VOIP: One Foot in the Door

IP telephony, as a technology, has matured significantly in the last two

years with the technology evolving into a more robust and stable platform to

deliver services. The technology and its applications have grown as a direct

result of a latent market demand for open standards and value-added services,

while delivering cost advantages.

An industry research report says that the voice market in India is estimated

to be Rs 33,000 crore (ILD and NLD together), of which Internet telephony is

about two to three percent.

According to IDC, the IP telephony market is set to touch $60 million mark

this year as compared to $30 million last year. On the other hand, IDC

Asia-Pacific estimates VoIP services in India to be worth $2.8 billion by 2005,

which will make it the second-biggest VoIP market in the region, behind China.

IDC expects revenues from VoIP from Asia-Pacific to be worth $13.8 billion.

Analysts say, VoIP equipment such as IP-PBX and IP phones/adaptors will

account for approximately $1.1 billion, up 50 percent from 2003. Cisco, a leader

in the VoIP solutions space, has shipped over 50,000 IP telephones in India

becoming the first vendor in India to cross this mark. In April 2004, Cisco

announced globally the shipment of its three millionth IP-Phone.

IP telephony spending will continue to expand. Worldwide IP telephony

spending reached $806 million in 2003, with an annual growth rate of 41 percent

expected over the next five years.

In spite of these figures, in India the traditional analog phones at most

enterprises have not been replaced by their VoIP equivalent. The market is

mainly driven by greenfield operators and call centers. Despite that, IP

telephony has seen an encouraging growth in India. The Indian IP telephony

market is expected to register an average of 60 percent CAGR over the next three

to five years.

Girish Trivedi, analyst, telecom, Gartner said, "The adoption of IP

phones is increasing in India and is driven by enterprises deploying pure-IP

infrastructure."

Even as long-distance call volume is on the rise, the enterprise spend on it

is going down. While approximately 28 percent of total telecom spending is

currently attributed to long-distance/IDD spend, this portion is expected to

continually decrease, making up only 23 percent by 2008. The increasing volume,

coupled with decreasing spend, indicates, that businesses are rapidly adopting

VoIP technologies for more cost-effective ways of conducting their business

outside their local area.

VoIP Globally PC-to-phone (internationally) calls will help employees communicate with partners or principals abroad at lower ISD costs. Home users will also have a low-cost voice communication to communicate overseas. Worldwide IP telephony spending reached $806 million in 2003, with an annual growth rate of 41 percent expected over the next five years

Over the years, the proportion of traffic has become inverted. In fact, in

several major economies of the world, data traffic comprises half of the traffic-sometimes,

even 60—80 percent of the traffic. When it gets to a point when most of the

traffic is data, then it makes sense to carry voice on a data network-as

opposed to data over a voice network. This change means that the world's

telephony infrastructure needs to totally change.

As SMBs in India, China and Russia continue their rapid adoption of PCs and

networking gear, VoIP will inevitably be reducing telephony costs while

providing increased value to other branches of the infrastructure. SMBs in these

markets spent $19.4 million on VoIP in 2003, and are expected to spend over $200

million in 2008.

Scenario Rapidly Changing



The increasing volume, coupled with decreasing spend, indicates that

businesses are rapidly adopting VoIP technologies for more cost-effective ways

of conducting business outside of their local area. Emerging markets aim to

reduce telephony costs while increasing overall infrastructure flexibility.

The value that corporations derive from of IP phones is that it leads in the

direction of convergence and also that IP phones typically use less bandwidth

compared to traditional phones (up to of 15—20 percent).

Mathew Varghese, principal consultant, ITS Cisco Systems India opines,

"The last decade has seen the greatest technological shift in voice

communications for over a century. The maturing of IP-based voice transport has

seen the world of telecommunications undergoing a tectonic shift. IP-based

voice, from being considered a technical freak-event is today universally

regarded as the future of telecommunications. My confidence stems from facts

evident in the global market today. Data, previously, went over voice networks,

as data was a small constituent of the overall telecommunications traffic.

Existing circuit-switched networks are not optimized for data and are not

efficient."

Emerging markets have strong potential-they are under-penetrated by

communications technology in general and have little legacy equipment holding

back new VoIP investments. Also, mature markets will push for enhanced VoIP

applications and convergence to increase productivity.

Why Will Enterprises Adopt VoIP?



IP technology allows enterprises to invest in just a single communications

pipe that will deliver voice and data communications to the enterprise desktops.

In fact, the use of IP telephony, by enterprises, to terminate voice traffic is

seen to be the market with maximum potential. Vendors, such as Cisco, offer

IP-based PBX solutions, which are replacing traditional EPABXs while offering an

array of value-added services right on to the enterprise desktop.

According to Nortel Networks' Rajat Tandon, national sales manager,

Enterprise India, "What basically is driving the adoption are dramatic

improvements in QoS over the various IP networks. People are moving towards IP

networks with improved quality of service, using technologies such as MPLS. As a

result, we are seeing more advanced IP networks. Although VoIP is still at an

embryonic stage here, India is moving strongly in that direction."

Who is Embracing VoIP?



The number of enterprises that have implemented VoIP in India is just a

handful. HPCL, LIC, National Highways Authority of India, HLL, GAIL, P&G,

and Bank of Rajasthan are amongst the few. It is in the IT and ITeS service

industry where the major use of VoIP solutions can be seen.

Enterprises are beginning to see the value in using IP telephony because of

its cost- effectiveness, easy deployment, and management. There is a huge

opportunity in diverse verticals like banking and financial services, ISPs,

system integrators, government bodies, and the oil industry.

Rajiv Gerela, general manager, technology, Wipro Spectramind Services says,

"Indian enterprise has always been at the leading edge of technology

adoption and has also been at the forefront of testing the VoIP platform. While

the testing has been very widespread, the acceptance has still been an issue as

there has been a lot of learning involved in ensuring acceptable voice quality

due to various issues of integration, firewall ports, improper bandwidth sizing,

QoS setup issues, equipment issues, vendor support issues, etc. Most of these

either have been ironed out or should now be history and thus we should shortly

see a big jump in the VoIP acceptability within the Indian enterprise

scenario."

Enterprises have realized that they can cut down on expensive STD and ISD

calls by using IP telephony. Some organizations have experienced a 10—15

percent increase in cost savings, going up to 50 percent in certain cases.

The RoI for an IP phone deployment is usually very quick, about six to 12

months. With Indian enterprises being extremely price sensitive, this is an

important reason why many enterprises adopt IP telephony.

Widespread broadband usage in the mature markets has set the foundation for

VoIP to make waves in the next few years. For the increasing number of mobile

employees, who travel four to five times a month, VoIP applications offer the

ability to manage business processes, collaborate with team members from around

the world on multimedia presentations, and stay connected with customers,

vendors, and coworkers-all in real time-regardless of geographical location.

Although over 90 percent of VoIP spending in mature markets is currently

attributed to VoIP equipment, VoIP service spending is on a steady rise, and is

forecasted to contribute over 16 percent of VoIP spending in 2008.

Though the cost of the IP-phone is very high as compared to the traditional

phones, their major advantage is quick deployment especially when setting up a

new remote office. Just a plain network point works just fine and there is no

hassle of a new phone setup. Cost, the last barrier, should soon see a fall.

That would lead to an exponential growth in the acceptability of these phones.

KVSSS Gunneswara Rao, director, VoIP, D-Link India explains, "IP

telephony is one of the functions of VoIP technology. For the corporate users,

VoIP technology shall bring in features like: instant conferencing and instant

messaging on to their desktop. These shall increase the productivity by at least

30 percent and hence an early adopter of VoIP technology is the corporate

world."

Corporations and individuals can create/develop their own features such as

e-notice boards, e-broadcasts, and deliver lectures (voice and image) or

conference proceedings, at a click of a button. The converged VoIP technology

shall usher in an era new functions for the professionals.

Obstacles to Implementing VoIP at Enterprise-wide Level

A proactive approach from the government will accelerate adoption of VoIP in

India because newly industrialized nations need more efficient ways to

coordinate with global partners.

In IP telephony, though attractive, there are a few factors that could hinder

its growth. The biggest is the relatively high price of IP phones. As a result,

organizations limit these high-end phones to their top managers, with lower-end

phones being offered to other users. Additionally the fact that IP calls can be

made only within a closed user group (CUG) is also a hindrance to the growth of

this segment.

The need to have two physically separate infrastructures is a big obstacle

faced by enterprises. While greenfield organizations setting up a new network

are following the revolutionary approach, others who are integrating their IP

and traditional networks do face a challenge of interoperability with the

traditional networks.

Interoperability is another issue that needs to be resolved. Not all phones,

soft phones, gateways, or call managers are interoperable as they support some

proprietary variant of a standard protocol. This limits corporations from doing

an unhindered mix and match of the components. Keeping this in mind, the

potential of IP phones is highest in new setups. Companies who have existing TDM

systems in place will find it more difficult to integrate IP phones with their

legacy system.

According to Mathew of Cisco, "The CUG issue is squarely in the hands of

the government. Industry consensus is that this is bound to , and

when it does, IP telephony will rocket into the stratosphere. This seems likely

when you consider that the deregulation of wireless LANs has seen a surge in

WLAN deployments."

He added, with large nationwide IP networks coming up and once deregulation

takes place, the existence of these fat IP pipes will let Indian service

providers emulate their counterparts in Singapore in offering IP telephony as a

service with varying levels of call quality that the user will be able to pick

by using a specific prefix before dialing out.

Today, CUG forces organizations to maintain two sets of phones, one for PSTN

and the other for CUG-IP calls. The government will need to take a favorable

view of a single infrastructure to see the sales of IP phones surge.

Rajiv Gerela, general manager, technology, Wipro Spectramind Services says, a

major roadblock to wider enterprise acceptability is the non-compatibility of

phones of from different vendors and once this is resolved, there would be a

huge drop in costs.

Last mile quality remains a challenge, though it is not a primary concern.

Apart from regulatory issues, price and RoI are other concerns. Integration

of backend and front-end systems is another area that vendors offering IP

infrastructure need to address.

Round the Corner



New technology adaptations cannot happen overnight. Still, impact of VoIP is

being already seen with the big corporate users. KVSSS Gunneswara Rao said,

"Most of the corporate houses/SMEs are planning to adopt the advantages of

VoIP platforms to reap the benefits and new style of functioning."

Earlier, Net telephony was used in a CUG network. Now enterprises can connect

with anyone, anywhere, at very low costs. Enterprise networks earlier restricted

to data will now integrate voice in the same network, thus bringing down costs

substantially.

Rajat Tandon of Nortel added, "Many companies already have VPN networks

using IP to transmit data. The same equipment can now be used for voice

communications too. India will benefit significantly from IP telephony, as

PC-to-PC communications will help enterprises in communicating with their

regional and corporate offices, thereby resulting in lower STD/ISD costs."

Minu G Sirsalewala