Enterprise Equipment: Voice Solutions: IP Leads the Way

FY '06-07 saw Indian enterprises looking at communication as a strategic
investment. While large enterprises invested in advanced communication
solutions, a new section of potential adopters emerged in the SME segment owing
to the buoyant economy and globalization.

Communication is an integral part of business processes, and last Fiscal saw
the communications industry undergoing a paradigm shift. The deployment of pure
IP and the converged multi-service communication systems began last year. These
converged systems give a capability to provide legacy connectivity like PCM-TDM
and IP as well. Standards and interoperability issues were dealt with.

According to VOICE&DATA estimates, the voice solutions market stood at Rs
1,413 crores growing at 27.8% in FY '06-07. The IP-PBX took the lion's share of
50% and TDM PBX reduced to 30% of the total market, and other technologies such
as KTS contributed 20%

REACHING NEW HEIGHTS

With VoIP becoming popular, companies are realizing the benefits of
IP telephony beyond the cost reduction factor. IP enables merging of voice and
data in a single network, thereby providing an enhanced communication
experience, which is imperative for any competitive organization.

VOICE&DATA estimates that, unlike FY '05-06, 2006-07 saw the highest growth
in the IP-PBX segment, with many organizations investing in high-end IP
solutions. Many managers looked at voice solutions as a way to help them reduce
rising administrative expenses, extend business reach, boost productivity, and
realize measurable returns on their infrastructure investments.

The market is just starting to ramp up as broadband connections accelerate.
Enterprises and telcos are starting to realize the vast advantages of VoIP and
are beginning to intensively deploy VoIP solutions. From TDM, India is moving to
VoIP-enabled solutions, while the legacy PBXs are moving to digital analog
connections.

However, the adoption of IP telephony in India is on the express lane to
prosperity and growth. This was the consequence of a chain of events. The
withdrawal of the TRAI regulation, which imposed restrictions on using IP
telephony by enterprises led to enterprises looking positively at IP telephone
deployments. This caused the service provider market to evolve.

Due to rising broadband penetration, a huge market is opening up and the
importance is on cost savings. In India, VoIP telephony can be used for making
phone calls from a PC to a phone abroad, from a PC to another PC within and
outside India, and between SIP/ H.323 devices globally. The advantages of using
this technology are apparent. Besides the freedom it provides, wireless VoIP
phone systems also allow organizations to combine communications to include
phone, email, and text messaging, allowing them to work together as one system.
This efficiency is a time saver, as well as a money saver. Organizations will
find that they can avoid lengthy contracts with phone companies in favor of
wiring systems that give the businesses more options.

PBX has moved from a simple TDM switch to a converged IP platform supporting
standard TDM, ISDN, ATM and IP connectivity on a single platform. Today,
enterprises are looking for 'real time communication' that is integrated with
the IT infrastructure and business support systems. Some of the dominant
technologies in the enterprise communication arena are VoIP, IP trunking, and IP
distributed architecture. The trend is also shifting towards adding mobility
features like GSM gateways and information mobility on the basic PBX platform.

Hybrid solutions have also seen growth especially in those cases where the
organization is shifting to an IP solution for the first time. Cost has been the
main driver for hybrid solutions. This is because the cost of deploying pure
IP-PBX is high, and so users prefer go with hybrid solutions.

Thus, FY '06-07 saw IP-PBX eating into the share of traditional PBX systems.
The traditional PBX market is shrinking by 10% y-o-y and IP- PBX is growing by
about 20% y-o-y. Growth in IP-PBX shipments has been over 30%. However, due to
restrictions on terminating computer-originating calls over a PSTN network, the
growth of VoIP has been restricted. Low PSTN tariffs too have discouraged PSTN
operators from investing significantly in the VoIP carrier equipment.

According to VOICE&DATA estimates, Avaya Globalconnect emerged as the top
voice solution vendor with 28.3% market share and revenues at Rs 400 crore. The
second is Cisco with revenues worth Rs 250 crore followed by Siemens with Rs 226
crore. The highest growth since FY '05-06 was that of Cisco's, which grew around
82.5% in FY '06-07 with a market share of 17.7%. Coral Telecom also registered a
growth of 19.5% with revenues touching Rs 49 crore. Among others, Matrix
registered revenues of Rs 11.38 crore while D-Link clocked Rs 2.3 crore.

BIGGEST CONTRIBUTORS

The IT and ITeS vertical invested the highest amount in voice
solutions especially IP-PBX. This is because, being a very people-intensive
segment, it focuses on technologies to enable productivity increase of the
workers. The second vertical that contributed the most to the growth of this
segment was BFSI. Apart from the private sector banks, the PSU banks are also
moving toward deploying advanced voice solutions. The SMB sectors have also
contributed largely to the growth of voice solutions in FY '06-07 in India.

Cisco sold around 15,000 IP phones to organizations in the IT/ITeS segment
and won huge orders from the government sector for e-governance initiatives. On
the other hand, Nortel provided converged IP voice and data connecting 150 South
Indian Bank branches along with getting orders from major companies such as
Hinduja TMT, ICICI One Source, Bharti Airtel, and Reliance Infocomm. It had a
very strong presence in the government and defense sectors and also launched
their SMB strategy. The biggest deal bagged by Nortel was the IVR project for
Indian Railways. Nortel also undertook a 'Call 108' (911-style) emergency
services contact system for Emergency Management and Research Institute (EMR) in
Andhra Pradesh which would eventually be deployed nationwide.

Siemens bagged big orders from Delhi International Airport Ltd, Bangalore
International Airport, and Hyderabad International Airport where it provided
multiple networked IP-PBX systems with call center applications. It deployed
IP-PBX for the corporate office and plant of Claris Pharma and undertook a large
IP-PBX deployment for ICICI Lombard. For Siemens Information Processing Systems,
it deployed IP PBX with applications for call centers, wireless LANs, etc.

While Alcatel-Lucent had RBI and ICICI in their client list, Ericsson bagged
a prestigious 1st MX One (IP-PBX) order from Royal King Palace of Nepal
supplying 400 ports for voice communication with DECt for mobility. Ericsson
also got orders from Soldiers eCare Contact Center (SeC) along with a 60 seat
call center for Delhi Police and a 3,000 port order for MX One from Bhutan Steel
Plant.
 

GROWTH OBSTACLES

However, the voice solutions market also faces certain challenges
that are hindering its growth. The PBX industry is witnessing a drastic change
on the technology front. With the introduction of technologies like IP
telephony, the definition of enterprise communication itself has changed. So
continuous enhancement of product lines is taking place to cater to the latest
IP technologies, while simultaneously decreasing price levels are the main
challenges faced by the PBX industry.

Also, many more customers are looking for pure IP deployments but the
prohibitive costs of IP terminals restrict large deployments of pure IP systems.
On an average, the converged systems are available at Rs 4,000 per user while
pure IP systems including IP terminals are available at Rs 15,000 per user.

There is very little awareness among the users about the advantages of IP
telephony in terms of total cost of ownership. They need to be educated. Another
challenge is that the government regulations do not allow connectivity of PSTN
and CUGs. Although termination of both on PBX systems is now allowed, it needs
to be logically portioned. This more or less cancels the benefits of IP for the
enterprise.

Another aspect is infrastructure. There is a need for high-quality broadband
connectivity and cost effective leased lines for pure IP-PBX to function well.
With deregulation coming in, the cost of leased lines is coming down but the
international leased lines are still expensive as compared to the western
countries.

Also, in a wireless VoIP phone system, the number of calls that can be placed
by callers at a time is limited. An access point in a system can't handle more
than a few calls at a time. This limited capacity, therefore, has resulted in
the inability of many businesses to use wireless VoIP. Businesses and industries
that require huge volumes of communication on a constant basis would simply
overload a wireless network.

THE FUTURE

The industry is moving towards unification. Enterprise and carrier
networks are overlapping in functionality. The way forward in such a scenario is
to offer comprehensive solutions catering to different market segments like SOHO,
SME and large enterprises. Extensive customer reach, backed up by high quality
service support will be a differentiating factor. Offering solutions for
verticals like hospitality, trading etc, will generate a new market segment. IP
converged network is a basic requirement of an enterprise now. Real-time IP
applications on converged networks will revolutionize the enterprise
communication market.

FY '06-07 saw a number of deployments and this reveals that the IP telephony
equipment market is quickly emerging from the regulatory roadblocks that it
faced. There has been a significant improvement in the technology and thus,
IP-PBX is bound to grow at the same rate in the coming years. Large, booming
economies of China and India represent a huge opportunity to equipment vendors,
systems integrators and telecom carriers. More and more organizations will move
to pure IP-PBX solutions instead of opting for hybrids and as companies in India
start considering IP to be the backbone of their business infrastructure, IP
telephony market is expected to reach $300 mn dollars by 2010. With Indian SME
telephony market expected to reach $158 mn, it is becoming a hot focus area for
the solution providers as well. Players like Avaya Globalconnect have already
started alliances with other vendors to provide solutions for this segment.
Other players are also focusing on this segment and also on government, retail,
manufacturing and FMCG. India is expected to overtake Australia's IP telephony
market by 15% in 2010. Another feature, which is expected to gain traction, is
the applications for IP-Telephony. With bigwigs such as Avaya Globalconnect and
Nortel focusing on services there will be a lot of action to see in the coming
days.

Sonia Sharma


sonias@cybermedia.co.in