IP and Groovy
UK businesses are slowly becoming more willing to spend cash - and VoIP is getting plenty of attention. In the first of five reports on the convergence market, CRN asks if the technology has finally gained the trust of users
Convergence means a lot of things to a lot of people, but most of all it means money. Customers might be dismayed by the complexity and costs of merging their voice and data traffic onto a single network, but to the discerning voice over IP (VoIP) reseller, complexity means revenue.
Converged solutions are not a 'box-shifting' solution, presenting resellers with a vast array of pre-sales, installation and post-sales opportunities.
What makes this space even more attractive for the channel is that VoIP solutions are becoming increasingly popular with the business community.
It has been a year since CRN's last 'How to Sell' guide on convergence solutions, and in that time the sector has begun to fulfil expectations and grow rapidly.
Converged technology also received a big vote of confidence in recent weeks when BT announced it is to migrate all of its users from its public switched telephone network infrastructure to an IP network.
As predicted by some research analysts, 2003 was the break-out year. Economic conditions improved and company purse strings were loosened significantly.
No one is running around throwing wads of cash at spurious IT projects, but an air of experimentation has returned. Pilot projects that had been put on hold are now getting the green light and VoIP is receiving a great deal of attention.
According to industry analyst Juniper Research, the VoIP market will contribute $32bn, or roughly 12 per cent, to the total telephony market by 2009. IDC has said the market in Europe has moved from "lots of hype and no action" to a situation where VoIP is on the corporate agenda.
In its European WAN Manager Survey 2003, which surveyed 625 companies in 10 European countries, 12 per cent of respondents reported that they integrate their voice and data traffic now, with 33 per cent planning to do the same in the next two years.
Importantly, cost control was not as important to survey respondents as in the 2002 survey. The availability of cheaper bandwidth in local access connections - essentially faster broadband roll-out and a reduction in the cost of leased line - is one of the main reasons that companies have taken an interest in VoIP.
Sure, VoIP offers businesses lower telecoms cost and more flexibility than the traditional PBX set-up, but that is when it is all in place.
Would so many businesses be seriously considering it if broadband hadn't finally arrived and leased costs fallen? Even Gartner advises that moving voice traffic over to IP is 'inevitable' and that companies should at least be testing the technology.
The researcher claimed that 2003 was the first year in which sales of communications servers supporting IP exceeded sales of traditional PBXs, and that by 2006 sales of traditional PBXs will be almost insignificant. So, the market is healthy then?
"The market has definitely picked up over the past year," says Roger Jones, director of convergence for Avaya in EMEA.
"Customers are beginning to view IP telephony in a different way, as well as realising that they don't have to have IP everywhere. IT professionals are also being allowed more leeway to look at products that don't just conform to ROI (return on investment) arguments. Budgets are a little less tight."
Simon Longhurst, channel manager of applications at Crane Telecommunications, agrees. "In recent years the market has been slow but it is at a turning point, and financially, it is in better shape. We are also four years down the road from Y2K and companies are looking to upgrade certain systems.
"Many are now willing to dip their toe in the water and try a VoIP pilot," he says.
Neal Tilley, northern European solutions marketing manager at Alcatel, says: "The market is booming again and we are seeing a rise in the sales of converged equipment. The three- to four-year business buying cycle is kicking in, with more businesses having to change their kit."
While VoIP may be inevitable, there are many ways to implement it, and pure IP solutions from the networking camp still represent only a tiny fragment of the market. At the moment, hybrid PBX solutions from telecoms equipment companies like Avaya and Nortel, among others, represent the lion's share of the business.
Many of these players sell more than one type of solution, with some selling traditional PBXs, hybrid PBXs and pure IP solutions, so the market cannot easily be split into two opposing camps: voice versus data.
The number of solutions has increased, with a wide array of offerings spanning most company sizes.
But does that mean that the business community has fully accepted VoIP?
"The industry has made too much noise about VoIP," admits Pierre-Alain Graf, head of SME business and indirect sales Europe at Colt Telecommunications.
"But huge progress has been made in the past 12 months in convincing businesses about VoIP. There are more and more systems available, but some challenges remain.
"The functionality of voice convergence solutions is still not equivalent to that of traditional voice systems, and the investment requirements are still quite high. The early adopters trust VoIP more than the general business community does."
Roger Hockaday, director of marketing at Packeteer, a company specialising in network performance software, agrees that businesses do not trust VoIP fully yet.
"We don't have enough experience of it yet to trust it," he says. "Although half of all PBXs have IP functionality, many companies are not using it.
"While we trust email and other online applications over the data network, we are also aware that they have performance problems. If we know that established applications on the data network cause performance issues, adding voice is only going to compound the problems.
"In surveys we have done on the impact of voice on the network, 85 per cent of companies have suffered significant application performance issues on their networks and over 50 per cent surveyed said the number of incidents was increasing.
"Some companies have help desks that spend all of their time trying to resolve these issues. All of this costs them money."
Longhurst agrees that the hype at the beginning was too much, but believes that things are now changing fast. "Converged solutions are not yet fully trusted, but the situation has improved a great deal," he says.
"The problem at the start was that everybody in the market was talking up VoIP as an application in its own right, when they should have realised that voice is just another application on a network. It's better now because standards have been ratified and networks are becoming more reliable all the time."
During the slack years from 2000 to the second half of 2003, VoIP solutions were being promoted as the coolest thing to have. The basic VoIP sales material ran along these lines: "Just put it in and watch your phone bills disappear. And did we mention it's bleeding-edge technology?"
This 'spending on technology for technology's sake' approach was fine in the boom time of the mid-90s, but it didn't wash with the cash-strapped businesses of recent years. Businesses that have fought hard to survive and managed to crawl through the economic downturn are a much more jaded, sceptical and thrifty lot.
Most VoIP suppliers have understood this and switched their marketing emphasis from 'brand new and super-cool' to 'cost-saving business tool'.
Tilley says: "Looking for the application is vital. It is no good going to a retail giant, for instance, and telling them you want to put an IP phone in every room and office, because they will ask you to leave. You now have to tell them exactly where IP can help their business by focusing on a few key applications.
"In the early days some businesses bought into VoIP without a compelling business reason. When they didn't get what was promised they complained, and this probably helped damage business trust in the technology."
Longhurst adds: "We still have to provide customers with more business benefits, from efficiency improvements to cost benefits. Companies no longer spend like they did in the 1990s. There is a greater need to sell applications that require converged solutions.
"ROI is important to all customers now, not just in terms of cost savings, but also in relation to getting better service from their IT suppliers."
Hockaday adds: "Businesses don't buy technology for technology's sake anymore. Five years ago you could sell switches by saying they were faster and would make your business run faster. Not any more.
"Businesses won't buy from a reseller that plans to sell them a box and walk away. Every customer I have ever spoken to and asked why they bought our box has said that the reseller understood their needs and sold them a solution, not a box. They want someone to take responsibility."
Any reseller looking for a quick buck in VoIP is missing the big picture.
Converged solutions, sold properly, are the IT equivalent of the pot of gold at the end of the rainbow. There's nothing sinister or underhand about saying there is a lot of money to be made from customers in this area; it's just a fact.
But the margin made on the technology is no more than the tip of the convergence iceberg.
Every VoIP solution needs some form of system audit to ensure that the customer's network is up to the job. In many cases this opens the door to network upgrade sales.
After the solution is in, there is testing and training of the customer's IT staff in running, configuring and managing a converged environment. There is also the opportunity for training all of the other employees to use IP telephones.
Even at this stage, the ground should be prepared for regular support and maintenance visits.
As the number of VoIP applications grows to support the hype, resellers also have an excellent opportunity to present new converged applications for particular areas of a customer site.
Even better, resellers with the right mix of voice and data skills are offering outsourced converged solutions to both small and large businesses. This appeals to companies still worried about having to taking care of a complex solution themselves.
Properly done, the relationship should be never-ending, and the trust established should pave the way to other, unrelated business opportunities.
"There are a lot of value-add opportunities in this marketplace," says Longhurst. "Previously in the world of telecoms, you had a restricted number of extras that you could sell to customers, like software upgrades.
But with converged solutions, there's so much, from data hardware to integration services, as well as working with the customer over the long term."
Hockaday adds: "From our perspective, why sell a one-off compression box when you can offer a solution that allows for repeat visits and business?
In the converged arena, resellers can analyse the network, write a report, suggest a solution, implement it and then manage it."
Graf says: "Convergence is quite complex, so there are very good project management, hardware sales and support opportunities. After all, customers are not really interested in technical details; they just want to get on with their business."
Although complete trust is the main thing lacking in this marketplace, that is changing. A rise in better service-level agreements (SLAs) is expected to help, and a growing number of resellers are using watertight SLAs to help ease customers' worries about investing in VoIP.
For many, the idea of placing their voice and data eggs in a single basket is, frankly, terrifying. Customers might be able to cope with a downed email server for hours, or even a day, but a company with no phones is a beached whale. Customers do not tolerate any kind of disruption to voice services.
That's why the telecoms sector has been known for its very high standard of SLAs. Resellers getting into this arena, particularly those from the data sector, are quickly discovering that if they can't back up what they sell with a very fast and efficient response, they may as well go back to flogging routers.
"SLAs are a dangerous thing," warns Tilley. "Device- or hardware-based SLAs are usually rock solid and easy to control. Things are a lot less clear in a converged world. For instance, how do you quantify quality of voice? As a reseller you have to be able to back up the SLAs you give.
It's not just about setting high standards but providing the productivity gain you promised. A good SLA can now be used to sell the converged solution."
Longhurst agrees that SLAs are an important part of the deal.
"SLAs and scope-of-work documents are very important to ensure customers are very clear on what they are getting and what will be supported. Telephony has always been a mission-critical application and SLAs have always been strong on the telephony side," he says.
"Data networking is important but if your email server malfunctions you can still get by. Not so with phones. The data networking SLAs need to change to reflect the high expectations of customers."
CONTACTS
Alcatel (0870) 241 7267
www.alcatel.co.uk
Avaya (0870) 909 4242
www.avaya.co.uk
Colt Telecommunications (020) 7863 5000
www.colt-telecom.co.uk
Crane Telecommunications (01444) 230 004
www.cranetel.com
Packeteer (0125) 276 1199
www.packeteer.com