When to Stuff Voices Into Packets

Your company may not be making calls using Internet standards now, but it will—eventually. So far, though, the cost to switch from conventional phone systems often outweighs savings.

Internet Protocol (IP) telephone systems convert the sounds of voices to bits and then pipe those over communications lines using the same Internet standards used to ship Web pages. Most businesses do not send phone calls over the public Internet today because of concerns about quality. But the technology can mean big savings for firms that spend a lot on long distance because it allows them to send voice and data across one connection, with no added charges for call distance or volume.

However, the expense to replace every phone, beef up the data network and provide employee training is hard to recoup just from savings on the telephone bill, says George Hamilton, a Yankee Group analyst.

Yet some companies are finding that IP telephony can pay back. Ingersoll-Rand, for instance, was spending up to $17,000 per month for AT&T teleconferencing services at its Huntersville, N.C., headquarters. The industrial-equipment maker eliminated that expense when it installed a voice system built on Internet standards last year and began managing voice conferencing internally, says Damon Cahill, Ingersoll-Rand’s director of infrastructure strategy. (For more on telephony systems using IP, see “Voice on Data Networks: A Sound Move?”)

Analysts say it usually makes the most sense to consider sending voice over Internet Protocol networks when retiring an older private branch exchange (PBX) phone system. Major PBX suppliers, including Avaya, Nortel Networks and Siemens, have added IP-telephony capabilities to their existing products, enabling customers to phase in Internet Protocol-based equipment where it makes sense.

The shift is already underway: Gartner Dataquest estimates that sales of IP-capable corporate phone systems totaled $2 billion in 2003, compared with $1.6 billion for traditional circuit-switched PBXs. By 2007, 97% of all phone systems shipped will be IP-capable.