THE ENTERPRISE COMMUNICATIONS ENVIRONMENT is undergoing sweeping changes as we move into the 21st century.
Data networks and digital wireless technologies such as radio and infrared are emerging and replacing wireline networks. Voice is being subsumed by data. Networking technologies are undergoing rapid change and broadband multimedia, for the first time, is becoming a reality. Voice, video/ and data are converging onto single networking infrastructures creating what one vendor has termed `business class Internet'.
The widespread adoption of intranet and extranet technologies are focusing corporate management on optimising resource deployment.
Portable computing devices, such as laptops, PDAs, and mobile telephones are also becoming both more commonplace and more powerful. The integration of these de
vices is enabling new levels of mobility, which in turn facilitates new ways of working for so-called knowledge workers. At the desktop, knowledge management is becoming a central business problem.
Although it may not appear to be the case, IP telephony will play a crucial part in the emergence of these technologies and applications. It represents the first of many paradigm shifts that will be experienced as the communications market evolves. It signifies the convergence of telephony and IT technologies, and represents the emergence of communications infrastructure that supports new applications that further enhance any communications experience. It also represents the convergence of end-points on these networks so that all communications (whether email, fax, video, telephony, or text-based chat) can be conducted through a single device and single networking infrastructure.
III telephony can therefore be viewed as a catalyst for the revolution in corporate communications that is bound to follow once this shift has been established. Once the gates are open, the next generation of applications will come flooding through and, in the process, change the way we understand networking and communication.
Market Evolution
Until 2000, the corporate market for IP telephony solutions in western Europe will be dominated by small-scale earlyadopter implementations of IP telephony But as we move into 2001 and beyond, many organisations will adopt IP telephony technologies and solutions and major growth in this market will occur.
Throughout this year, equipment vendors and service providers operating in this market have been and will continue to define strategies that enable them to capitalise on the opportunities presented. This may include equipment, personnel, market knowledge, and marketing channels. During next year, vendors will be executing these strategies, acquiring the competencies and in some cases companies that they need in order to augment their market proposition. Endusers will have been familiarising themselves with the value-added opportunities that IP telephony presents and preparing to implement them.
During 2001, this technology and market will reach critical mass and subsequently grow. Multinational vendors will undoubtedly capture the high-end of the market, and smaller players will have to focus on the mid-market and verticals in order to survive.
As growth and adoption starts to occur in 2001, new applications will emerge to drive this market. The issues that have stunted growth will have been addressed and the potential of IP telephony understood and realised by enterprises. Rather than the technology push that has been experienced up until this time, the market will demand unique ways of exploiting the new approach and will probably be looking for ways to further enhance investments. Applications will emerge that satisfy these demands.
A further, though nonetheless important, driver for applications development will emerge from increasing user awareness of the phased cost-saving potential of IP telephony (through, for example, network consolidation) as opposed to the `single hit' saving (in the sense of cheap minutes) which was an initial demand driver. It will become a technology that delivers incremental (versus step change) efficiencies and value-add.
The Mobility Factor
Not only will IP telephony technologies provide mobility and access for employees that telecommute through homebased dial-up intranet access, but a new kind of mobility will be enabled as IP telephony emerges. This will be empowered by new communications terminals that combine the freedom of mobile telephony with the functionality of personal information devices and support for H.323. The communications market has already seen mass adoption of mobile telephones. over the past four years, we have also witnessed meteoric growth in the PDA market, with products such as Psion's Series range, and 3Com's PalmPilot. Next generation devices will combine PDA functionality with networking/communications capabilities. The mobile phone and the PDA have become essential tools for mobile employees, allowing them to maintain contact with the office and corporate network while on the move. As these devices converge, and hybrid PDA/mobile handsets are released, IP telephony has a further opportunity to drive user and corporate adoption as fast access is provided and H.323 applications are integrated.
Third generation mobile networks, with their higher speeds, will also have an effect on the future of IP telephony. Meanwhile, recognising the opportunity and latent demand for higher quality (and more importandy higher data rates) services, the majority of cellular operators are looking to deploy other new network technologies in the intervening period - high-speed circuit-switched data (HSCSD) and general packet radio service (GPRS). Although HSCSD offers improved data throughput (up to a theoretical 76 kbps) it retains all the inefficiencies of GSM. These problems are addressed by GPRS, which offers theoretical data speeds up to 164 kbps (although the mass market deployment is likely to offer a maximum of 115 kbps).
This mobile network evolution will directly influence the future of IP telephony and this becomes more apparent when considering the methods through which Internet access and access to the corporate network are established today. Typically this has been accomplished by dial-up or leased line access over fixed-wireline networks, with obvious restrictions on users in terms of both geographical location and a physical connection to the network.
In contrast, the availability of cellular mobile Internet access over global networks that deliver bandwidth significantly greater than that offered today, presents many opportunities:
* remote access: users will be able to gain high-speed access to corporate networks and internal databases remotely, either by direct access or via the Internet;
* groupworking: higher transfer speeds make real-time collaboration on projects and individual files a possibility;
* videoconferencing: a constant 64 kbps is sufficient to allow postage-stamp sized videoconferencing while any speed above around 400 kbps (which UMTS is capable of achieving) should permit full-screen, TV-- quality videoconferencing;
* high-bandwidth 'push': data can be delivered to the access device and stored for review at a convenient time;
* multicasting:packet-based networks are capable of supporting multicast data and are inherently more efficient in achieving this than circuit-switched networks.
With the advent of faster Internet/intranet access, it is likely that IP telephony and more importantly IP applications such as web browsing will be achievable through these devices. What this will clearly illustrate is that IP telephony is principally not about how efficiently voice can be compressed and the cost say ing economics derived from this. Rather, IP telephony is about the convergence of voice and data and the ubiquity of the protocol that is used for its transport.
Next Generation Service Providers
The enterprise market is also attracting a new breed of IP-based provider. Incumbent PTTs and network operators have traditionally serviced a large proportion of this sector (for reasons such as perceived value and stability of buying services from the largest suppliers). However, it appears that a large number of organisations across western Europe will change their network solution provider during the next four years. This churn will be driven by the emergence of network service provider strategies that are more attuned to business, infrastructure, and communication needs - in alignment with a convergent communications policy and the Internet economy.
Cisco, Lucent and Nortel Networks have all announced and made available products that significantly increase the ease with which a service provider can offer advanced services to their customer base. The younger, more dynamic service providers that have emerged over the past five years are more suited to exploiting these technologies, primarily because they do not suffer from oil tanker syndrome. One example is the large US-based ISP, PSINet. In 1998, PSINet launched a voice-over-IP suite of corporate services targeted at meeting the rapidly growing demand for IP telephony solutions in the US. The announcement marked the rollout of new solutions, aimed at providing businesses with PBXs with the ability to use PSINet's IP network for carrier-grade voice services between locations at prices lower than those provided by existing carriers. Many others have made similar announcements since.
In addition, while a number of ISPs in western Europe already offer mobile (GSM) Internet access, in the short- to medium-term, a number of other ISPs will strike agreements with cellular network operators and fuel further consolidation through these applications. These agreements will provide the foundations for future offerings that are likely to include Internet, dial-up remote access, and cellular/mobile virtual private network (VPN) services. In addition, it is almost inevitable that many cellular network operators will establish their own (high-speed) Internet access networks and services groups that enable users and enterprises alike to exploit the advances that are being made in mobile networks and mobile devices.
IP Applications Development
There are already indications as to how IP telephony will be used in the corporate networking and communications environments. Many of these applications, in fact, already reside on PCs, and arguably form one of the most neglected and unused tools. These include Microsoft's NetMeeting, Netscape's Conference and the multitude of other Internet telephones released into the market over the past few years. At present, the corporate market fails to realise the significance of these applications. Invariably, they are in first or second point release, and do not feature the full desktop integration and functionality that they soon will. Nonetheless, when one considers the simple functionality that these applications have today, and how instrumental they have been in the evolution of the IP telephony market to-date, then their part in the future of IP telephony cannot be questioned.
They wield a great influence on infrastructure deployment as they are integrated into desktop applications with communications functionality, such as virtual meetings, document collaboration, telecommuting and distance learning. As networks are designed and implemented to efficiently deliver voice as well as data to endpoints in IP networks, their profile will rise as they become essential components of a corporate communications policy.
During the next four to five years, enterprise desktop computing will evolve such that IP telephony and other emerging technologies will become standard, integral parts of application packages like Microsoft Office and Lotus SmartSuite. Enhanced (or even new) applications will combine current functionality with real-time voice and video communications and technologies such as knowledge management, speech recognition, textto-speech, speech-to-text capabilities etc.
As these applications enter the corporate market, the primary communications models (`real-time' and `store-and-forward') will converge and users are expected to seamlessly interact and switch between both modus operandi. Equally important however, as these applications emerge, so too will value-added ways in using the power of this combined functionality.
As IP telephony emerges, the line that differentiates between real-time and store-and-forward communications will blur (Figure 1). Both modes of communicating will be integrated and accessible through a combination of new devices and user applications. Imagine the ability to send a window of information (with reference to a particular spreadsheet, word document, or database) across a network to a colleague (or even a team of colleagues) requesting comment. A detailed voice message (or perhaps a video recording) could be attached to the message. Any parties involved could be in the same office or geographically distributed around the world and the same result could be achieved.
The Customer Premise Network
Finally, the make-up, or way in which a corporate network is designed and implemented will undergo many changes as IP telephony emerges and other technologies follow. Data networking technology choices will be of critical importance to IS/IT managers, as products that incorporate voice functionality are released into the market and traditional voice platforms evolve into software. The choice of routers and switches will become a pivotal decision in any organisation's strategy, and the procurement of other technologies will be of peripheral importance in comparison.
Central to any equipment vendor's strategy will be equipment pricing and the total cost of ownership of IP telephony equipment. In 1998, the cost of building a LAN telephony system was significantly higher than building separate LAN and PBX infrastructures. At present, Ethernet telephones cost approximately US$ 1,000. High-end digital PBX handsets cost US$ 450. As handsets constitute 40 to 60 per cent of the total cost of a traditional PBX system, the additional cost of building an IP telephony solution with an equal number of Ethernet telephones implies a much higher initial capital outlay.
However, as this marketplace evolves and competition heightens during 2000 and 2001, changes will take place in communications equipment pricing. Figure 2 illustrates how IP/LAN-based telephony equipment is expected to fall in price over the coming years and undercut traditional PBX equipment pricing.
In many instances, it is thought that PBX manufacturers will have difficulty competing with the price points imposed on the market by the vendors of IP/ LAN-based telephony equipment if current LAN pricing models are used for IP telephony. In order to remain competitive, many PBX vendors will dramatically cut equipment prices. Alternatively, PBX manufacturers have the opportunity to distribute equipment at cost (or below in native territories); and pre-empt the falling cost of IP telephony systems.
Taking a sceptical approach, one could say that these technologies, solutions and communications practices are many years from becoming mainstream in the corporate environment. But it is far more feasible that in fact they are just a few short steps away from becoming reality.
This article was taken from the Durlacher report IP Telephony and Enterprise Network Convergence that was published earlier this year For more information please contact: researc@durlacher.com
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[Author Affiliation]
Richard Wendland is a telecoms analyst with Durlacher Research.
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