telephony for supposedly offering lower voice quality. ISPs can run IP phone systems with the same redundancy and uptime as a TDM network, Touzeau says.
The carriers' trash talk has an effect on perceived legitimacy. Touzeau says many SMBs say that until IP telephony is available through Telstra or Optus, it won't be widely accepted as a medium.
"When the carriers release their products you'll open up a much more competitive environment where people will be more comfortable running their traffic over the internet," Touzeau says.
Next: IP only, thanks
What's the main reason companies go for IP-only systems? It's not features, it's not future-proofing and it's not lower call costs, Scanlan says.
"It's all about the person that sells it. If you've got a salesman that sells the benefits of a LAN... if I've got a customer that has a larger IT budget than a telco budget I might sell a pure IP system and score a LAN upgrade to house the phone system. That gives me a much larger sale number," Scanlan says.
"Yet there might be another [worthwhile] system. Siemens and Panasonic have a very solid upgrade system where you can change the box up to IP and take the handsets with you rather than forklift in a brand new system. A lot of customers like that because they've invested over the years and are reluctant to throw that money away."
Continuous upgrades to IP handsets is easier to afford and manage for customers than replacing the whole system in one go. They can keep their TDM network and squeeze the most from their hardware investments. This can make a big difference to the cost of moving to IP telephony, as handsets sometimes make up half the cost of the package.
"You can add IP handsets over the years and end up with a pure IP system at the end of it," Scanlan says. This method is also favourable to the reseller because it prolongs the length of the sale and consequently the depth of the relationship.
"In the hybrid world we strongly focus on utilising current technology. It helps you keep the customer, too, from a dealer point of view and it gives you a customer-upgrade path that you can keep earning an income stream off for many years to come."
Telephony vendors price IP handsets higher than TDM handsets despite the fact that there is little obvious difference in how they are made, according to Scanlan, who assumes the premium is "contrived".
Next: Sales-winning features
Telephone systems at the bottom of the market are sold on the style and appeal of the handsets. Higher value sales are being won and lost around the applications available on one vendor's system compared to another, Scanlan says. A number of PBXs integrate with Microsoft Outlook and popular databases.
Applications are critical for call centres, even those as small as five people. Downsizing call-centre staff means fewer people have to carry out more tasks. "Having tools that make that job easier is critical now," Scanlan says.
Unified communications is another important application. It is now much easier to combine traffic from email, voicemail and text messages on the one platform. Users can tell who is calling and their contact history through integration with address books and CRM software.
Other unified communications features include voice to email, which sends voice messages to a mobile phone; free text messages on mobile phones to internal staff; and "twinning", where an incoming call rings a mobile and deskphone simultaneously.
More sophisticated applications are specialised voicemail, website links and predictive or progressive dialling within a sales team.
Companies of all stripes are investigating these applications and buying the IP systems that support them. There is no expensive outlay to get access to the latest software features, Scanlan says. Some applications cost as little as a $50 flat fee, and licences are added as needed.
Scanlan calls the category of customers willing to invest in IP systems "smart SMBs" because they understand staff productivity. If the reseller's salesman understands the business a application could cost very little and yet have a dramatic effect, he adds.
The prospect of selling additional features opens the door to future sales. Conventional TDM systems are quite simple in comparison and once installed offer little recurring revenue to a reseller other than maintenance calls.
However, a reseller can keep returning to a customer to introduce more features that make sense for the business as it grows.
Selling extra features was the reason Centrix Systems chose to move to IP systems, Mahdi says. The Zultys range has added a conference bridge allows users to set up a conference and send participants Outlook invites with the PIN and phone number to dial.
Another feature lets a user host a webinar, which can be two-way or host-driven. It has allowed people to replace their GoTo or Citrix subscriptions, Mahdi says.
Unified communications and more exotic features are not something SMBs typically demand, unless they are moving from a similar system, Mahdi says. However, once the features are in use and the company is drawing a benefit they are hard to remove.
"I don't expect clients to willingly request those features but they do add value to the prospect of having them switch over to the solution," Mahdi says.
Next: The soft touch
Telephone applications that sit on a computer, such as Skype, are becoming more common in IP phone systems. Also known as softphones, they are important elements in unified communications platforms because they combine instant messages, presence and email with telephone calls.
Zultys' softphone MXIE is sold by the seat. While a user can tag the presence indicator as "back at 2pm" if in a meeting, the softphone is smart enough to update itself. If the phone, keyboard or mouse isn't used for several minutes the presence changes to "be right back"; after several more minutes it changes to "unavailable".
NEC unified communications business manager Steve Woff is also seeing customers push for softphones. Businesses are looking for greater flexibility with off-site employees, unified communications and more integration with Outlook and CRM packages to journal phone calls.
NEC has its own softphone that imitates Skype by answering and making calls to an office extension through a laptop. As VoIP calls to landlines are free, using the softphone to make calls can save money otherwise spent on mobile phone calls if an employee is working off-site.
Woff says he is witnessing another trend filtering down from enterprise - the need for video.
"We are starting to see a lot of customers asking for video capabilities. And not the high-end, multi-screen video that is way out of the reach of most companies, but just the ability to video on the deskphone. It's definitely more engaging when I'm talking to someone face-to-face and you can have a much higher quality conversation."
Video has the advantage of guaranteeing the attention of the other party. Someone answering a call can be looking at their email, talking to someone else or otherwise not listening and the caller would often be none the wiser.
Video collaboration also makes it easier to see things, whether sharing a presentation or looking at an object.
Woff sees the greatest benefit in sales. Instead of sending a salesman on a half-hour trip to see a customer, the salesperson could have the same quality of conversation over a video call. "It could be just as immersive as me actually being there," Woff says.
The hour of travel time could be spent instead following up the sales call or making another, and the business would also save on the taxi fare or parking. It doesn't take long before the video equipment pays for itself, especially if it avoids interstate trips, Woff says.
Selling video is another leap for telephone dealers who are still adjusting to IP networking. Woff says "without a doubt" more education will be needed on video communications.
"It's not an easy sell," he admits.
In the shorter term, there are several video solutions that run on top of the network as a leased arrangement where call time is rented from a central video supplier, such as NEC.
"I think that's easier for a dealer to understand and they can get a percentage revenue from that. They might take that up before they get to the point where they can sell that type of equipment," Woff says.
Next: Hosted telephony gains traction
Hosted telephony has usually been the domain of large companies or high-volume, large-scale call centres looking to outsource management of complicated, multi-vendor solutions.
Recently new players arrived in Australia to target small businesses which want to pay as little as possible for a phone system.
US vendor Fonality launched its Connect service in May, which gives a business an IP handset, free calls and a web-based PBX interface for $39 a month.
Marc Englaro, vice president of international sales, says since the launch he has been "crazy busy" and selling connections twice as fast as expected. In seven weeks the vendor picked up 200 customers and was heading towards 1000 seats.
When CRN spoke to Englaro last month he had just recruited a new sales team and was considering hiring another to handle enquiries.
Englaro attributes his success to the vendor's unorthodox approach to selling telephony systems which he says is the "telecommunications version" of software-as-a-service programs such as Salesforce. "We're trying to remove this idea that you buy a phone system and it starts going out of date as soon as you buy it and you have to replace it in five years.
You pay only for the use of the [Fonality] system rather than buying an asset which you then have to depreciate. We will refresh hardware and handsets as required, you get two new feature releases included in your subscription fee, you're always up-to-date and you're future-proofed."
A business adds users and pays an extra subscription for the additional handset and a VoIP line.
Fonality has added a mid-market product called Fonality Professional Suite which includes an on-premise PBX controlled through the web using a similar interface to the cloud-only Connect service.
Englaro says the most common reason customers buy the professional suite over Connect is to retain phone lines. "You can put a switching box on premise but still get advantages of cloud. Software upgrades occur twice a year and are automatically available, and all support is through the cloud," he says.
Professional suite customers may want to keep ISDN lines or their internet connection might not be reliable enough to carry all their voice traffic. "If they make lots and lots of phone calls they're going to need a bigger internet connection or ISDN lines. Some people want to change one thing at a time," Englaro says.
The company is targeting up to "a couple of thousand" employees, although Fonality's largest customer in Australia has 150 staff. In Japan, it has customers with 1000 seats and more, including one with eight call centres.
Most sales have been direct but the vendor is expanding its channel operations (see case study) in line with the model used elsewhere in the Asia Pacific.
Englaro is looking for conventional IT resellers who provide internet connections, networks, applications, consulting, IT support and unified communications. "Generally not traditional telecommunications people but more IT and data and networking people," Englaro says.
Fonality's solution runs over the public internet rather than a dedicated line. In most cases customers don't need to upgrade their internet connection to handle the extra VoIP traffic, Englaro claims. Of 200 installations only five have upgraded their bandwidth.
Most small businesses have ADSL2+ and can sustain up to 10 concurrent calls, which is quite a lot of lines for a small business of even 20 employees, Englaro says.
"You would hardly notice the increased traffic. Voice takes up very little bandwidth but it is very sensitive. If 80 people were on the phone at once they might use 1 megabit per second," Englaro says.
Next: A different opinion
Unlike Fonality, ISPhone bundles a dedicated PSTN line to handle VoIP traffic.
Managing director Gavin McDougal takes the opposite view to Englaro as he insists it is still important to keep carriage separate. "It does really matter what network you're using when you're connecting these devices and solutions."
A bugbear with IP telephony is pinpointing the cause of poor call quality. McDougal says that before he began selling dedicated carriage he had complaints from customers over call quality using a single ADSL2+ connection for voice and data. The culprit could be the ISP supplying a line with high contention rates (number of connections a line), an employee downloading large files or interference from security devices.
In situations where insufficient bandwidth is a problem, McDougal says adding a dedicated VoIP line makes more sense than increasing the size of the main connection.
ISPhone provides dedicated SIP trunks or VoIP tails to guarantee the best call quality and control. "From our experience it has been a major improvement and the number of customer complaints has gone down massively," McDougal says.
ISPhone, managing director, Gavin McDougal
ISPhone sells a dedicated a 2 MbpsADSL2+ VoIP tail to its channel partners for $59 a month with unlimited calls. "They can sell it at $79, $89, whatever they want," says McDougall. "But that might replace 10 lines for an average $30 a line."
The ISP has branched out into selling non-VoIP bandwidth as well. Speeds increase all the way up to 30Mbps.
This month ISPhone is launching a hosted IPPBX service. McDougal says companies are demanding hosted solutions because they can add features as the business grows.
"We think the mobile phone and the office environment will get closer and closer and you can have all the features of your IPPBX on your mobile phone," McDougal says.
Photo right: Panasonic NT400
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