Host of opportunities

As convergence and IP telephony build momentum, the question is no longer whether or not the enterprise should opt for it — for greenfield sites and companies with an exhausted PBX it is a no-brainer. The real questions are what form IP telephony should take and how the enterprise should manage it.

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By  Simon Duddy Published  April 24, 2005

IP telephony is here. For companies moving to new premises or upgrading their telephony systems, an IP-based system is almost a must. The IP platform has the edge in terms of innovation, with the vast majority of telephony vendor research and development spend going into IP telephony rather than time division multiplexing (TDM). While TDM will be around for many years to come, it is no longer first choice for new deals. Infonetics Research in its Enterprise Telephony quarterly worldwide market share and forecast report observes that TDM accounted for 34% of PBX sales in 2004 and predicts this figure will shrink to 10% in 2008. The balance will be made up by pure and hybrid IP telephony solutions. Closer to home, there is further proof that TDM is ailing. In January 2005, UAE telco Etisalat stopped selling traditional PBXs to its customers to concentrate on IP. Although companies can buy TDM from other sources, with many looking to Etisalat due to its wide range of services, this move will further encourage firms to opt for IP telephony. With IP telephony on the up, the dilemma for the enterprise now centres on what form to use, with the most fundamental issue whether the service should be inside or outside the enterprise. Most enterprises in the Middle East have their own PBX (whether traditional or IP), although hosted and managed options are increasingly available. In a hosted solution, service providers use an IP telephony server that is logically divided between different customers. For premises-based installations, the enterprise installs and utilises its own IP telephony server, although in the managed scenario, a service provider will install the solution in the enterprise and manage it remotely. According to many analysts the market for hosted voice over internet protocol (VoIP) services is set to boom in the next five years. IDC predicts that the hosted enterprise VoIP market in the USA will grow from US$60 million in revenues in 2004 to US$7.6 billion in 2008, with a compound annual growth rate (CAGR) of 282%. The main drivers of this uptake are predicted to be cost, scalability, the ability to upgrade hardware and software painlessly and lack of management headache. Thus, while IDC sees the enterprise as a big potential market for hosted IP telephony services, arguably the small business and isolated enterprise branch office are the most natural fits initially. Of the main advantages of hosted IP telephony services, cost is the most significant, as it will enable companies to make use of IP technologies by paying monthly fees rather than making hefty capital investments. It also allows smaller companies to gain access to services that have previously been the preserve of larger corporations. This opens up opportunities in contact centre operations for example, with the possibility that enterprises can lease a contact centre service rather than build and manage a contact centre of its own. “The key advantage is the lack of investment needed, the service can be purchased for a fixed cost, plus you don’t need staff or to maintain equipment,” says Jan Hof, director of marketing at Extreme Networks EMEA. “We reckon enterprises can achieve 20-40% cost savings by using hosted IP voice services rather than premises-based,” he adds. The success of hosted IP telephony services rests on the ability of service providers to roll out the services with attractive pricing and there are signs that this will happen. “We are seeing innovative pricing being introduced by service providers [in other regions],” says Ramin Attari, vice president for Nortel Middle East. “For example, some are offering free calls between the enterprises that are connected to a particular service provider’s hosted solution,” he explains. Equally, a key factor influencing the speed of managed IP telephony service adoption will be service provider pricing. The enterprise will look for a single, easily understandable price rather than complex, per-component pricing. In addition, carriers should be able to get discounts from equipment vendors and should pass these savings on to customers. The managed approach has seen some traction in the region, with one example being Qatari telco Qtel managing a Cisco-based IP telephony system it installed at the premises of Qatar Petroleum. This service suits customers with next-generation voice requirements who either lack staff expertise in IP voice or prefer not to use their staff for the maintenance of the technology. Behind cost, scalability is the key attraction for enterprises opting for outsourced IP telephony. An outsourced service allows the enterprise to quickly and painlessly up or down scale according to need. This could help enterprises adapt to volatile economic circumstances, while maintaining an appropriate level of service. This is well illustrated by Omani call centre operator Infoline. The company is a joint venture between Bahwan CyberTek, Omantel and Oman’s Public Establishment for Industrial Estate. Infoline rents the technology as a service from Omantel, allowing it to concentrate on running its business while the service provider applies its expertise to the technology. This flexible approach allows Infoline to quickly scale its service up and down according to customer need. “Infoline utilises a hosted IP telephony service leased from Omantel, which allows us to quickly roll out services to Gulf Air and other customers according to demand,” says S Durgaprasad, the chief executive of Bahwan CyberTek. Furthermore, as management of the service takes place in the service provider’s data centre, it allows the enterprise to focus valuable IT resources on other projects. A hosted service also removes the burden for quality of service, as this will be taken care of through a service level agreement (SLA) with the service provider. However, while this will be a relief to many companies to others it will represent an unacceptable abdication of responsibility. Many enterprises in the Middle East would feel more secure knowing that its telephony system was firmly under its control. Hosted providers have got a long way to go to prove to enterprises they can be trusted to provide a high level of reliability. “Before the arrival of IP networks in the region, companies such as Nortel and operators such as Turk Telecom tried to introduce Centrex services over TDM,” says Ahmed Bouna, account director for NetCentrex Middle East and Africa. “But the technologies had difficulty providing a high enough quality of service and there was little sales push, so companies turned instead to PBX deployments for their telephony needs,” he adds. Having a premises-based IP telephony system also confers many advantages to the enterprise, and often works out more cost effective. In addition, many enterprises see advanced IP telephony features, as well as cost, as a key reason for going IP. Features such as routing calls to an employee’s office or mobile phone, internal dialing for employees no matter where they are in the building or the world and the easy set up of conference calls, which are all possible on premises-based systems, may be not be available on a hosted service. “Hosted solutions tend to offer basic services that won’t really be tailored to the customer’s business,” says Nidal Abou-Ltaif, managing director of Avaya in the Middle East and North Africa. “So the customer will not have the same ability [as in premises-based solutions] to run applications over IP telephony, for example, unless the service provider offers it,” he adds. That said, if the service provider invests in the correct technology, a hosted solution can provide the same features as a premises-based systems. “If an employee decides to work from home one day usually this means leaving a message routing callers to an employee’s mobile phone,” says Attari. “Now employees can connect their laptop to a DSL connection, launch a soft client which establishes connection to the hosted IP telephony service and make and receive calls as if they were sitting in the office,” he adds. Before choosing between hosted and premises-based IP telephony solutions, the enterprise must look carefully at capabilities. If a company has made a significant investment in infrastructure and staff, it might be better to go with in-house. “You need to establish a baseline and understand service level requirements and also remember that you can’t isolate IP telephony,” says Erkan Gulec, general manager at Mawahib Business Developments, which is half owner of IT-Serve Abu Dhabi, which is the country distributor for the Interactive Intelligence IP telephony software brand. “There are grey areas with CRM and contact centre functions and you have to decide what is core and what is not, what you outsource and what you keep in-house as well as ensure smooth interaction between both elements,” he explains. Gulf Air has dealt with this issue, with the airline deploying CRM systems at its headquarters in Bahrain and operating a call centre through Infoline in Oman. This means that linkage between the two has to be strong so both systems can derive maximum benefits. “Although the two departments are in different countires, there is great communication between them,” says Mohammed Sarwar Rabbani, project manager of IT infrastructure at Gulf Air. “We can, for instance, utilise customer calls for CRM functions. It comes down to having strong connectivity and sound work processes,” he adds. While enterprises will have to choose between premises or hosted telephony, the two systems can dovetail well in another sense. It could be argued that hosted services will allow premises IP telephony to reach its full potential by allowing IP telephony calls from one enterprise to another. At the moment IP telephony calls in most Middle East countries are limited to the enterprise itself and must connect to the PSTN network for outside calls. The battle lines in IP telephony are just being drawn between premises and hosted solutions, with premises having the upper hand in the Middle East. However, according to some sources, the hosted model is already making inroads. “In the Middle East, demand for hosted VoIP solutions definitely trended upwards in 2004,” says Wael Fakharany, regional manager, 3Com Middle East. “The region’s smaller companies were the first to move heavily into the area, and they’re now being followed by larger companies, government organisations and residential and commercial developments,” he adds. Attari also says that he has seen interest in hosted solutions, with telcos in the region starting request for quotation (RFQ) processes for products that will allow them to offer hosted IP services. Other commentators, however, are emphasising that while the technology and demand is there, the telco providers are not yet ready or willing to offer hosted services. “Uptake is just beginning for hosted IP telephony services as there isn’t the level of readiness among telcos to offer IP telephony widely,” says Ghazi Atallah, general manager at Cisco Middle East. “But we have seen some good examples such as Dubai Internet City (DIC), which has centrally hosted Cisco CallManager systems providing extensions, voice mail and call centre services for small businesses,” he adds. Telecom providers have traditionally built their infrastructure around non-IP systems and must make a transition to IP networks to offer IP telephony services. While it will take time to install this technology, a bigger stumbling block is the monopolistic telecommunications environment in many Middle East countries. When there is no competition, there is no incentive for telcos to take the initiative in offering hosted services. However, as countries deregulate, hosted services could be a key differentiator for new operators. Also as the telco markets open up bandwidth will become commoditised. If a telco stays simply a bandwidth provider, it will see its revenues and profitability fall. Therefore, deregulation should push telcos to engage customers with value added services such as hosted IP telephony. As one of the first countries in the region to deregulate its telecommunications, Bahrain is a good place to get a glimpse of the future. In the Kingdom, LightSpeed Communications has set up as the second operator in Bahrain licensed to provide internet services and the company sees hosted IP telephony as an important way to differentiate itself from incumbent operator Batelco. “The Telecommunications Regulatory Authority (TRA) in Bahrain has made it clear that operators are free to use any technology they wish as a means of carrying voice calls, as long as they hold the relevant license,” says Shaikh Abdulla Khalid Al-Khalifa, managing director of LightSpeed Communications. This move paves the way for using IP to carry voice traffic, even internationally, if the provider has the relevant license. For the enterprise in Bahrain, this means being able to extend its IP telephony system from serving the enterprise internally to being able to carry calls throughout Bahrain. “As a voice call leaves the IP network and goes on the traditional PSTN voice circuit network customers are billed at normal rates,” says Al-Khalifa “This defeats the purpose of IP telephony. There is an abundance of broadband capacity so customers should take advantage of the potential cost-savings associated with the technology,” he adds. As telcos increase the sophistication of their networks, the situation should get even more interesting for the enterprise. Once a service provider has a unified IP network, it should be possible to use IP telephony to extend calls to the mobile worker. “The convergence of IP telephony and mobility has the potential to transform enterprise communication, business processes, workforce productivity and IT architecture. Exploiting this potential will be the key for driving growth in IP telephony in general and hosted IP voice in particular,” says Khaled Rifai, director of business development, at Lucent Technologies, MEA. The potential of IP telephony is only beginning to be tapped and is likely to add features and productivity to the enterprise, however the question of which type of IP telephony to opt for is a key issue for the enterprise and one that is not easily resolved. Enterprises need to carefully examine their requirements when considering their IP telephony options, particularly in terms of factors such as their need for highly, customised applications, as well as the strengths and best deployment of their staff, and the effectiveness of current communications assets. While premises-based IP telephony is arguably the safest option for the enterprises at the moment, the cost and flexibility benefits that come from hosted and managed solutions cannot be ignored. As these solutions become established and providers hone their offerings, the case for taking telephony outside is likely to become more compelling. It would not be surprising to see considerable growth in IP telephony services in the Middle East in the years to come, especially considering that the region has so many greenfield sites. “With deregulation in Bahrain, we anticipate the IP voice services market growing dramatically. Within five years, we will be surprised if most of the voice calls transmitted within Bahrain do not go through the IP network,” says Al-Khalifa.

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