January 3, 2000

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A New Era For Voice
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Nonetheless, managers say they're excited about the technology's potential. Running voice over IP is inexpensive and flexible. Plus, it enables applications that combine voice and data. "We are definitely going to evaluate voice over IP," says Matt Fahrner, manager of networking at Burlington Coat Factory Corp., which runs voice over a frame relay network (see sidebar story). "Using IP means you're working under a common paradigm. Frame relay is slightly more complicated, and we have a lot more IP expertise in-house than frame relay expertise."

So far, the biggest reason for companies to consider voice over IP has been the promise of huge savings, especially on international calls. Businesses using the technology say they've been able to cut their telephone costs at least in half. Kanematsu USA reduced a $10,000-a-month phone by $6,000 a month by installing voice-over-IP gateways in New York and Tokyo. Similarly, Universal Sewing Supply Inc. in St. Louis saved about $2,500 a month using voice over IP between St. Louis and the Dominican Republic. These companies aren't using services--they're managing their own gateways and the lines that connect them.

But moving to voice-over-IP services means businesses can save money on staffing, too. Most companies now have separate telecommunications and MIS teams; moving to voice over IP will let businesses eliminate the telecom staff. "Once these groups meld, there will be tremendous savings internally for companies," Broadlink's Stritzinger says.

Perhaps even more exciting are the new applications that voice over IP will spawn. Some of the first applications for businesses will be productivity enhancers such as IP-based Centrex, says Brian Walsh, senior marketing manager for voice-over-IP services at GTE Internetworking. "Companies will be able to give their employees the ability to do four-digit dialing to any site in the world," Walsh says.

Another application is unified messaging, which combines voice mail, E-mail, and fax on one platform. "Unified messaging will appeal to small and midsize businesses," Walsh says. Large companies won't use such services in the near term because they own voice and E-mail systems and aren't ready to give up control of them, according to analysts and service providers. "I don't imagine a large corporation outsourcing that part of their business any time soon," he says.

Businesses first may consider call-center applications, such as the ability to talk while online at a retailer's Web site. Some service providers and Web hosts already offer these click-and-connect services, but quality remains an issue. Until quality is improved, retailers can opt for software packages that let a business set up click-through services on its own.

Golfdiscount.com Inc., an online retailer of golfing gear, set up its own click-through service using software from Cosmocom Inc. and subsequently increased sales by 20%, says Tim Reha, managing director of electronic commerce.

Golfdiscount.com customers can either click a button to chat online with a customer-service representative, or make an IP voice call to the service representative, provided their PC is equipped with Microsoft's NetMeeting software. Once connected via NetMeeting, a customer-service rep can push Web pages and video clips to the customer to help explain a product, or suggest other products the customer might like. "About 70% of people ditch their shopping carts online, so it's important to be able to engage an agent where you think it's worth it," Reha says.

As more users get connected to the Internet at higher speeds through cable modems and DSL services, applications such as Golfdiscount.com's, which merge data with voice and video, will become more common. The call quality and download speed are too slow over a 28.8-Kbps modem.

Integrated access, improvements in IP voice gateways, and the creation of enhanced services are paving the way for voice-over-IP services to take off with businesses this year. Companies will start using voice over IP internally to save money on international calling this year. Then, as the technology matures and businesses get used to the idea of running voice over a network originally intended to carry only data, companies will start using the technology beyond the borders of their own enterprises.

"Companies will begin to communicate externally in the later part of 2001 and early 2002," says Broadlink's Stritzinger. "We'll see exponential growth after 2002."

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Illustration by Dave Plunkett

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