Calling for managed VoIP?

Carriers are talking up their new hosted IP voice services, but at this point most enterprise users are doing more listening than buying.

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Sean Burke didn’t shed any tears after giving the heave-ho earlier this year to a frame relay network that had been carrying phone calls and data transmissions. Burke, network director for advertising and marketing firm InChord Communications in Columbus, Ohio, traded up to an IP-based VPN that now carries IP voice, data and even a little videoconferencing among seven domestic sites and an office in London. Now InChord pays for T-1 access to AT&T’s IP backbone rather than for the MCI frame relay service. What he and other users are moving toward are essentially managed VoIP services.

Burke now pockets roughly $4,000 per month in savings. That’s no small savings, especially when considered along with the greater reliability of the VPN over the frame relay net, Burke says.

“When we move into a new building, we can cut 40% off our wiring costs by dropping only [Category] 5 wire now,” Burke adds. “Not having to pay the telephone company for moves, adds and changes is also great – we can do those in minutes” with the Cisco IP phones.

What’s missing is rich management from the carrier, particularly QoS capabilities for prioritizing bandwidth based on the application, time of day or user status. “End-to-end QoS is really important to us to get from a carrier,” Burke says. It would save him from monitoring traffic levels at seven remote sites before injecting IP voice into the network.

What Burke and other users really crave is a fully managed VoIP service that would take the onus of worry off their shoulders.

With such a service, a carrier provides the premises-based access device – a DSL or cable modem, remote-access router, even a multi-protocol multiplexer – for packetizing voice before it enters the wide area. Carriers also may bundle in IP phone handsets or the software for turning laptops and PCs into voice terminals. And, the managed service provider should offer service-level agreements that guarantee a certain percentage of uptime or minimum thresholds of downtime.

Managed VoIP portfolios, from incumbent carriers and specialty providers, offer support for audioconferencing, videoconferencing, presence, follow-me/find-me and other voice-related applications. Tom Roche, executive director of advanced products and services for the enterprise solutions group at Verizon, even suggests that most customers won’t be able to fully benefit from VoIP without a carrier’s help. “An IP network needs to be constantly managed to be sure it’s at peak performance and efficiency,” he says.

Verizon, like AT&T, plans to launch managed VoIP within the next six months.

But the sales pitch for managed VoIP has a disconcertingly familiar ring of convergence to it. IT managers have heard it before for ISDN, ATM and frame relay. One pipe, one protocol, one network, one management interface, one bill. Mix voice, data and video traffic in ways that can be customized to your requirements. Save gobs of money in the process, and streamline internal support requirements.

Perhaps it’s no surprise, then, that enterprise users aren’t yet showing as much enthusiasm for managed VoIP as you’d think from the carrier buzz. Raw bandwidth is really what many enterprise users want from their carriers, says Robin Gareiss, principal research officer with Nemertes Research. “Only a small percentage of the 55 companies we surveyed say they want a managed service,” she adds, and with the voice business so tough these days, “many carriers are really kind of challenged as to what they should be doing with VoIP.”

A starting point for some has been the small to midsize business (SMB) or branch-office markets. Those are the targets of specialized service providers such as Virtela Communications and CallTower, for example.

The strategy makes sense, as SMBs don’t want to undertake the daunting task of buying, installing and managing a big piece of equipment, says Danny Klein, a senior analyst at The Yankee Group. “Service providers are giving them options to spending, translating it from a capital expenditure to an operational expense. A hosted solution makes it easier to budget,” he says. “It also allows them to grow the telecom infrastructure as their business needs grow. As they add or delete employees, they add or delete lines.”

That rationale made sense to Contract Office Group (COG), a $25 million office furniture dealer in Milpitas, Calif., when phasing out its 15-year-old phone system. “Vendors were telling us it would cost $60,000 for a new system,” recalls Carol Fagan, a manager with the company. “As a small business, we couldn’t afford that kind of cash outlay. Plus then at the end of 10 years, you have an outdated system that can’t be upgraded.”

The furniture dealer contracted with CallTower for consolidated local, long-distance and Internet access. CallTower, partnered with Cisco as part of its Architecture for Voice Video and Integrated Data IP telephony program, ships handsets to COG’s two Bay Area offices as needed. Features such as unified messaging, four-digit dialing between offices and follow-me/find-me are hosted by CallTower, and easy to access, program and use, Fagan says.

With about 45 users, Fagan says she spends an average of $72 per seat, per month, for the managed service. While the fixed-cost aspect is a big plus to her, Fagan also really likes the 40% reduction in monthly telecom charges from the company’s old solution.

Network executives at larger corporations will want to keep their eyes on leading-edge deployments such as the one SBC and Ford Motor announced last week. This will become SBC’s largest ever managed IP telephony deal, the provider says. With it, SBC will design Ford’s VoIP network at 111 sites, install the premises equipment and employ on-site engineers to manage the service.

While managed services aren’t for every company, analysts note that service providers can roll out new services or upgrades more quickly than an IP PBX vendor, and without the associated costs of patching. The companies that will be purchasing hosted IP solutions will have different requirements than those who would purchase an IP PBX, Klein says.

“There are lots of advantages to centralizing applications in the service provider network rather than on-site for SMBs and branch offices of large enterprises,” Klein says. And there will always be room for hybrid solutions. “Many service providers will start to offer both. VoIP will be more of a solutions-sell approach rather than individual point-products from a portfolio.”

Sweeney is a freelance writer in Los Angeles. He can be reached at terry@tsweeney.com .