VocalData this week announced a new round of venture funding that will be put toward helping the company better meet the needs of carriers using its software to expand their hosted IP telephony rollouts.

VocalData has added $12.5 million to its total of $60 million in funding since being formed back in 1998. The latest funding round, the company's third, was led by Austin Ventures and included others such as Seed Capital Partners and Trinity Ventures.

VocalData sells software that enables carriers to provide their customers with PBX features without the hassle and expense of owning and maintaining their own systems. The product line includes an application server, dubbed VOISS, that supports programs such as conferencing and unified messaging. Also in VocalData's portfolio is proxy firewall technology that ensures IP telephony calls can get through to customers.

The company's software runs on Sun Netra boxes. VocalData actually sold some hardware, including IP phones and gateways, at the start of its life but is phasing out hardware sales.

VocalData is sometimes lumped in with softswitch makers by industry watchers, though the company claims its technology actually complements softswitches. However, company officials acknowledge that their software can serve as an alternative to softswitches in some newer networks when the carrier cannot afford to buy a full-blown softswitch.

Danny Klein, a Yankee Group analyst, says VocalData competes with the likes of Sylantro, Broadsoft, Natural Convergence and VoxPath. "There is an immediate threat by Lucent's iMerge product, but this solution leverages a Class 5 switch and is not ideal for an all-IP environment," he adds.

Yankee Group says VocalData is going after a hosted IP telephony application server market worth about $61 million today and expected to hit $1.5 billion by 2007.

The company plans to use its new funds to expand its sales team, as VocalData evolves from supporting small deals to larger ones. Laurie Shook, the company's director of marketing, says a typical VocalData deal today ranges from $100,000 to $250,000, though can reach up to about $1 million. But she notes that customers have begun moving from IP telephony deployments in one city to rollouts that span double-digit numbers of cities. The company's biggest U.S. customer, ICG, has now rolled out IP Centrex services in 23 cities, she says.