Loud and Clear

The sales message for voice over IP solutions is getting stronger and vendors and integrators are gearing up for growth

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By  Andy Tillett Published  February 28, 2006

Investment in overdrive |~|Tawil200.gif|~|Roger El-Tawil, channel and marketing director MENA at Avaya.|~|The traditional telecommunications sector is in a state of flux as vendors promote the benefits of using voice over internet protocol (VoIP) over traditional PBX systems. In the Middle East the infrastructure lends itself to migration much better than more developed regions and is also one of the fastest growing areas for the deployment of single converged networks in new buildings. These factors give the region great strategic significance in the battle between the IT networking and telecom sectors. This is a competition that vendors in the VoIP space are confident they are winning, backed up by their investment in their channels in this region. Vendors have been going into overdrive during 2005 with their investment in VoIP, with companies such as Avaya, Cisco, Mitel and 3Com establishing or developing partner programmes and appointing specialised partners in country in the VoIP arena. The region’s number of legacy systems is much lower than in areas such as Western Europe, where enterprises have invested billions in their telecoms infrastructure, and in the Middle East it is more viable for companies to implement a ‘rip and replace’ tactic. Also the level of greenfield development in ‘smart buildings’, housing estates, offices and tower blocks is some of the highest in the world, with many of these developments putting single network infrastructures for voice, video communication and internet access in place. “In 2005 we started to sell more IP telephony than traditional telephone systems, so the adoption of IP is becoming a reality. The Middle East and North Africa (MENA) is growing faster than some of the more mature markets in Europe,” says Roger El-Tawil, channel and marketing director MENA at Avaya. Other vendors are reporting a sharp rise in VoIP takeup. For example, Cisco says it is replacing 12,000 PBX phones with IP phones a day worldwide, compared with 8,000 this time last year. Mitel too says that 90% of the products it ships to the region are now IP telephones. The advantages to an enterprise organisation of VoIP are clear. From reduced cabling requirements through to the maintenance of the network and the manpower needed to administer it. The largest advantage, according to vendors, is that VoIP is a better quality service than PBX systems and becomes cost effective very quickly. While these advantages are clear for enterprises, takeup in the SMB space has so far been slower, as the benefits are less pronounced. “Ten years ago, when we started with VoIP, the whole industry thought that this technology was ideal for the SMB. We thought small businesses were more dynamic and flexible and in a better position to implement VoIP, but enterprises were the first ones to realise the opportunity and potential,” says Hisham Amili, general manger GCC at Mitel Networks.||**||Rules and regulations|~|Amili200.gif|~|Hisham Amili, general manger GCC at Mitel Networks|~|Despite vendors driving efforts to promote VoIP to both the channel and end users, it is a difficult market for integrators and providers to work in because of regulations in the market. The infrastructure of the Middle East is itself still developing, and though it is established in all of the countries of the region, many markets are still monopolistic and controlled by the government, the exceptions being Bahrain and Jordan. VoIP service providers are seen as direct competition to government interests and many have taken measures to regulate the application and use of VoIP technology. In most areas this means that VoIP is only allowed to be used over a local area network (LAN). Confusion reigns and many industry sources claim these rules are not very clearly set out. “There is no written regulation on VoIP, it is up to the service providers, so it makes things difficult. There are no specific rules from an application point of view. In the UAE the provider says you can use VoIP over a LAN but that is all, in Saudi Arabia there is no specific demarcation and in Bahrain the operator does not mind VoIP, but it needs clarifying,” says Amili at Mitel. This confusion makes it very difficult for the channel to work with VoIP, and Those with the skills ready to provide VoIP systems find themselves increasingly frustrated. “We started the company one year ago, and to begin with they rejected our application for a trade licence in the UAE just because we have VoIP in our title,” says Reza Mamati, managing director at UAE based VoIP solution provider VoIP Monster. “Our work is all presently in Bahrain, Kuwait and Iran. All solutions providers face the same issues, nobody knows what they can do and what they cannot do. This is holding back our investment in the market. Every solutions provider is ending up dealing, rather than providing the services that they are trained for.” This is a factor that can seriously hold the channel back. If partners cannot see the immediate return on their investment in skills, they are less likely to put effort into gaining them. This uncertainty is not helped by the hesitation from end users, who are put off investing in VoIP by the present regulatory environment. “Onspirix has been here eight months and there has been interest, but people are hesitating. The IT managers are not prepared to make the investment, and there was a scare story about the authorities removing some VoIP equipment at one company. They are not sure enough to make a solid investment,” says Philipp Waechter, UAE branch manger at Swiss distributor Onspirx, offering solutions from Egypti. SMBs are the businesses that need the competitive advantage VoIP offers the most. In cases where it is cost effective to implement a VoIP system over a LAN, the advantage is that the system is ‘future proof’ and when it becomes legal to use VoIP over a wide area network (WAN), it is only a case of flicking a switch to enable it. ||**||Enhancing profitability |~|Reza200.gif|~|Reza Mamati, managing director at UAE based VoIP solution provider VoIP Monster|~|Once the difficulty of making a sale is overcome, VoIP becomes very profitable. Maintenance and services provide great opportunities due to the mission critical importance of handling voice traffic. “The beauty of VoIP is it’s a relatively low cost investment to install, but for partners it is all about value added services — in terms of the architecture of the network and the applications you can run on it. Once you have one application, the customers are always requesting more, and this is a service opportunity for each reseller, and companies are likely to stick with the provider they know,” says David Allen, head of marketing and business development EMEA at 3Com. Once a country adopts a timetable for deregulation it gives a definite date that integrators and resellers can prepare for and skill up in advance. Companies that are prepared for a market opening will hold the competitive advantage over those that try to jump on the bandwagon. Distributor and integrator Netcomms cut its teeth in VoIP through an operation in the USA before setting up in Jordan. “Nobody else we know distributing in Jordan has the experience and skills as us, so we have a head start. Distributing and reselling VoIP products requires expertise. We see resellers or distributors signing up products but not able to support them on a service level,” says Rami Sweis, general manager at Netcomms Jordan. The best thing for potential partners is that vendors are actively investing in skilling the channel up right now. Avaya has widened its channel partner base dramatically since 2005, claiming that its partner training conferences have doubled in size. These events are now held twice a year. “We are still growing and investing in our channel, and bringing training into the region. There is room for growth; I think the economy is growing at such a speed that we need to keep recruiting. Infrastructure is growing faster than our partners are able to deliver,” says Tawil at Avaya.||**||Skill up or ship out|~|Waechter200.gif|~|Philipp Waechter, UAE branch manger at Onspirx|~|Dedicated home and SMB networking vendor Linksys paints the same picture. “We are building our value added reseller channel and expect to have up to 500 trained resellers in the Middle East,” says Mohammed Meraj Hoda, regional manager MEA at Linksys. As VoIP pushes the voice and data channels together, partners can potentially come from two different backgrounds, telecoms or IT networking. Vendors say they are ideally looking for partners who have experience in both sectors, but admit new recruits are more likely to come from IT networking backgrounds. “We do not have any partners solely from a telecoms background. Through our SMB initiative in the last two quarters, five companies have specialised to be VoIP Cisco partners from scratch. It takes one quarter for partners to get into and the next quarter they are picking up orders. If you are asking me if we are calling for partners, the answer is yes,” says Tarek Ghoul, regional channel manager at Cisco Middle East. Linksys’ approach is more focused towards helping the distribution channel get involved with the market. “We give a 5% discount upfront on purchases of SMB and business class equipment. We have the product ready, we have the services ready and as soon as the governments announce markets are open we will launch in full force,” says Hoda at Linksys. “I think those installing telephone systems haven’t realised that their technology will not be needed in three or four years, if they are only in telephony they will have a problem building up the skills for converged systems. IT companies can skill up much better. Telephony companies are only making money now because they are offering cheaper products,” claims Waechter at Onspirix. A number of governments say they are looking into putting a timetable for deregulation in place. The UAE has already entered the first stages of a deregulation timetable with a second operator in the country set to provide in the second half of 2006. Saudi Arabia already has two mobile telecom operators. The World Trade Organisation is also putting pressure on governments to deregulate. Estimates of when this will happen are difficult, and vendor’s views differ, ranging from six months to three or four years before many economies have entered into a deregulation timetable. In the region’s open markets, such as Jordan and Bahrain, the immediate results haven’t seen an entirely smooth transition to a healthy and competitive environment. Jordan Telecom has had issues with its regulatory authority over interconnection with the eight newly appointed service providers in-country. Most of these companies are still in the setting up and testing stages prior to launching their VoIP products. Further to this there is a much bigger obstacle holding back the success of VoIP, in the form of broadband internet connection and availability. “Residential customers are able to adapt quicker to VoIP as they can sacrifice a little bandwidth. Most SMBs have just enough bandwidth to run their e-mail and internet connectivity, but when you add VoIP to the network the quality is sacrificed because of the bandwidth,” says Sweis at Netcomms Jordan. ||**||Capitalising on continued growth |~|Tarek200.gif|~|Tarek Ghoul, regional channel manager at Cisco Middle East|~|Hoda at Linksys estimates broadband penetration to be around 10% in the UAE, while Sweiss estimates that 4% of the population in Jordan have access to broadband internet. Despite this limited uptake in Jordan, Netcomms has seen VoIP grow from 20% to 70% of its business in one year. The targets for vendors this year are mainly to increase their channel breadth and start to specialise partners in vertical sectors. This year will also see more differentiation in product offerings. Vendors have identified different key areas to concentrate on. “We have around 18% of the market, which leaves us with 82% to capture and address. There is still a part of the market that we do not understand, and we usually understand that through our channel partners, so this is Cisco’s challenge for the next year,” says Ghoul at Cisco. Other vendors will be concentrating on coverage and product development in 2006. “Our company is only 2,500 people and we play in the same league as Cisco and Avaya — that is because we have taken the basic product and given it to the small guy. It is our innovation, Mitel is an innovator, bringing unique products to the market,” says Amili at Mitel. “Our aims are to recruit more integrators, continue to expand our reach into the intelligent buildings sector and work with the different telecoms authorities on boosting the spread of VoIP,” says Allen at 3Com. The Middle East is in a transition stage. Even without deregulation, the VoIP market is growing healthily. The more investment from vendors, the more the end customers are waking up to the benefits they stand to gain from a VoIP solution. This particularly applies to the SMB sector, which is the largest business area, and also the one that needs the technology most to gain an edge over its competition. Governments are taking a slow and cautious approach to deregulation. A push is needed from vendors, distributors, integrators and resellers for continued deregulation, which will unlock the full potential of the VoIP market. ||**||

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