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IP TELEPHONY ADOPTION ACCELERATES
The IP Telephony phenomenon is global. Businesses are replacing their traditional phone systems with IP telephony solutions at such a rate that Synergy Research predicts that the IP PBX market will exceed the legacy private branch exchange market by 2006. It projects that the worldwide IP PBX market, estimated at slightly more than US$2 billion in 2003, will climb to US$6 billion in 2007. Meanwhile, the market for traditional PBXs will decrease by 50 percent over the same time period from an estimated at US$7 billion to US$3.5 billion.
The interest in IP Telephony spans across all market segments. Morgan Stanley's 2004 Telecommunications Survey found that more than 50 percent of medium-sized and large enterprises have deployed or plan to deploy the technology in the next 12 months. These large customers as well as small and medium-sized businesses (SMBs) see IP Telephony as a way of increasing productivity through convergence of voice and data applications. More than 70 percent of these customers also anticipate modest to substantial savings from having a single network for voice and data, according to Meta Group.
STRONG INTEREST IN IP TELEPHONY OUT-TASKING
Many enterprises opt to deploy their IP Telephony solution on site and self-manage it. For others, however, the move to a new technology can be viewed as challenging for a variety of reasons. They may not want to invest time and money in specialized resources to support a new technology; they know that keeping up with changes in technology can be difficult and potentially expensive if the right choices are not made; or they may prefer to take advantage of the scalability and reliability of a carrier's infrastructure to help ensure high quality of service (QoS). As a result of these concerns, it is no surprise that many customer studies indicate that as many as 30 percent of enterprises are looking to out-task some or all of their ongoing IP Telephony operations.
These business and technical concerns are even more problematic for SMBs, which generally lack the resources in time, money, and trained personnel to make the transformation to IP Telephony. The market opportunity for service providers to deliver IP Telephony services to the SMB segment is significant because, according to Dataquest, about 50 percent of the revenue for premises-based telephony systems comes from customers with fewer than 100 lines. In addition, according to the Yankee Group, more than one-third of SMBs are interested in getting IP Telephony as a managed service.
SMBs want to focus on their core business and do not want to manage the service delivery infrastructure of an unfamiliar IP Telephony solution. They also want to avoid investing limited available capital in a new solution, preferring instead to pay for services on a usage basis as a monthly operating expense. SMBs outsource the IP Telephony service from service providers if it allows them to scale affordably and reduce their needs to manage customer premises equipment (CPE). Service providers that meet these needs will facilitate the transition for SMBs to IP Telephony and will generate new revenue sources for themselves at a time when simple voice transport is becoming commoditized and revenue from traditional voice services is rapidly declining.
Cisco Systems® offers service providers proven IP Communications solutions for targeting this important market segment with a scalable and flexible set of managed IP voice services.
CUSTOMERS HAVE CHOICES
Managed IP Telephony services can be delivered in several ways. Market research firm Ovum defines four options available to customers implementing IP Telephony:
• In a do-it-yourself approach, the IP Telephony solution, which would be either leased or purchased, resides at the customer site and is self-managed by the customer. The service provider's role is limited to providing IP connectivity.
• The managed IP PBX approach involves deployment of an IP PBX at the customer's site, with the service provider responsible for ongoing remote management of the platform and service delivery. The service provider provides a range of services for the premises-based IP Telephony solution, including fault monitoring; configuration management; performance management; moves, adds, and changes, and so on. Customers have the option to buy or lease the onsite equipment or rent it as part of the service.
• IP Telephony also can be offered as a hosted IP PBX solution. Here, the IP PBX is housed in the service provider facility and managed on dedicated servers. The customer simply rents the service on a per-user basis. The IP phones on the customer premises may be bundled as part of the hosted IP PBX service fee, or may be leased or bought directly by the end customer. Because the IP PBX servers are dedicated to unique customers, additional productivity and industry-specific applications can be easily integrated as needed by end customers, enabling the service provider to provide further value and gain incremental hosted services revenue.
• IP Telephony also can be provided as a hosted service from a shared server housed by the service provider, an approach sometimes referred to as IP Centrex. With an IP Centrex solution, the customer rents the service on a per-user basis, much in the same way traditional time-division multiplexing (TDM)-based Centrex is priced. Customers seeking to integrate productivity or custom applications depend upon the service provider to do this-and to do it in a manner that preserves the security of the customer's data from other users of the shared call-control application.
DISTRIBUTED APPROACH TO MANAGED IP TELEPHONY SERVICES
To enable service providers to meet the needs of those customers who want to out-task IP telephony, Cisco Systems has developed the Service Provider Business Voice Solution (BVS). The BVS approach can aptly be described as distributed managed IP Telephony, a model that supports a range of end-customer options as described by Ovum. The solution's major voice components, such as Cisco CallManager Express, Cisco CallManager, and the Cisco BTS 10200 Softswitch, are integrated in a manner that offers service providers a flexible, distributed IP Telephony solution for delivering managed or hosted voice services to enterprises and SMBs over broadband connections (refer to Figure 1).
Figure 1
Cisco Service Provider Business Voice Solution Architecture
Cisco CallManager Express, a business-class software module for Cisco IOS® Software routers, provides a robust set of popular IP PBX features for up to 240 Cisco IP phones or traditional analog phones. It is a cost-effective solution for addressing the needs of not only SMBs but also the branch offices of larger businesses. Located as CPE, the Cisco IOS Software router running Cisco CallManager Express functions as a one-stop shop for a customer's data and voice needs. All the call control for the commonly used telephony features are performed locally at the customer's site. The Cisco BTS 10200 Softswitch in the service provider's data center complements Cisco CallManager Express, extending customers' capabilities by providing additional network-based services such as: efficiently routing "on-net" calls between a customer's distributed sites, managing private custom dial plans, serving as a central point for call detail record (CDR) collection, and to connect to the public switched telephone network (PSTN) for off-net calls.
By enabling call signaling between traditional and IP endpoints, the Cisco BTS 10200 preserves feature interworking for multi-site customers so that they can migrate to IP Telephony on a site-by-site basis without losing any custom voice features. The service provider can also offer voice mail and automated attendant services, either by adding Cisco Unity™ Express to the same Cisco IOS Software router that hosts Cisco CallManager Express or by using a centralized voice-mail system deployed in the service provider's data center.
The distributed approach to managed IP Telephony for SMBs, which uses a network-based Cisco BTS 10200 Softswitch in tandem with CPE-based Cisco CallManager Express, offers service providers a service delivery architecture that is superior to a centralized IP Centrex solution because it is more reliable, flexible, and economical. Wide-area network (WAN) reliability and QoS issues, which could adversely affect customers of IP Centrex services, are mitigated to a large extent in a distributed solution that delivers services and features locally through the onsite Cisco CallManager Express platform.
In this distributed service delivery model, the service provider remotely manages and maintains the Cisco CallManager Express router from a network operations center. The service provider can also give customers control of their own moves, adds, and changes through an easy-to-use Web interface.
INVESTMENT PROTECTION AND NEW SERVICES REVENUE
The many benefits of the Cisco IP telephony solution go beyond the mere replacement of traditional PBXs and Key Telephony Systems (KTS). The solution extends the value of the Cisco IOS Software-based router by using it for multiple services in supporting customers' data networking needs while serving as an onsite IP Telephony application. Moreover, the opportunities for additional revenue do not stop here because the service provider can further enhance its relationship with customers by using the same customer premises-based router to offer an array of additional managed services such as managed LAN, managed firewall and security services, as well as IP Security (IPSec) and Multiprotocol Label Switching (MPLS) based VPNs.
The distributed model for managed IP Telephony allows service providers to invest in infrastructure and equipment as they generate the revenue to support those investments. Thus, it does not require significant upfront capital investment. The service provider incurs most of the costs on a "success" basis; that is, as customers sign up for the managed IP Telephony service. This is in contrast to an IP Centrex solution, which requires significant upfront capital investment before acquiring customers. Service providers and customers also have the security of knowing that, if the need increases beyond the 240 IP phone limit of Cisco CallManager Express, they can easily upgrade to Cisco CallManager, which supports up to 30,000 users in a single cluster. This will fully protect the investments already made in IP Telephony CPE, including LAN switches, IP phones, and routers.
EARLY SERVICE PROVIDER SUCCESSES PROVE THE MODEL
Many service providers understand and appreciate the advantages of distributed managed IP Telephony and are currently offering converged managed data and voice services to customers with Cisco CallManager Express. Both BT and Italy's FastWeb see Cisco CallManager Express as a right-sized solution for meeting the telephony needs of their SMB customers. FastWeb offers small business customers bundled data, voice, and video services over an IP connection. "Our customers like the service because they no longer have to worry about setting up separate maintenance contracts with PBX suppliers. They also appreciate its ease of use and the outsourced management that the Cisco solution enables," says Guido Roda, FastWeb's director of network service engineering.
BT, Britain's largest service provider and a European pioneer in voice-over-IP (VoIP) solutions, began offering Cisco CallManager Express as a way to deliver converged data and voice services to its smaller customers and to branch offices of larger companies. Branch-office employees of Northgate PLC, a vehicle rental company, rely on BT's managed data and voice service based on Cisco CallManager Express, and use the Cisco 1751 Modular Access Router or the Cisco 2600 Series Multiservice Platform to enjoy the many benefits of an enterprise-class phone system, including paging and conference calling.
"Cisco CallManager Express has helped us move into the small- and medium-sized-business market for managed data and voice services. The Cisco CallManager Express solution gives our customers who think full-blown IP Communications solutions are too expensive an opportunity to try the technology with minimal investment," says Cuan Middleton, new propositions consultant of BT Convergent Solutions.
These service providers and their customers know that their investment is also future-proof because they will be able to take advantage of the Cisco investment in and integration of an ever-expanding suite of enhanced IP Communications applications. These applications include Cisco Unity unified messaging, videoconferencing, mobility extension, the Cisco IP Contact Center (IPCC), and Extensible Markup Language (XML)-based applications for the IP phone display. Cisco IP Communications solutions also can be tailored to specific customers by integrating with the customers' own applications and with a wide range of Cisco partner solutions in such areas as personal productivity, call accounting, IP phone applications, and collaboration. All this would be considerably more difficult to accomplish in the IP Centrex model with its centralized approach to the call-control platform and applications, which are shared across multiple end customers and thus cannot be incorporated with an individual customer's unique application requirements. Table 1 lists some advantages of the distributed managed IP Telephony services approach.
Table 1. Benefits to Service Providers of the Distributed Managed IP Telephony Approach
SEIZING THE MARKET OPPORTUNITY
Service providers can gain new revenues by helping SMBs make the transition to IP Telephony with the distributed managed service model enabled by the Cisco Service Provider Business Voice Solution, which uses Cisco CallManager Express on the customer premises and the Cisco BTS 10200 Softswitch in the service provider's data center.
Studies by market research firms also show accelerating adoption rates for managed services in general, with application hosting, IP VPNs, and IP Telephony ranking as the top three managed service applications. According to their estimates, worldwide service revenue from managed IP Telephony will grow from US$153 million in 2003 to almost US$1.4 billion in 2006. The Cisco distributed managed IP Telephony model offers service providers a way to capture this fast-growing revenue source. With a lower upfront cost, the Cisco solution helps enable service providers to scale voice services in parallel with customer demand, offer both data and voice services with a single IP connection, bundle additional managed services, and support new services and applications-thereby increasing revenue streams and customer loyalty while improving profit margins.
For more information about the Cisco Service Provider Business Voice Solution, including solution overviews, success stories, and case studies, go to: http://www.cisco.com/go/telephony.
