Trend Overview
Recent Yankee Group research has shown that a large percentage of enterprises haven't leveraged voice equipment to improve operational efficiency. Most large enterprises have a network made up of PBXs [Private Branch Exchange] at a few of their main offices and key systems scattered throughout the rest of the organization. In most cases, the systems don't network. This results in higher costs for system administration and intra-office phone calls. Several Fortune 500 companies were among those we recently interviewed. They all had voice networks made up of disparate systems that don't work together.
Many enterprises have a configuration of phone systems that don't network for the following reasons: Due to mergers and acquisitions, these companies acquired phone systems from different vendors that didn't integrate with their existing systems. Circuit-switched PBXs have deliberately been built to not network with other vendors' systems. This encouraged buyers to go to their existing vendor when they added a new office. Generally, vendors haven't adopted networking protocols such as QSIG that allow for networking of multivendor systems. Many companies have separate buying groups with their own agendas. Therefore, they don't have a coordinated strategy to set up a network of voice systems that integrate with one another.
A Yankee Group study in 2000 found that 28 percent of the US$19.5 billion revenues collected by vendors and resellers of voice equipment were generated by adds, moves and changes. One major reason why enterprises are paying so much for service calls is that their voice network isn't managed from a central location.
Trend Impact
Corporate America is in a major campaign to lower expenses. Consequently, some enterprises will ensure that their voice networks can be centrally managed and can allow for low-cost intra-office calling. IP telephony is the long-range answer to lowering service and intra-office toll charges. Spending on phone systems will now shift toward IP telephony, replacing money spent on traditional circuit-switched PBXs. IP telephony lets enterprises manage all offices over the corporate WAN from a central location. Using the WAN to connect offices also eliminates usage charges for intra-office calling.
Those vendors that are the most diligent about developing and selling IP telephony solutions will be the immediate beneficiaries of the enterprises' push to lower telecommunications costs. These vendors include 3Com, Mitel, Vertical Networks, Alcatel and Cisco. Nortel, Siemens and Avaya - three vendors with large market share - should also benefit from the migration to IP telephony. Of the latter group, Avaya, the U.S. market share leader for phone systems, has recently emerged as a force in the IP telephony market. It was second in IP telephony line shipments in the United States for the third quarter. Because of the strong leadership of CEO Don Peterson and the company's shift in strategic focus, we predict that Avaya will emerge as a fierce competitor to Cisco in the IP telephony market.
The migration to IP telephony is the long-range answer to the demand for phone systems that can be affordably networked. Because enterprises will never swap existing PBXs with new IP PBXs all at once, it will be necessary to manage multiple systems from different vendors in the near term. Telecom management software vendors and systems integrators will benefit from this trend.
Bottom Line
Vendor Recommendations System management and intra-office calling costs should be the two prime areas of concentration for sales. Relying strictly on side-by-side comparisons of system hardware will no longer win deals for sales staff. Salespeople must also understand the best procedures for delivering high-quality voice over the LAN and WAN. An IP telephony system that enables full-feature transparency across a network of voice systems should be the major differentiator. Current IP telephony systems, to varying degrees, allow feature transparency across the network. Features like caller ID are not transferable from system to system with some IP telephony systems. Vendors should make the software code for their traditional PBXs available to telecom management software vendors. Some vendors have not been cooperative about offering code to third-party software vendors. This is not a good policy, as enterprises will become disenchanted and eventually move away from third-party vendors anyway. So why create a bad image for your company?
Enterprise Recommendations IT and telecom managers must spend the time to fully understand the costs of managing and maintaining a network of phone systems. Our research has shown that many enterprise decision-makers know the initial costs for their equipment as well as the monthly maintenance costs. But they do not, in many cases, have a handle on the ongoing costs for adds, moves and changes or an understanding of the costs associated with intra-office communications. Enterprises must develop a strategy to administer the voice and data networks from one location. Having employees at remote offices spending time dealing with phone issues is a waste of human resources. Also, people at branch offices don't deal with phone issues on a regular basis; they usually don't understand how to make changes to the system on their own. This leads to integrators making costly site visits. Enterprises must involve service providers in discussions with equipment vendors when making plans to network systems. Because setting up the WAN to deliver voice quality is so difficult, it's crucial that the service provider and equipment vendor work well together during the installation process.