Print this article | Return to Article | Return to CFO.com
The venerable office telephone finally joins the digital age.
Elaine Appleton Grant, CFO Magazine
October 1, 2007
When it comes to rating the technological progress of office equipment, the telephone probably runs a close second to the stapler. Walk in to almost any place of business and you'll see the same rectangular boxes companies have been using for years. The only change has been a proliferation of blinking lights. If this qualifies as advanced technology, then the inventor of Lite-Brite deserves a Fields Medal.
The truth is, most business telephones don't do a whole lot more than they did decades ago. Private branch exchange (PBX) switches are better, yes, and reliability is much improved. Functionality, though, is little changed. Call forwarding? They had that in 1965.
Now, though, it appears the office telephone is finally undergoing a real transformation. This has less to do with the phone itself and more to do with the network to which it is tethered. Over the past 10 years or so, businesses have spent considerable capital deploying private broadband and local area networks. Initially, most of these setups were intended to speed the transmission of vast amounts of data between computers. But advances in communications technology have made it relatively simple to send digitized voice signals over these data networks.
Such a service, known as Voice over Internet Protocol (VoIP) or, loosely, Internet telephony, has plenty to recommend it. Since voice packets routed over data networks make optimum use of available bandwidth, long-distance calls are generally cheaper than those placed on standard switched circuit lines. VoIP also eliminates the need for a business to operate separate voice and data networks. More important, Internet telephony boasts features that plain old telephone service (POTS) can't match, including the ability to combine different types of formats in a single message. Says Pascal Luck, managing director at venture-capital firm Core Capital Partners: "If someone leaves you a voice mail, you can now forward it as an attachment to an E-mail. You can also combine voice and video."
Some businesses have outsiders handle their VoIP networks. A number of vendors, including Digium, M5 Networks, Bandwidth, Covad Communications, and Broadview Networks, offer various types of hosted IP telephony service. On-premises vendors tend to be more established communications companies such as Cisco, Nortel Networks, Avaya, 3Com, Siemens, and Toshiba.
Whatever the approach, business managers finally seem to be heeding the call of VoIP. So far, call-center operators appear to be the biggest champions of the technology. Initially attracted by the economics, they now see plenty of potential in VoIP's superior capabilities.
Convergys, a Cincinnati-based customer-relationship specialist, began rolling out Internet phone service in its call centers three years ago — mostly to cut costs. But Bob Lyons, senior vice president of global information services at Convergys, is now working on an idea that would allow retail clerks — say, at an electronics store like Best Buy — to answer questions from customers who have dialed a call center. He theorizes that in-store employees have product knowledge that call-center workers can't match. When a call-center employee gets stumped, an agent could simply reroute the call to a retail worker who isn't busy at that moment.
Of course, it would be helpful to know whether the store employee is available. VoIP networks offer a feature called "presence" that alerts the system about a user's whereabouts and availability — much in the same way that instant messaging informs a sender whether a recipient is online. And because virtually all VoIP systems offer options such as "find me/follow me," it's easy to know where an employee is at all times. "It's like home agent [on cell phones]," says Lyons, "but at a much higher level."
Executives at businesses outside the customer-relationship-management sector are also starting to take advantage of running voice over data networks. Musco Lighting, an Oskaloosa, Iowa-based sports stadium lighting company, relies on VoIP to, among other things, improve internal company communications. "Say I'm on the phone and have an urgent call come in at the front desk," says Scott Wilson, network systems manager at Musco. "From its software, the front desk can choose my name and send a text message saying, 'Scott, there's an emergency call on line 1.'"
Unified messaging, as it is called, is just one of the selling points of Internet telephony. Several months ago, a New York–based IT support firm known as Lloyd added VoIP features that allow the company to analyze incoming traffic — something not readily done with POTS. Lloyd owner Adam Eiseman says he can log on to a Website and get statistics on call volume, hold time, and abandoned calls. As a result, he says, Lloyd has changed its staffing setup. What's more, says Eiseman, "we're proactive about reaching out to our clients to tell them the best times to call."
Despite the many pluses, only 15 to 35 percent of U.S. businesses have deployed IP telephony networks, with large companies far more likely to have signed on, usually to augment traditional phone service. Consultants say VoIP may not be a good match for every type of business. Certainly, outfits with little network bandwidth will want to wait to make the move. Further, replacing a traditional switched-circuit PBX system with an Internet protocol system generally requires a sizable upfront investment in switches and software. Other, less obvious costs can creep into the equation as well. Workers trained in managing an old PBX system, for example, rarely have the expertise to work on a VoIP network. Thus, rolling out IP telephony often requires training, hiring, or outsourcing.
Then there's the continuing problem of voice quality. In an IP call, voice data is broken up in packets, routed along different paths, and then reassembled at the other end. When there is network congestion, individual packets don't necessarily arrive at the same time or in the right order. This can result in delays or jitters that make conversation feel stilted. Sometimes, calls over the Internet simply get dropped (usually due to network outages).
Still, research house In-Stat predicts that nearly two-thirds of U.S. businesses will have rolled out VoIP networks by 2011. Why the boom? For starters, many companies last updated their phone systems 5 to 10 years ago. Back then, enterprise VoIP was hardly a mature technology. On the next upgrade cycle, many corporations will take the opportunity to phase out antiquated copper-line networks and expensive PBX switches.
Enterprise VoIP also tends to be more reliable than the consumer version. Typically, larger businesses don't run digital calls across the public Internet, says Steve Hilton, vice president of enterprise research at The Yankee Group. Rather, they route VoIP calls over their own local area networks or virtual private networks. Even when a call goes outside a company's internal network, says Hilton, it's often sent over a leased T1 line.
To immunize delays in service, many businesses employ extra lines — or hire Internet telephony outsourcers that do. The redundancy helps boost availability while reducing network congestion. Says Steven Barnard, chief technology officer at ATI Enterprises, a Texas-based vocational-education company: "If we didn't have [a redundant circuit to the Internet], I wouldn't have a job right now."
In fact, with enough redundant lines — and backup generators — IP telephony becomes almost bullet-proof. This little fact has led some managers to include Internet communications as part of their business-continuity plans. When Hurricane Katrina destroyed the roof on one of ATI's Fort Lauderdale schools, Barnard simply logged on to the portal of his hosted provider and switched the phone to ring at headquarters. "We could still take phone calls as if the school were open," recalls Barnard. "We could still schedule people for future classes. It was a big reason to choose VoIP."
Elaine Appleton Grant writes frequently about business technology.