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IP Telephony: Comparing the Different Approaches to Implementation| August 14, 2007 | Business Telecom Services - Europe | Advisory Report (Europe) Issue IP Telephony implementation means many things to many people. An IP PBX, for example, can be managed by the customer or by a third party (e.g., equipment vendor, service provider, VAR or system integrator). If the customer chooses to have IP PBX services managed by a third party, the communications platform is either a premises-based IP PBX managed on site but owned and maintained by the third-party, or a hosted IP PBX system dedicated to one or more businesses but residing in a service provider’s data centre. If the IP PBX communications platform is hosted from the network, it does not necessarily mean it is IP Centrex (even though this is commonly termed hosted PBX) and service providers use these terms almost interchangeably. The confusion does not end here. There are other types of IP Telephony deployments, such as VoDSL and Integrated Access to IP, that are becoming more popular. There is also SIP Trunking, which few providers offer as standard, yet MNCs seem to demand. This advisory report examines the different approaches for VoIP implementation, explores pros and cons, and offers some insight into customer segmentation. It will also compare what many of the tier-one service providers are offering and identify areas for improvement. One size does not fit all. The best practice approach to IP Telephony implementation is a hybrid solution that ‘mixes and matches’ to meet customer needs.
Current Analysis Perspective
Premise-based IP PBX The most common type of a managed IP Telephony service is a premise-based PBX. This is where the business either owns or leases an IP PBX that resides in its corporate offices, but is managed remotely by a service provider (or some other third party). The premise-based solution is ideal for enterprises that either have limited resources or may not want to invest in costly upgrades, but at the same time want to take full advantage of IP telephony. The benefits of premise-based solutions are the fact they are well established and already have a high penetration in the enterprise, have a low CapEx and OpEx (if the customer chooses to lease the equipment), and are used to support other business applications within the enterprise network environment. The most prominent vendors in Europe that offer premise-based IP PBXs are Alcatel-Lucent, Avaya, Cisco, Nortel and Siemens Enterprise Communications. In fact, these vendors together nearly dominate the European market. Synergy Research, for example, estimates that these vendors have 83% market share of the enterprise telephony ports in EMEA. A traditional drawback is that customers have long experienced problems with integrating multi-vendor platforms. This is still an impediment, but more carriers are making improvements in this area. While AT&T has achieved standards of interoperability with five vendors (and supports Digium’s Asterisk open source-based platform), Orange Business Services offers its VISIT technical programme to validate interoperability between vendors and currently supports Alcatel-Lucent, Nortel, Cisco, Avaya, and Aastra Matra systems. This is helping customers to avoid being locked into a single vendor, platform, or technology. Now that carriers are showing a new willingness to support multi-vendor platforms, customers are responding positively. The premise-based IP PBX is generally the safe bet for most enterprise customers.
Hosted IP PBX Hosted IP PBX services are similar to the managed (or premise-based) IP PBX and developed by much the same range of vendors. The main difference is that the service provider locates the IP PBX core infrastructure in their data centres. In the experience of some global service providers, more customers take for the premise-based PBX (over the hosted solution). However, the hosted IP PBX still tends to be the choice of some of the largest customers. Some of the advantages with hosted IP PBX services are transparent per-seat pricing, arguably a richer feature range than what might be possible with some of the premise-based solutions and stronger self-management capabilities for end-users. There is also the potential for new applications, such as client-based IP soft phones and desktop integration. COLT Telecom, for example, provides a hosted IP PBX solution and offers several hundred features. They have a multi-tenant offer that supports as few as 20 users (using a single blade server solution) and dedicated offer geared for companies with several hundred employees. As with many providers, COLT offers per-seat pricing that includes handsets and features for approximately EUR 20 per month. Dialling plans or usage-based billing is also possible and the minimum contract period is three years. On the downside, the hosted IP PBX has the potential of locking business customers in with a particular supplier. If a customer, for example, opted for COLT’s IP Telephony solution, Avaya would be the supplier in this case. A pure deployment of hosted IP PBX with one-vendor may also require customers to give up existing premise-based IP PBX equipment (especially if it is from another supplier). While circumstances vary by customers, this scenario could be costly. Since hosted IP PBX services are deployed centrally from the data centre, there could be some complications in supporting customer sites that are located outside the service providers’ footprint. While the service provider could provision its network to support remote locations, there are cost considerations. There are also customers that are very reluctant to have any services hosted by a provider from a ‘third-country.’ However, most carriers in Europe are flexible and offer ‘hybrid solutions’ combining a premise-based and / or hosted IP PBX solution to the enterprise. They tend to use the same vendors, are more willing to manage the LAN / WAN environment and adhere to stronger SLAs.
Hosted IP Centrex The IP Centrex platform gets its origins from the Centrex model and is a software-based system where switching, applications (and typically call control) is provided by the carrier and managed entirely from the network to deliver hosted telephony and multimedia services. IP Centrex is a replacement for traditional Centrex services by bringing services delivered in a TDM environment to an all-IP world. Vendors, such as Broadsoft, NetCentrex, Sylantro, Nortel, Siemens and Tekelec, offer these types of services. The IP Centrex system is broadly shared among a provider's customers, but will generally segment customer-specific configurations and deliver virtual private telephony functionality to IP phones placed in the enterprise network. IP Centrex is similar to Hosted IP PBX. Both services are subscription-based, which is attractive to customers that prefer the lowest capital expense possible. Charges are generally allocated per seat and special features can be allocated to each user. IP Centrex is an ideal solution for green-field locations as customers can avoid heavy upfront investments in new IP PBX equipment. Since the services are based on equipment inside the carriers network (as the argument goes) the service provider carriers the task of investing in new technologies, not the customer. On the downside, IP Centrex does not have the same level of features, and there is less customisation than what is possible with the IP PBX (premise or hosted). Enterprise users can be unfamiliar with IP Centrex and are missing many features that they had in the IP PBX world. In fact, one service provider recently withdrew its IP Centrex approach for hosted and premise-based IP PBX for this exact reason. Another has to do with the fact that IP Centrex tends to be a national offer whereas the hosted and premise-based IP PBX are widely available as multinational offers. For this reason as well, MNCs have preferred to stay loyal to the IP PBX-based services. Having said that, a number of carriers such as BT and Orange Business Services have stated their intention to internationalise their IP Centrex offerings. Verizon Business has IP Centrex on offer today in six countries and with ambitious plans to bring another five online this year.
Voice over DSL Voice over DSL is used to typically to connect remote workers and small offices. In these types of services a broadband access line is used to provide both Internet access and voice services. Some national carriers, such as QSC, have provided multiple voice connections across a single access line using ISDN BRI and PRI (in some cases supporting up to 20 voice channels). This has enabled enterprises to save on costs by reducing their TDM real estate, but it has also made it easier to set up and tear down new extensions (as with many of the competing IP Telephony solutions). In addition, VoDSL providers offer free on-net calling to other locations connected to the network and offer very competitive dialling plans. Voice and broadband services are enabled through an adapter (i.e., integrated access device) located on the customer premises. This market is gradually gaining more ground as broadband penetration increases across Europe. Some of the disadvantages have been quality and coverage. DSL varies on the length and quality of the copper connection and is not available everywhere. Often times, it is limited to the coverage of a single provider. In some markets, such as Germany, the incumbent has avoided this market altogether leaving alternative providers to come up with their own solution through LLU. There are also big differences in access speeds, contention ratios, and most importantly SLAs across countries. In some cases, there are many white spots where the customer will have to find another solution. In addition, VoDSL is also not a full IP Telephony implementation, so there are few applications and value-added services that can be delivered across this platform. Some could also argue that there are security concerns as part of the solution (e.g., last mile) may run across the public Internet if it is not integrated with an IP VPN, or supported with other security features.
Integrated Access and SIP Trunking Integrated Access provides a pathway to IP convergence without replacing existing PBX infrastructure. The solution is ideal for SME customers and helps customers reduce costs by replacing TDM assets for IP/MPLS. Similar to VoDSL, the solution will have an integrated router on the customer location, which supports both IP and TDM traffic. The main advantages of Integrated Access is that companies can keep their existing equipment as is, cost-savings (e.g., free on-net calling and common dial plans available across multiple countries), and there are also new functionalities to manage VoIP traffic that can be advantageous to the end-customer. Similar to Integrated Access services, SIP trunking can work with some existing IP PBX equipment (e.g., Cisco Call Manager 4.1.3), but targets much larger sites and offers converged access without the need for expensive premise gateway equipment for interfacing between the IP and PSTN clouds. Customers no longer need to purchase TDM circuits as local off-net calls are carried by the service provider, (and converted at closest the PSTN gateway before termination). On the down side, these solutions still tend to be less common approaches to IP Telephony implementations. Despite customer demands, especially for SIP Trunking, very few service providers are offering standard services in Europe.
While each of the business models for VoIP and IP Telephony have their respective merits, the reality is that customers are not going for a one-size fits all approach. Carriers are realising this and showing more willingness to offer hybrid solutions to meet customer requirements. Orange Business Services and BT, for example offer both the hosted IP PBX solution and premise-based services. Both will also support multi-vendor environments through standard methods. Most carriers also offer VoDSL. Orange Business Services is deploying it in seven European countries and AT&T in nine. While Hosted IP Centrex has tended to be a national product offered by incumbents, Verizon Business is currently offering it in six European countries with local inbound and outbound gateways and has an ambitious roadmap to add another five countries within the next months. Verizon Business is also one of the first carriers to offer SIP trunking (as well as Integrated Access) and is perhaps one of the most dangerous ‘up and comers’ in the European IP Telephony market. Recommended End User Actions • Rather than being cajoled into one model or another (e.g., managed PBX vs. IP Centrex), enterprise customers are best advised to look at the requirements for an IP Telephony migration and work backwards. The best solutions come from service providers that are willing to develop hybrid solutions to support corporate HQ, branch offices, and remote workers and each group may require a different solution approach. • Since a number of IP Telephony propositions require seamless integration between the LAN and WAN, enterprise customers should consider outsourcing all of the components to a single service provider as a managed service. In doing so, they should look for benefits in security, QoS, monitoring and accountability. They should also look to the service provider to take over additional functions as IP Telephony moves closer to the desktop environment. • Enterprise customers should be aware that a common complaint with hosted IP Centrex is the lack of features when compared to the IP PBX. While this is not a ‘show stopper,’ it might not be suitable for some locations. Some applications (e.g., voice endpoints) may also be geared for the IP PBX and less with competing platforms such as IP Centrex. This is worth exploring further with the service providers and vendors.
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