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SIP Trunking Helps Bridge the IP Islands

Businesses are gradually migrating to IP-based platforms and solutions. Frost & Sullivan’s research shows that most businesses that have not yet deployed IP telephony plan to do so in the next few years. But not everyone is ready to make the move. And practically no business is willing to forklift its entire existing infrastructure overnight. 

The major holdbacks in IP telephony and UC adoption are typically related to concerns over how to protect existing, unamortized assets and ensure continuity when migrating to new communications architectures. Therefore, most businesses are cautious in their implementation of VoIP and IP telephony and are only gradually migrating individual platforms and sites, thus creating “islands” of IP technologies within the company’s communications environment. SIP trunking helps bridge these islands.

VoIP access and SIP trunking services involve the provision of integrated circuits using VoIP or SIP technologies to enterprises that have implemented premises-based enterprise telephony solutions (Private Branch Exchanges (PBXs)/IP PBXs or key systems). In a VoIP access or SIP trunking scenario, the service provider typically offers local dial tone, long-distance calling, and a limited set of call-management and control features such as extension dialing to intra- and inter-office locations.

VoIP access and SIP trunking services essentially direct enterprise customers toward a path of gradual transition to fully converged, IP-based networks. They allow businesses to enjoy the benefits of IP telephony while eliminating the need to forklift-upgrade their networks. VoIP access services interfacing with a legacy TDM system do require the deployment of a voice gateway at the enterprise premises, whereas SIP trunking services are typically deployed with SIP-based or SIP-enabled enterprise telephony platforms where protocol conversion is not required. Session border controllers (SBCs) may, however, be needed for protocol normalization and security purposes.  Typically, VoIP access and SIP trunking services allow enterprises to continue to utilize their existing handsets as well as other TDM voice customer premises equipment (CPE) thereby preventing significant upfront investments.

Increasingly, service providers are bundling VoIP access and SIP trunking services with various network-based communications applications and capabilities, such as hosted auto attendant, voicemail, unified messaging, mobility/FMC or some data services including web hosting, web email, managed security, and so on.

Join Frost & Sullivan and Level 3 for a presentation on sustainable business voice strategies with a key focus on SIP trunking and its benefits to small and large businesses: http://bit.ly/lXeeJw

WebRTC

The PBX is Dead! Long Live the PBX!

Well, maybe the PBX term is dead. Maybe, going forward, we will be referring to the platforms delivering PBX functionality as “communications systems” or “UC solutions” or something else.  But it is just funny how industry pundits frequently seek a sensational effect by using strong terms like “death” and “extinction” to refer to certain aspects of technology evolution. The reality is – market trends take a long time to mature and legacy technologies just don’t disappear over night. We were quick to “bury” the TDM PBX some ten years ago, but TDM line shipments, lo and behold, account for an impressive 25% of total line shipments today.

I was reading my colleague Alaa Saayed’s upcoming study World Enterprise Telephony Platform and Endpoint Markets and the following excerpt made me smile so I thought I would share it here.

•Just like in 2009 many observers prematurely pronounced the death of IP desktop phones, today, the same group of people is predicting the impending death of premises-based telephony platforms.

•Our findings show that the premises-based telephony platform market is still very much alive and displaying sizeable growth rates in terms of both shipments and revenue across the world.

•Although Frost & Sullivan recognizes the relentless advancements in communication technologies that are, today, allowing businesses to choose from multiple deployment and architectural options for enterprise telephony, including hosted and cloud-based technologies, premises-based solutions are still the most popular and dominant type of architecture among businesses of all sizes and verticals. The unfamiliarity with other technologies, the uncertainty about the benefits offered by the new delivery models, and the potential risks associated with decommissioning and/or replacing existing solutions are some of the main reasons why businesses continue to choose premises-based systems.

•Instead of the death of the premises-based telephony platform market, Frost & Sullivan prefers to talk about the death of the “PBX” terminology and the continuous transformation of communications architectures. In fact, since the introduction of enterprise IP telephony technologies around a decade ago, the traditional PBX platform has been completely re-designed, enhanced and re-purposed for the ultimate benefit of the customer. The multiple “boxes” required to support an enterprise-grade communications architecture in the past have been condensed into a smaller number of multi-purpose servers. The market has shifted from hardware-centric solutions to software-based, application-centric solutions. The call-control component of the PBX (practically, the heart of the PBX) has been extracted, in many cases,  and modified into a software application that can run on any third-party standard servers or treated as a virtualized application in a virtualized data-center environment. Finally, the IP PBX functionality is increasingly becoming just one of several applications in a comprehensive unified communications solution/bundle.

•While all these technological advancements have certainly transformed the communications marketplace, from large, isolated, proprietary cabinets to easily distributable low-cost, space-efficient, rack-mountable chassis equipment (servers for call control and media gateways for port interfaces), this evolution should not be misconstrued as the death of enterprise premises-based telephony.

The study will be published within the next few weeks on Frost & Sullivan’s Enterprise Communications portal.

WebRTC

Microsoft & Skype – What’s Behind the Obvious?

The acquisition of Skype could have enormous implications for Microsoft. If everything works out well, Microsoft gains access to about 600 million potential users globally. What it can do with those users is up to Microsoft, but the possibilities are almost infinite.

Even without any integration or service adjustments, Skype brings close to $860 million in revenues, even though they come at a loss. With the recent service enhancements (for instance, multi-party video, enterprise voice functionality) the existing (and rapidly growing) customer base can be further monetized for revenue growth and greater profitability.

But no one expects Microsoft to pay a premium (which the $8.5 billion appears to be) to just leverage the status quo. Microsoft is likely to seek to connect businesses using its own business software and services (from Office to Outlook, Lync, SharePoint, Office 365, etc.) to all the consumers and businesses using Skype’s VoIP and collaboration services. With Microsoft’s big push into enterprise communications and collaboration with the OCS and Lync platforms, Skype nicely complements its portfolio with cloud communications capabilities – including the app, the network, DIDs, mobility, and federation with other apps and networks. Potentially, this could help Microsoft customers enhance sales and marketing reach or create new options for economic and effective collaboration between office locations and teleworkers. 

Skype’s capabilities can help Microsoft re-enter the SMB voice space, which it pretty much deserted after it chose to discontinue Response Point. OCS and Lync are fairly expensive for this customer segment. Skype can also help add inexpensive VoIP alternatives for Microsoft’s cloud-based Office 365 packages.

Certainly, Microsoft can leverage this acquisition in the consumer space by linking the Skype customer base with its Windows Mobile and Xbox 360 and Kinect users or simply integrating Skype services into its gaming and mobile products. But the bigger opportunity is in bridging the consumer and business worlds. The lines between the two are blurring as the prosumer segment grows both in number of users and in terms of application and devices used for both personal and business purposes, leading to increasing consumerization of enterprise IT. Prosumers expect familiar, intuitive interfaces in their business environments and access to inexpensive communications and collaboration tools anywhere, anytime. Skype can help Microsoft deliver some of these capabilities to its business customers.

This is also a big defensive move for Microsoft – against Google as well as against the enterprise communications vendors. It is not clear how Skype’s partnerships with enterprise vendors will fare after the acquisition, but regardless of whether they survive or not, Microsoft will limit the options for others, while expanding its own.  If Microsoft pushes for greater federation, this will be beneficial to everyone, both on the supply and demand side. But it will mostly help Microsoft, the new kid on the block, make friends with the existing leaders, to be able to survive and thrive. It is a little hard to believe, but it is possible that Microsoft can use Skype as the common network for all its business customers (not just those using OCS or Lync for voice) to communicate and collaborate “on-net” among each other. Imagine free calls with your suppliers, partners and customers. Of course, businesses can use Skype to do that today, but having Skype integrated into Microsoft applications is going to make the value proposition a lot more compelling.  The ability to get its foot in the door with businesses using competitors’ communications systems with a service that provides clear benefits and does not require a significant capital outlay, can open tremendous opportunities for Microsoft. It will have the disruptive impact that other communications solutions and cloud-based communications services have not been able to accomplish yet.

One of the biggest questions is how Microsoft will deal with the various challenges that the merger presents. Certainly, the two cultures are very different. Also, as an Internet-based, primarily consumer service, Skype does not offer the type of SLAs businesses require.  The quality of Skype communications is only as good as the available bandwidth, the quality of the access network and the processing power of the devices it’s running on. If Microsoft plans to penetrate the enterprise space with Skype communications and collaboration capabilities, it will have to make sure it only promises what it can deliver or else customer disappointment will have an irreversible negative impact on future adoption. Also, Microsoft will need to learn about managing phone numbers and handling regulatory issues related to voice services in various countries. So the bottom-line question is – with all its ambitions to leverage the cloud and to grow its real-time communications business, is Microsoft prepared to be a voice services provider?

WebRTC

A Strong Consolidation Wave Sweeping the Next-Gen Services Market

Today’s announcement of TelePacific’s Acquisition of Telekenex provides another boost to a strong consolidation wave that started some time back in 2009, but gained more power in 2010. This acquisition enhanced TelePacific’s CLEC portfolio, which includes next-gen trunking services, with a set of additional capabilities, such as:

  • A robust hosted PBX platform with nationwide voice capabilities
  • A nationwide PCI-compliant MPLS backbone
  • A fiber network in the San Francisco-Oakland Bay Area
  • Managed network services providing advanced configuration and support for complex network deployments and
  • Managed security services through a cloud-based firewall

According to my estimates, Telekenex is adding between 15,000 and 20,000 hosted telephony seats (mostly multi-site SMBs) and about $30 million to $50 million in annual revenues to TelePacific’s portfolio.

As the market becomes increasingly competitive, it becomes compelling for LEC organizations with managed network services to merge with hosted/cloud applications providers so they can diversify their portfolios and offer customers a broader set of communications solutions and capabilities. Examples of similar developments over the past year include:

  • Comcast acquired NGT
  • Covad and MegaPath merged
  • Cypress Communications acquired Reignmaker Communications and merged with Broadvox
  • M5 Networks acquired Geckotech
  • Paetec acquired Cavalier Telephone
  • Vantage Communications acquired Digital Ingenuity
  • West Corporation acquired Smoothstone

Further M&A activity is expected over the next couple of years. With over 60 providers in the North American hosted telephony market, there is plenty of room for providers to join their forces for healthier competition going forward. As businesses look for a trunking or hosted communications provider, they need to take the following factors into consideration in order to make a good choice:

  • Network reach
  • Service management and demark: does the provider manage the service all the way to the desktop
  • SLAs on network reliability, availability, quality
  • Failover, redundancy and disaster recovery capabilities
  • Pricing
  • Channel partnerships
  • Knowledgeable sales force
  • Customer service and tech support
  • Depth & breadth of product portfolio (access network, UC, CEBP, hosted email & IM, contact center, managed data & security)
  • Simple, transparent and efficient billing and service provisioning
WebRTC

New Business Models Emerge in Hosted/Cloud Communications

I have written some earlier posts on Mitel’s and Siemens’ strategies for the hosted IP telephony/cloud UC market. But  there are others that have tapped into this space previously reserved for the telcos (ILECs, CLECs), MSOs, ISPs and some ASPs. I get a lot of questions about BroadSoft, Cisco, Microsoft, IBM, etc. I have now completed my study on North American hosted IP telephony and UC services markets and have some new insights to share. Unfortunately, the individual vendor analysis is too lengthy to post here, but I will share excerpts that more broadly discuss the value proposition of these new business models.

A key new development in the hosted IP telephony and UC services market is the entry of PBX vendors with their own multi-tenant or virtualized (multi-instance) solutions designed specifically for carriers and partners or intended for service delivery out of their own data centers. Cisco’s Hosted Collaboration Solution (HCS) architecture, Mitel’s various hosted/cloud solutions and Siemens’ OpenScape cloud architecture are some examples of these new business models. These platforms are typically more feature-rich than the carrier softswitches and application servers traditionally utilized to deliver multi-tenant business telephony services, but they also offer some additional benefits. For example, Verizon’s UCaaS services based on Cisco’s HCS are positioned as most suitable for the highly demanding large enterprises who wish to integrate the hosted service with their existing Cisco premises-based infrastructure. Also, most of these new architectures are not truly multi-tenant, but are instead using shared hardware and dedicated software, thus addressing some security concerns associated with hosted services.

The new business models are likely to cause some re-alignment in the value chain, with potential advantages and disadvantages for all market participants. Their impact on end users, however, is going to be mostly beneficial as they will be able to choose from a larger number of alternative solutions. For the supply side, the key benefit is ability to focus on core competencies – vendors will be able to leverage their software expertise, data center providers will deliver the most cost-effective server hosting and management, and the diverse range of service providers will focus on customer acquisition and ongoing management, as well as the integration of typical carrier services such as SIP trunking.

  • PBX vendors: PBX vendors are likely to benefit from gaining access to a customer base looking to outsource both infrastructure and infrastructure management from a third party. They will also be able to deliver greater value to their channel partners by enabling them to generate recurring revenues by either hosting the platforms themselves or reselling services hosted in a third-party data center. Potential pitfalls for PBX vendors include channel conflicts, if the vendors are also selling hosted/cloud services directly; customer mismanagement, if tiers of support and responsibilities are not clearly defined; and some loss of professional and managed services revenues. Also, customer churn is likely to be greater compared to that experienced in the premises-based business.
  •  Telcos: Service providers stand to benefit from the opportunity to deliver hosted/cloud services to more demanding customers using advanced telephony and UC platforms previously only available as premises-based solutions. Also, they can realize cost savings and reduce time to market, if the solution is hosted in a third-party data center, as the deployment and integration of multiple servers and software stacks is typically costly and time consuming. Virtualized solutions such as Mitel’s Virtual MCD and Cisco’s HCS also enable them to provide more secure hosted services to customers requiring their own dedicated software while leveraging the benefits of shared hardware and a hosted model. Potential challenges for service providers include the need to maintain multiple versions of vendors’ software stacks (as in the case of Verizon’s implementation of Cisco HCS), and more limited ability to customize the solution when hosted in a third-party data center. Furthermore, the new business model lowers barriers to entry thus potentially leading to increased competition.
  • VARs, SIs and MSPs: For VARs, SIs, MSPs and smaller LECs this is an excellent opportunity to expand their portfolio and generate recurring revenues by introducing hosted/cloud-based services without the cost and hassle of acquiring, integrating and running the systems in their own data centers. The cost and complexity of next-generation architectures has prevented this group of market participants from exploring hosted services in earnest. Now they can more successfully compete against larger telcos and premises-based solution vendors by presenting several alternatives to their customers – from premises-based systems, managed in house, to provider-managed on-premises solutions and fully hosted services. With their strong expertise in CPE installation, integration and management and typically better customer service and support, smaller, regional interconnects will now be able to serve their customers even more effectively.
  • Business customers: Business customers will benefit from increased availability and diversity of hosted/cloud solutions. As more service providers introduce hosted IP telephony or UC solutions, businesses will be able to choose a partner from a broad range of providers – from large telcos with a substantial brand-name reputation to trusted local system resellers with whom they have long-standing relationships. The increasing competition is likely to result in more competitive prices and better customer service. Also, service offerings now include a large spectrum of alternatives – from low-end basic telephony offerings to comprehensive UC bundles and packages of tightly integrated communications and business applications (e.g. CRM). Furthermore, along with the cost-effective multi-tenant services, providers are now able to address the needs of businesses with high security requirements by using virtualized solutions based on shared hardware but dedicated software.
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