Businesses adopt technologies that accomplish their goals, increase productivity and provide a competitive advantage. Voice over Internet Protocol (VoIP) is one such key communications technology that is constantly in the news for the increased momentum and adoption by both consumers and businesses alike. The recent announcement of eBay to acquire Skype in a $2.6 billion deal indicates that eBay is betting on VoIP to enable business transformation and meet its customer requirements. Globalization and virtualization of businesses have helped accelerate the deployment and adoption of VoIP by businesses. Large enterprises as well as small and medium businesses (SMBs) are realizing the benefits of moving to an IP-based telephony model and rapidly adopting VoIP. A brief history of VoIP

VoIP made its debut over a decade ago. Vocaltec launched its Internet phone, which was designed for home computers, and used compressed voice signals and transmitted over the internet to receiving system. There were hardware and software requirements and dependencies for the call to work. The voice quality was not comparable to a traditional circuit-switched PBX based call.

Following the launch of the Internet phone, numerous companies dived into the foray and provided IP phone calls for free or a for minimal charge. Even then VoIP traffic represented an insignificant percentage of the total voice traffic. Initially the model was from PC to PC, evolving to PC to phone and later to phone-to-phone connections. In North America, the “free” phone call provided some viral marketing air cover for VoIP. Advertisers used this trend toward VoIP to provide “free” connections as long as the callers went through ad content at the front and back end of the call. This viral marketing was one of the key reasons VoIP was getting so much more promotion than some other technologies. But at this stage, the adoption was primarily by technology enthusiasts. In the late 1990s, equipment manufacturers used VoIP as a trunking technology to connect remote switches--this lowered businesses’ costs by routing long-distance traffic over a company’s wide area network (WAN) rather than paying per-minute long-distance charges during peak traffic times.

Gradually, the ability to switch between IP and circuit-based traffic, depending on customer usage model, would drive the rapid adoption of VoIP in the mainstream market. By early 2000s in the U.S., more and more international callers were turning to VoIP as the less expensive option. Since then, businesses have realized the opportunity to use VoIP for their global communications needs and are deploying VoIP in an effort to reduce costs and provide flexibility to their workforce.

VoIP vs. circuit-switched

Businesses, until recently, had deployed PBX phone lines that rely on circuit switching. At the simplest level, a switch is open during a call between two numbers, which allows two parties to speak, and the call is disconnected when one of the parties hangs up and thus the switch closes. In this model the call allows only voice traffic and the capacity of the connection is not being optimized since voice traffic is not constant due to conversational lulls. Businesses were also paying high long-distance charges.

Businesses then moved to distributed switches. These deployments were promoted for the need to support decentralized offices and mobile work force. Distributed switches replace a central switch with multiple switches that are interconnected. While providing flexibility to businesses and advances over silo-circuit switched networks, this implementation still had its drawbacks of sub-optimized connection and expensive long distance charges.

VoIP began to gather momentum as business realized the benefits of using it to interconnect physically distant switches and then started realizing the lower cost benefits of routing interoffice long-distance traffic over a company WAN. VoIP relies on packet switching, similar to the way that e-mails are sent over the Web. The technology breaks down a voice call into smaller-size information packets. This allows the excess line capacity to be used to carry other data. When the voice data arrives at its destination, it's reassembled into a voice call. Analysts are upbeat about the opportunity of VoIP based on the consumer adoption and the promise for businesses. According to an Infonetics Research report, 40% of customers with broadband Net connections will buy voice service by 2008.

Key drivers for VoIP adoption by businesses

Lower costs: VoIP allows businesses to use a single network to carry voice and data. There are inherent cost savings in the approach, especially in cases where users have underutilized network capacity. Most consumers view VoIP as “free,” though technically the cost of the Internet access is the “cost” to the consumers. For businesses whose needs are more complex (call waiting, call forwarding, voice mail, audio conferencing, video conferencing, call attendant, etc.) VoIP still proves to be a less expensive alternative to traditional phone networks, especially in businesses whose large percentage of traffic is long-distance.

Growth of global communication traffic: Whether it be voice, data or video, communications traffic on networks is growing at a remarkable rate. The convergence of data, voice and video traffic offers a unique opportunity for businesses to deploy VoIP in an effort to streamline their operations and realize efficiencies.

Increased functionality: VoIP enables a new usage model which has been extremely expensive or difficult to deploy in traditional phone networks. For example, in a business environment, incoming phone calls can be automatically routed to an employee’s VoIP phone wherever the employee plugs it into the network. It also enables the new mobile workforce, as discussed below. In addition, with the growth of distributed business model with call centers, agents using VoIP phones can easily work from anywhere with a good Internet connection.

Service providers can offer flexible options to suit business needs: The telecom downturn of the early 2000s resulted in increased competition for the service providers, reduced margins and continual management of operating costs. With the rapid adoption of VoIP by businesses, it was clear that the service providers had to adapt their offerings to retain customers and get new customers. Based on the customer needs, service providers today offer hosted VoIP, managed VoIP (for CPEs/VPNs) or just pure VoIP access. The differences and key benefits of these options are discussed in detail later in the article.

Bundling of services for one stop shop: Service providers have also started bundling other IP services such as call pick up, caller ID, number portability, number redirection, conferencing, directory assistance and other services based on customer needs.

Increasing mobile workforce: Today’s workforce is increasingly mobile. Mobile users want the convenience of all the communications tools they use at the office at any place they choose to, or need to, work. They want an intuitive way to communicate easily on the device of their choice, anywhere they work, and stay connected through one phone number and one message mailbox. Before the convergence of IP telephony and wireless communications, this concept was just a pipe dream. The expense of enterprise enabling workers made it impractical to extend communication features beyond a wireline radius of the PBX and impossible to extend them across the PSTN.

Globalization and virtualization of businesses: Today, more and more businesses are working across the globe – either by having part of their work force in a different region in the world, or through a network of international vendors and global customer base. This has accelerated the adoption of technology solutions in businesses. VoIP offers the opportunity to connect businesses through an already deployed network i.e. the Internet. Ease of collaboration, integration, and interactivity between employees and applications few of the benefits businesses can garner from VoIP.

Complimentary technologies: Some of the key market drivers are an influx of complimentary technologies that are affecting the adoption of VoIP in businesses:

• Broadband: Widespread availability of broadband and usage has enabled more business to connect. More businesses not just connecting to the Internet but also selling to their customers via the Internet. VoIP allows them to take advantage of their available bandwidth and use it for voice traffic.
• Wireless technologies: Numerous wireless technologies such as WiMAX, Wi-Fi are changing the business and consumer expectations on always-connected experiences. VoIP offers an application that takes advantage of employees always connected experience (whether it be using T-1, broadband or Wi-Fi hot spots) and extends it to further communications both by businesses and consumers.
• Telephony services: With service providers constantly seeking compelling new services to generate new revenue, numerous telephony services are being bundled with VoIP. Unified messaging (i.e., ability to make/retrieve calls from a single device), call forwarding, collaboration and conferencing, SMS, call redirection, and custom programmed responses are all services that lend themselves to VoIP deployment.
• Multimedia: New multimedia enable applications are becoming a standard part of business usage. This demands communications not just be voice but integrated with data, video/multimedia. VoIP offers an integrated solution for communication by enabling voice, data and video communication.
• Powerful computers: Powerful new computers--desktop, clients, servers, PDAs allow businesses to use VoIP through any device without significant impact in quality.

VoIP options for business

Service providers are increasingly offering numerous VoIP options to businesses that do not want to use end-to-end VoIP or make the investments themselves. Some of the options are:

• Hosted VoIP
• Managed VoIP for CPE and VPNs
• Pure VoIP access

Pure VoIP access: Service providers now offer this as part of business-standard package VoIP services. From a business’s perspective, this implies access to Internet services, regular phone services, plus the ability to use VoIP through the same loop (whether it be T-1 for large businesses or broadband for small and medium businesses). The customer owns the PBX system and service providers offer VoIP and other services. This is a good option for customers who are not sure about the benefits to moving to an all-IP network; it provides them an opportunity to evaluate their employee response and adoption to VoIP, base their future investments on this evaluation. Most service providers also bundle key services as part of the VoIP package thus providing additional revenue streams.

Hosted VoIP: Numerous businesses moving to VoIP do not want to make the investment until they know they will get business benefits out of their VoIP network. Service providers in this situation offer delivery of VoIP through hosting the application server and softswitch in their premises. Off-premises switches minimize the business risk, initial investigation, and investment needed to pick VoIP hardware. Key advantages to businesses are the ability to pick a service provider of choice and the ability to realize the benefits of VoIP without the expense of hardware costs (switches, power backups and others) and without the need to train or recruit VoIP-savvy maintenance staff. In addition, the bundling of services mentioned above acts as an additional incentive for businesses to outsource their VoIP. Most SMBs see hosted solution as an ideal choice because it provides them flexibility of scaling to meet their growth needs. To service providers, hosted IP offers them a way to generate revenue, and stem losses and retain some of their traditional customers wanting VoIP. Market research firms are projecting that VoIP adoption is fastest among U.S. businesses that are moving to a hosted IP model. IDC projects a CAGR of 282% in this market by 2008 for a total of $7.6 billion.

Managed VoIP (CPE/VPN): In a fully managed VoIP offering, a carrier provides the customer premises equipment--a DSL or cable modem, remote access router and even a multiprotocol multiplexer--for packetizing voice before it enters the wide area. Carriers would include service-level agreements that factor in the quality of service (QoS) and support. Managed VoIP portfolios from service providers, offer a slew of services (i.e., audio conferencing, video conferencing, call redirection and other voice-related applications). Similar to hosted IP, managed IP provides good option for businesses that want to evaluate their investment in VoIP and do not want to have dedicated support staff for VoIP services. Today major carriers/service providers offer this option to businesses.

Businesses need to evaluate their choice of VoIP options based on security, interoperability of equipment, price, carrier/service provider services, availability and geographical coverage to branch offices or satellite offices, customer support, projected savings, QoS expectations and their willingness to invest.

Kirti Devi is technical marketing manager in Intel's Communication Infrastructure Group.

Visit Intel online.