Project Planning Guide: Stuffing Voices Into Packets

IP telephony is not a magic bullet for everyone-the payback depends on the age of your existing system and how you deploy the new one.

Your business may not be using Internet standards to make calls, but it will—eventually. So far, however, the cost to switch to voice-over-Internet Protocol systems from conventional phone setups often outweighs the savings. Some companies, however, are finding that wide-scale adoption of IP telephony can reap a significant payback.

The expense of replacing every phone, beefing up the data network and providing employee training is hard to recoup just from the savings on your companys phone bill. Analysts say it usually makes the most sense to consider voice-over-IP networks when retiring an older private branch exchange (PBX) phone system.

The University of South Florida, for example, last year installed an Avaya S8700 server to extend its existing Definity G3R PBX phone system over IP networks, a project that only cost around $80,000. "We didnt have to spend a ridiculous amount of money to move to the new technology," says Kate Nidasio, USFs director of telecommunications. The university now provides IP-based voice service to 200 employees at 12 off-campus sites.

Industrial-equipment maker Ingersoll-Rand took a more aggressive tack. The company was paying AT&T $14,000 to $17,000 per month for teleconferencing services at its Huntersville, N.C., facility. It eliminated that expense when it installed Ciscos IP voice system last year and handled its voice conferencing internally, says Damon Cahill, Ingersoll-Rands director of infrastructure strategy.

Ingersoll-Rand also considered upgrading its existing Avaya phone system to support IP telephony. But Cahills group performed a return-on-investment study and realized that a wholesale replacement with Cisco IP telephony equipment made sense—even though Ingersoll-Rand would need to pay Avaya roughly $200,000 to break the lease on its previous voice system. "We ran the numbers and it ended up being cost-effective," Cahill says.

Sometimes a companys phone systems are so ancient that theres no way to gracefully shepherd them into the world of IP telephony.

The U.S. Department of Commerce wasnt looking to save money when it rolled out 4,000 Cisco IP phones at its Washington, D.C., headquarters last year. The department was mainly looking for a way to broadcast emergency announcements, so it needed to replace 134 obsolete telephone systems. "We had no modern phone technology," says Karen Hogan, the departments deputy chief information officer.

Unlike the jittery, unreliable IP phone systems from years past, todays offerings have matured into stable, full-featured products. When St. Michaels Hospital in Toronto IP-enabled its Nortel Networks PBX two years ago, it had problems with poor call quality, according to chief information officer John Wegener. Those issues were fixed in subsequent upgrades, he says: "Now it doesnt make any difference whether I use the analog or IP phone—they both work the same."

But the killer benefit many people expect from IP telephony—being able to skirt long-distance charges—doesnt always materialize, except for companies that place a significant number of calls between their own offices in different areas, analysts say.

One reason: U.S. long-distance rates are so low, its almost a wash to replace legacy telephone service with voice-over-IP, especially when you factor in the cost to upgrade the data network to handle voice, says Ray Cowley, senior vice president for enterprise network services at KeyCorp. "Youve got a perfectly good, reliable voice network thats cost-effective," he says. The Cleveland-based financial services firm has implemented IP telephony at just 3% of its 900 branches.

IP-telephony vendors hope to provide more compelling selling points by linking traditional voice services with Web-based services. For now, though, these applications arent developed enough to turn many customers heads, says Jeffrey Snyder, an analyst at Gartner Inc. "The move to IP telephony is inevitable," he says. "But right now were in a transition phase."

Even organizations that would seem to be excellent candidates for the technology arent taking full advantage of IP telephony. For example, Jenny Craig, which sells weight-loss programs and meals, installed Avayas IP Office phone systems in about 450 locations across the U.S. more than a year ago. But it still hasnt linked them over IP because of concerns that its wide area network may not be able to support quality-of-service levels necessary for voice.

"Were poised to use voice-over-IP, but we will never do something to affect customer service," says Tony Lopes, telecommunications manager at the Carlsbad, Calif., company.


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