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Internet Companies Dial Into VoIP

AOL, Microsoft's MSN, and Yahoo are adding VoIP capabilities to their popular IM software, giving more credence to the burgeoning technology
Although currently focused on the consumer market, AOL, MSN, and Yahoo are adding credibility to VoIP and might even fuel the adoption of similar services by larger businesses. "What has held back the growth of VoIP in the enterprise is the lack of simple interfaces and applications," AOL's Tobin says. And although the Internet companies aren't considered to be traditional VoIP players, they already know how to tie together an address book, a buddy list, and E-mail. Now the Internet companies are working closely with their partners, including systems integrators, software vendors, and, in some cases, phone companies, to apply the same concept of seamless integration to voice over IP. "If companies like us are jumping into VoIP now, it means that the technology has definitely reached a stage of maturity where it can be broadly adopted," Tobin says.

Even so, the Internet companies' consumer-oriented services are less likely to be adopted by large companies and more likely to be of interest to small and midsize businesses, says Brian Washburn, senior analyst at market-research firm Current Analysis. Chances are, a large business would first go to a big phone carrier such as AT&T, Verizon, or MCI to leverage existing investments in phone services with these carriers, instead of deploying VoIP in an ad hoc fashion, he says.

Services from AOL, MSN, and Yahoo "are absolutely of interest to small and medium companies out there," Washburn says. "What we've been hearing is that they're generally not paying less for VoIP; they're just getting more features with these services."

For example, AOL's service comes with a console in the form of a Web page, where users can organize and access their offline communications such as voice mail, E-mail, IM, and address books. "The phone-pad navigation is painful by comparison," Washburn says. Small and midsize business can much more efficiently tap into their contacts and make calls with one click. Similarly, Yahoo and BT Group's offering lets users manage their calls over the Web through premium features such as Internet call waiting and PC-to-phone calling.

Still, a small or midsize business might not see as much value in MSN's service. "Most small businesses aren't looking for heavy-duty converged applications and media streaming. They're much more concerned about Web-page configuration, quick-to-access voice mail, and that kind of flexibility," Washburn says.

Although services from the Internet companies offer potential benefits, smaller businesses are still skeptical about voice over IP. One midsize consumer-goods manufacturer, which asked not to be identified, hasn't made any plans to deploy VoIP primarily because there's still a fair amount of setup and ongoing maintenance involved with VoIP, and the concerns about uptime and security still outweigh the benefits.

Business customers interested in deploying VoIP have other options. In March, Microsoft introduced Office Communicator 2005, an integrated communications client. Communicator lets users move between communication modes such as instant messaging, voice, video, telephony, and Web conferencing. "We're very much thinking about voice and telephony, about the way information workers communicate," says Ed Simnett, group product manager at Microsoft's real-time collaboration division.

Communicator also links PCs with a company's phone system, giving employees the flexibility to control their desk phones using their computers. Additionally, Microsoft has added public instant-messaging connectivity to its Live Communications Server 2005 to give companies a way to connect with users on the three major IM networks: AOL, MSN, and Yahoo.

Businesses are looking to add value to their office applications, and voice is a large piece of the puzzle, Simnett says. Microsoft has had a number of business customers requesting a way to link their existing PBXs to the rest of their Microsoft productivity tools. Although Microsoft doesn't have such an offering yet, it's definitely on the company's radar.

It's still too early to tell whether the VoIP services rolled out by the major Internet companies will gain traction within large businesses. Industry analysts say that these types of services will be more appealing to small and midsize businesses because "large enterprises handle their telephony needs differently and are moving toward a different kind of IP," Gartner's Schoener says. But the Internet companies remain hopeful that wide consumer adoption of their services will spark the interest of CIOs.