As the voice-over-Internet-protocol industry matures, demand is surging amid technological advances that are continuing to boost its benefits for businesses.
Known as VoIP, the process uses the same technology that transmits e-mail to transmit voice, allowing users to make phone calls using a broadband Internet connection rather than traditional phone lines. For businesses, the technology often can translate into lower costs per call compared with land-line phone service, as well as the ability to leverage existing data networks.
"It's gaining that point of maturity where in 2005 we expect to see customers really start looking at it very seriously and doing major shifts toward that technology," says Ernest Sandoval, director of product management for business VoIP at Verizon Communications.
In recent years, with improvements in sound quality and connection availability, VoIP has grown to account for roughly 15 percent of the long-distance market, with expectations that it could reach 55 percent by 2009, according to some industry estimates.
About 3 million subscribers are expected to use VoIP technology this year, with the percentage of U.S. businesses using it estimated to have risen from 4 percent in 2003 to 6 percent last year, according to Consuelo Sanchez-Octavio, senior vice-president for DirecTV Latin America.
Last year, the booming interest in VoIP was highlighted in the U.S. Hispanic economy, with Miami-based Latin Node Inc. – a wholesale provider of Internet voice-communications services for major providers such as AT&T and Bell South – ranking No. 1 on the Hispanic Business Fastest-Growing 100® directory with revenues of more than $26 million and a four-year growth rate of 107,993 percent.
Still, for businesses considering a conversion to VoIP, experts urge caution. "Everyone thinks VoIP will save you money, and that's why everyone is asking for it," says Speleos Dravillas, chief business development officer for Chicago-based BTI Communications Group Ltd. "The problem is you actually may be hurting yourself if you don't have the resources to support it."
According to Mr. Dravillas, whose company consults on telephone, video, and data communications, businesses must weigh whether they will need to augment their existing data network to accommodate the increased load added by VoIP.
"Most companies that have remote sites have a data connection there. So there's a motivation to use VoIP because they can use existing infrastructure to run their voice network as well," says Joshua Soliz, director of IT infrastructure for Sunterra Corp., a San Diego timeshare vacation company that is using VoIP. Companies with a large number of users on the same network also could benefit, Mr. Soliz says, allowing VoIP use within an entire building and utilizing advanced features such as company databases with information on incoming callers.
But Mr. Soliz says some of the costs associated with VoIP include routing hardware, provisioning, and ordering data lines and phones that support VoIP. "Typically, the technology is more expensive than a regular analog setup," he says. He advises CEOs and IT directors to perform a return-on-investment analysis to ensure benefits outweigh the costs. "Most companies try to get a six-month ROI before actually implementing something like that," he adds.
Experts say other ROI considerations include: figuring the cost of a backup system, accounting for potential lost productivity during any VoIP system software upgrades, determining whether resources will have to be increased to maintain the new voice/data network, and determining exactly how much VoIP can help contain costs and increase productivity.
In addition, says Norbert Kubilus of Tatum CIO Partners, a national professional-services leasing firm, companies need to consider set-up requirements: "If you have a full-time data communications technician or specialist on staff, you can do it yourself. If you don't, you'll have to bring in a contractor or a consultant or service provider to do it for you."
Still, Mr. Dravillas and Mr. Sandoval say businesses should offset the potential costs with the potential value offered by advanced VoIP applications including audio and video monitoring, recording, and conferencing.
"Test out the service and if you're convinced you want to go with VoIP, then come up with some sort of pilot program for it that only involves a little bit of an investment," Mr. Soliz advises. "If that works, then you can go with a full-blown implementation."
Options for VoIP
A simple way to try VoIP is to subscribe to a service that uses standard phone lines
rather than requiring new data network equipment. Many offer a variety of calling options including call waiting, caller ID, and voice mail. Typically, they supply a telephone adapter with Ethernet ports to connect to a business's DSL or cable Internet connection.
Offers CallVantage that includes a small business plan for $49.99 a month with unlimited local and long-distance faxing and calling in the United States and to Canada for the first line and 500 long-distance minutes
for a second line.
Supports a retail division that offers services ranging from long distance to broadband telephony for residential and corporate end users. In the United States, the company is partnering with CrossFone.
Offers VoiceWing, allowing unlimited local and long-distance U.S. calls (including Puerto Rico). Prices range from $29.95 a month for Verizon subscribers to $34.95 for VoiceWing-only customers.
Offers unlimited calls to anywhere in the United States for $49.99 a month, or as many as 1,500 minutes for $39.99.
Offers Packet8 that includes a comprehensive business plan with unlimited calls in the United States and Canada for $39.95 a month.
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