The VOIP vortex

Voice over IP (VoIP) has been pushed as a solution to enterprise telephony for nearly a decade now, yet the fixed-line telephone market is still going strong. Nathan Statz reports on the intricate world of VoIP in the Middle East

Tags: Arab Advisors GroupAvaya IncorporationExtreme Networks IncorporationNortel Networks CorporationOliver Wyman GroupUnited Arab Emirates
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The VOIP vortex EL TAWIL: The financial crisis has definitely hit the Middle East but our operations in the region are still intact.
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By  Nathan Statz Published  May 23, 2009 Arabian Computer News Logo

Transmitting the sound of your voice along a copper wire is something that is generally trusted – countless generations have grown up alongside the technology and it has followed them into the business world.

You probably see that most telephone lines are already IP-based or are in the process of being IP-based. If you walk into your average office you will see a Cisco IP phone on most desks.

The same could not be said when Alexander Graham Bell first commercialised the telephone and had many pundits dismissing it as some sort of hocus-pocus.

Similar reactions of disbelief greeted Voice over Internet Protocol (VoIP) providers when they tried to convince CIOs to buy into the technology, though the head-shaking was aimed more at the startup costs rather than any accusations of magic.

Much time has passed since those first impressions were formed and the technology has matured along the way. Many organisations now trust the lifeblood of their communication strategies to VoIP infrastructure and constantly pump voice packets over IP connections.

There are still quite a large number of CIOs out there who are not interested in making the switch, particularly those who have had years of reliable service from their copper-based landline telephones. Some of the companies that are firmly entrenched in the traditional camp reside in the Middle East – which presents a special case when it comes to VoIP.

This is mainly because several countries in the region regulate the technology and have passed legislation to outlaw overseas VoIP calls. This has given rise to a grey area where countries will allow IP telephony – or IP phones as they are commonly known – to be installed and used domestically, but the actual calls are routed through existing copper lines internationally.

What this results in is a whole lot of confusion about what VoIP and IP telephony actually are and which countries they can be used in. Millan Sallaba, director of the Dubai office of the analyst firm, Oliver Wyman, believes it is easy to hit the nail on the head by exploring take-up of the two.

“You probably see that most telephone lines are already IP-based or are in the process of being IP-based. If you walk into your average office you will see a Cisco IP phone on most desks – for corporates – now that isn’t the whole story because of legislation,” says Sallaba.

“Take the UAE for example, it puts a bit of a dent in the initial IP phone on your desk and the abilities and potential for cost savings because VoIP in an international context is banned, it’s illegal,” he adds.

The most common areas for IP handsets is within organisations who have moved into one of the thousands of new real estate developments – or greenfields as they are commonly known. New buildings usually come with baked-in fibre connections and the latest and greatest infrastructure that is tailor-made for VoIP.

“Every desktop where you are going to put an IP phone needs to be connected to your LAN and you need to have a sufficient number of ports. If you are really old-school and you don’t have a proper LAN or Ethernet in the office with the right provisions for your voice service then your upfront costs are going to be higher compared to someplace where you have state-of-the-art LAN or Ethernet already there,” adds Sallaba.

Jawad Abbassi, founder and general manager of the analyst firm, Arab Advisors Group, believes that VoIP has a bright future in the region, particularly in greenfields which make the adoption of any new technology easier.

“It is packet-switching versus the old circuit-switching voice, so VoIP is the future and how quickly it arrives is a market initiative and not just by the technology [providers] but also by the use of the regulatory body of that market,” he says.

Abbassi explains that VoIP is a technology that you can use over dedicated connections, so you can have carrier-grade voice calls over existing internet connections.

“There is this misconception sometimes that VoIP is much lower quality – the VoIP over the public internet is of lower quality because nobody really guarantees the state of it,” he says.

“Nobody really owns all the links in the public internet so you don’t have control over it. Whereas if you have the direct links between point A and point B such as one company having its own internet connectivity or its own lead-time between its offices, it can easily do carrier-grade VoIP because it controls the bandwidth available.”

Seeing the saving

Given that the global economy is in the worst shape it has been in since the 1930s, the cost savings being promised by VoIP vendors should be music to the ears of CIOs.

Though the real question is whether this fits into the organisation’s schedule and whether any CIO has the budget left to invest in new infrastructure, particularly those in regulated countries where there is no possibility of a reduction in overseas call costs.

“We were talking to a bank in Abu Dhabi a couple of months ago and the big saving they were expecting is they were hoping to cut down on mobile communication costs. The scenario was that people were calling other parties and most of the time those other parties weren’t at their desk, so their reflex was to grab the mobile phone or call their mobile. Part of these expenses were reimbursed by the banks and of course they were losing lots of money,” says Apollinaire Moreno-Borondo, sales engineering leader for the Middle East at Nortel.

Moreno-Borondo points out that VoIP allows an organisation to have a one-number scenario, where you can call one number and it will first try to call your desk phone before trying your mobile devices.

The flip side of that coin is that setting up such a system requires sinking money into new infrastructure in a period of economic uncertainty. Vendors are in a unique position to gauge whether the increased focus on cost-savings from the credit crunch has translated into more business.

“I am surprised if anyone says that the market had been growing. Certainly what we’re seeing with the liquidity crisis is we believe that there are issues with our customers getting financing and we do see it with the number of projects that have been put on hold,” explains Moreno-Borondo.

“Having said this, I think that the justification for going to VoIP – the concentration of systems and benefits that some of the features such as mobility can bring – are still valid and they will lead to cost savings. We’re not seeing anyone move away from VoIP,” he adds.

Roger El Tawil, director of channel and marketing for MENA and Turkey at Avaya explains that the crisis has hit hard, but operations for most vendors are still intact.

“Over the last 18 months we have doubled in offices and people. As far as the global crisis is concerned, it has hit the Middle East but we have not reduced people or operations,” he claims.

Ioan MacRae, managing director of the technology group, Mettoni, believes that while demand has decreased, that is not purely from people opting for one technology over the other.

“Budgets have been cut and therefore projects have either been delayed or stopped, so there has been a drop, not because of the technology itself but because of the general recession and economic climate we are in,” he says.

MacRae is in a unique position to observe the marketplace in the Middle East as Mettoni is the parent company of Arc Solutions, a Cisco partner, as well as Datapulse, a Nortel partner.

“There has definitely been a switch in the market, Nortel have been in the Middle East for 20 years and they have a very large install base. I would say that up until two to three years ago the market was heavily weighted towards Nortel – they were known, they had the presence and they had a very good stable,” he explains.

“I would say that in the last year to a year and a half it switched to being in favour of Cisco. When you are looking at new IP telephony deployment, depending on the vertical, just going generally, I would say that Cisco are deploying and winning more business than Nortel and that has been exemplified since January when Nortel went into Chapter 11,” adds MacRae.

Vendors are the first to tell you that everything is ok because it is in their best interest to do so, but they are also the ones with their fingers closest to the market’s pulse.

VoIP companies may be both suffering and benefiting from the financial crisis, though the technology seems well-poised to continue on its consistent path in the Middle East.

Naturally it would be reasonable to expect that the market will be healthiest in countries that allow overseas calls over IP connections, particularly when trying to win over the CIOs who have decades of history with the classic copper-line telephone.

Rapid fire

Why is VoIP regulated in some countries in the Middle East and not others?

Oliver Wyman:
“Telecommunications in the GCC is quite a protected environment, probably as a function of slow liberalisation, but also as a function of the governments having a stake in almost all players. A lot of the sovereign wealth funds have invested in telco operators and basically you’re talking about the citizen’s pension funds.”
Millan Sallaba, director of the Dubai office of Oliver Wyman

Arab Advisors Group: “Mainly because international long distance in many countries subsidises local service, it is a major revenue generator for the operators and that’s why the operators are very keen not to give up their international and long distance monopoly too soon – for them no date is too soon.”
Jawad Abbassi, founder and general manager of the Arab Advisors Group

Avaya: “I think every country has its own initiatives to enable or not enable these services and it is fundamental as part of the enabling of the country. If you look at countries like Jordan they have identified an industry – like the callcentre business – and they believe they have the resources and infrastructure. The next thing needed was the de-regulation of the telecoms industry and that was enabled by government.”
Roger El Tawil, director of channel and marketing at Avaya for MENA and Turkey.

Nortel: “I am not very sure, but to be honest it is probably a question of history and investments – to be honest I think every country has got its own reasons.”
Apollinaire Moreno-Borondo, sales engineering leader for the Middle East at Nortel.

Extreme Networks: “I know in Saudi they are not allowing VoIP solutions yet, some of the countries in the Gulf and the Middle East are allowing that and one reason could be security. The other reasons could be for better utilisation of resources for the country and within the country itself – to keep the money within the country instead of going outside.”
Khaled Fathi Al-Najjar, territory technical manager of Extreme Networks for Saudi Arabia, Egypt and Jordan.

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