VoIP: At the Cost of...

In the last few months, there has been a lot of noise about VoIP and the
benefits that enterprises can accrue out of the technology. VoIP solution
vendors have been aggressively telling enterprises how they can bring down their
communication costs considerably. What vendors have been saying is true. Take
for example, the expenses on long distance calls of an organization. It is often
the case that in an organization, 60 to 70 percent of the long distance calls
are intra-office. So if an organization spends Rs 5 lakh on long distance calls
every month, Rs 3 to 3.5 lakh would be on intra-office calls. If an organization
bargains it right with its connectivity provider, VoIP can bring down this
expenditure (on intra-office calls) somewhere around Rs 1 lakh or even less, per
month, in such a case. Besides this, using VoIP would mean that an organization
could run many new applications. And since it is about integrating voice and
data on one network, organizations can also save on future cable deployments.

Now, which organization in India or even in the world would not like to have
that kind of savings or run new applications?  Probably, every one. The problem,
however, is that since most of them would not have any other significant
application except for voice to run, the amount of investment that an
organization would need to deploy VoIP appears to be too much. Notwithstanding
the attractive savings that VoIP promises to deliver even if one just uses it
for voice, the fact remains that deploying it is still too costly. A very basic
VoIP deployment for such organizations for intra-office communications would
cost nothing less than Rs 55 to 60 lakh for an organization with 100 or more
users. This does not include the cost of leasing the inter-city IP connectivity
link from a service provider.

Considering the savings scenario mentioned above, it can be seen that it will
take several years for an organization to recover the investment. Practically,
very few organizations can afford to invest that kind of money in a voice
switch. Moreover, since the technology is new and sophisticated, costly manpower
will be required to monitor the network. At present, in a majority of Indian
enterprises, especially the SMEs, telecom is being taken care of by the
administration guys, who also look after many other functions.

End-user Equipment Will Cost too

VoIP vendors usually talk about two strategies that an enterprise can take for
migrating to VoIP–first, setting up a VoIP network on the top of existing LAN
and voice network, and second, deploying a pure-IP network that would junk the
existing voice network. In both the cases, there are two aspects of investments
that an organization would need to make for deploying VoIP. One is on
connectivity links and the other is on devices. Inter-city leased line or VPN
(many service providers are trying to offer voice VPN services) links are quite
affordable these days, and with competition among various service providers,
organizations can expect to strike a favorable bargain. Technically, a 64-kbps
link can support four voice channels. So what capacity link an organization
would need will depend on the number of voice channels it wants to support?

While connectivity comes at a considerably cheaper price, equipment that an
organization would need to set up a VoIP network, even without junking the
existing voice switch, does not. Indian businesses have offices in at least four
cities across the country. These are usually Chennai, Delhi, Kolkata and Mumbai.
If an organization wants to link these four locations through a VoIP network, it
would need a voice gateway at each of these locations. One voice gateway, which
can support up to ten phones, costs around Rs 11 lakh. At this price, four
gateways would cost Rs 44 lakh. That surely is not a cheap affair. An
organization would have to go for higher-end gateways if it wants them to
support more than ten phones, and that would again cost more. Then there would
be additional expenses on devices like IP phones (they cost anywhere between Rs
10,000 to Rs 40,000, depending on the features and make) and power-enabled
switches or power adapters (each IP phone needs power source, as power does not
come over the Ethernet). A cheaper alternative to buying IP phones would be
analog adapters (priced at Rs 5,000 to 15,000) that can interface analog phones
with the IP network.

All this could be roughly the minimum investment if an organization wants to
migrate to IP, using its existing LAN infrastructure and PBX. It is true that
this cost can come down considerably if an enterprise goes for low-end devices
like those made in Taiwan. Taiwanese-made voice gateways are said to be
available at one-sixth the price of the gateways mentioned above. However, those
gateways may not be enough to meet an enterprises’ needs and could be
unreliable, and often won’t come with after-sales support.

Forklift not justifiable

If migration to VoIP using the existing network could cost Rs 55—60 lakh,
one can easily guess what it would cost to deploy an all-IP network by junking
the old system.

For deploying a pure-IP network, an enterprise would need to invest in voice
gateways, call processing software (IP PBX), IP phones, and telephony
applications like voicemail, auto-attendant, unified messaging solutions,
personal assistant, etc.

An IP-PBX costs around Rs 3 lakh and the cost of telephony applications can
be in the region of Rs 10-12 lakh, depending on the configuration and
functionality. All this could run on the existing LAN only if the solution
deployed is capable of integrating into the existing infrastructure. As Swapan
Johri of HCL Comnet points out, "There are still issues in terms of
standards. Hence, it is recommended to go with the solution supported on the
same LAN–Cisco LAN means Cisco AVVID, for Enterasys LAN use Siemens HiPath,
for 3Com LAN use 3Com". However, Jayesh Chaitania of Cisco India says that
an organization can reuse its existing LAN switch and Cat 5 cabling even if
deploying IP telephony completely. "Additionally, it will need to invest in
voice gateway (to interconnect with PSTN and to an existing PABX system),
application software that provides controls to set up VoIP calls, and features
required for enterprise communications and IP phones," he adds.

Stating that any new technology should do either of the two things–more
things for less money or the same thing for less money, Ravi Chauhan of Nortel
Networks, observes that while IP is uneconomical in the LAN environment, one
needs to invest in IP WAN sensibly. "There is no need to go for an all-IP
network because you would still need a separate voice and data network," he
adds. Anil Jain of Siemens also suggests that if an organization is moving from
the traditional PBX to IP, it is better to take the migration approach instead
of forklift. "For IP infrastructure, none of the components of the existing
TDM network can be used and then it becomes difficult for an enterprise to
justify such investments," Jain says.

Convergence Benefit too Is Far off

The other significant benefit that can accrue to an enterprise deploying
VoIP is that it can allow it to have a single network for all its voice and data
applications instead of having two different networks. However, in India, this
is not possible, as existing regulations do not favor integration of voice and
data networks. Organizations deploying VoIP network will not be allowed to
connect that network to the PBX that is connected to the PSTN. This by
implication means that the organization will have to deploy a PBX for its VoIP
network for carrying both voice and data, and at the same time continue with the
PBX connected to the PSTN for outside closed user group (CUG) voice calls. In
other words, the cost advantage that an enterprise would have enjoyed because of
a converged network can be achieved at the cost of having a separate PBX for
PSTN connectivity and a separate one for VoIP.

The Bottom Line

There’s no doubt that VoIP is capable of reducing business communications
costs considerably. No one can doubt VoIP’s functional capabilities. However,
the bottomline is that it is still too costly even though its cost-saving
abilities could seem too tempting for organizations. Besides, there are other
practical hurdles that negate VoIP’s cost advantages, here in India. True,
convergence still faces legal hurdles. And whatever service providers may claim,
it is a fact that leased lines are often down, and lack of a proper SLA culture
means that service providers often play the blaming game. What enterprises can
do is to look for network-based services where service providers host the VoIP
infrastructure and applications, and the enterprises have the CPEs and the
internal network in place to access and use the services. "This approach
could save them from making huge investments in technology and also save in
costly replacements and upgrades," Himanshu Goel of CommWorks points out.
And this could also help an enterprise in becoming technology agnostic. Perhaps,
an enterprise could leave everything on the service provider, provided it gets a
good SLA.

Ravi Shekhar Pandey