TMCnet - World's Largest Communications and Technology Community




Rich Tehrani’s “Executive Suite” is a monthly feature in which leading executives in the Voice over IP/IP communications industry discuss the latest industry trends with TMC president Rich Tehrani as well providing insight and analysis on industry news. This month, Rich had the chance to speak with Deloitte & Touche’s (news - alerts) Phil Asmundson.

Phil is vice chairman and national managing partner for Deloitte & Touche’s Technology, Media & Telecommunications practice (TMT). The TMT practice focuses on the business needs of these rapidly changing markets and brings together functional specialists addressing industry challenges. In his more than 24 years of experience with TMT clients, Mr. Asmundson has worked with virtually all segments of the communications industry including LECs, CLECs, Optic Networks, Wireless and Satellite. He is one of the firm’s designated “thought leaders” and is an active speaker and author on industry trends, challenges and opportunities.

Phil Asmundson




April 25, 2006

What do you think is the primary motivator for enterprises to move to VoIP? Describe what you expect will be the progression from digital to VoIP. Do you expect most companies will forklift to VoIP or do it gradually? What are you seeing among your clients?

Cost has been portrayed in press coverage as the major driver, but we believe that functionality will eventually drive adoption as cost differences even out. Regardless of the primary motivator, we’re seeing that enterprises are most likely to adopt VoIP gradually, often deploying it by division or for specific call types.

What types of companies do you see emerging as the winners in delivering VoIP equipment and services (e.g., pure play, traditional telcos, cable companies)?

It’s actually very fragmented right now. There are pure plays, cable companies, and traditional telcos all fighting for a piece of the VoIP marketplace. The challenge is in determining who the eventual winners will be. They each have different motivations for pushing VoIP. For the pure play and cable industries, VoIP represents an extended revenue stream, while for traditional telcos, it is both an opportunity and a threat. As a result, I think many see telcos as the enemy of VoIP, when, in reality, I think they are evaluating how to best leverage corporate assets for the benefit of their shareholders. Once VoIP takes off with the masses, I believe the telcos will continue as the dominant provider of voice-based services.

What do you see as the main benefits for enterprises moving to VoIP?
What do you think they see as the main benefits?

A key benefit for enterprises moving to VoIP is that it takes advantage of the data networks they already have in place and simplifies IT/Telecom network management. Converged data/telecom networks open a world of possibilities, in terms of functionality and applications. I see this as being an application-driven market in the future. As I mentioned earlier, enterprises are still focusing on the cost side of the value equation, principally because this is easier to measure. However, as applications emerge that boost productivity through collaboration, functionality will become the dominate reason for VoIP deployment.

What are the downsides?

The downside, for now, is that there are still some issues with Quality of Service (QoS) and reliability. Companies should absolutely perform network assessments to ensure that their networks can handle their voice traffic. Upgrading and preparing the network for voice traffic can help mitigate potential issues like dropped calls. Many companies live and die by their voice communications, so dropped calls are a big issue. We are all used to having 24/7 telephone service, something that is hard to match 100 percent of the time on any data network. In addition, once data and voice are merged onto a single network, concerns about security protection from viruses will greatly increase, and they are likely to become boardroom issues.

Deloitte predicted that, by the end of 2005, more than two-thirds of Fortune 2000 companies would have deployed VoIP. Has this really happened? What is driving it?

VoIP is really happening, and here’s why. Falling VoIP equipment prices make it more affordable and more attractive. Improvement in QoS means that call quality is no longer a big issue. Plus, even if the quality isn’t what we’re used to on digital phones, it is still better than cell phones. Fortune 2000 companies are deploying VoIP gradually to try it out. They are gaining experience and they like it. The only qualifier I have is that, in most cases, VoIP deployment is not universal, but rather being tested in trials.

What are the ways of implementing VoIP and what is the path most likely to be taken?

Most large enterprises will adopt VoIP incrementally, as it makes sense. There is still a degree of caution, such as perceived issues with reliability and voice quality, so they are trying VoIP where it makes sense within the enterprise and rolling it out gradually. Many enterprises will continue to rely on switched systems for some telephony needs, because it makes the most sense for them.

How about implementation? Will it be at the carrier level, at the gateway level, or at the desktop? What are the key drivers?

There are three main ways of implementing VoIP: at the carrier level, at the gateway level, or at the desktop. We believe that the desktop is the likely winner, as deploying VoIP end-to-end has the greatest impact for both the enterprise and for the service provider.

Cost reduction is always cited as an issue, although some say that with long distance costs falling, that cost savings is less of an issue to move to VoIP. Where do you still see cost reduction being an issue (e.g., internal calls, external calls, network management)?

Cost reduction is still a big issue. Some ways we’re seeing our clients use VoIP to reduce costs are (from highest priority to lowest):

• Reduction in costs of external calls
• Reduction in network management costs
• Reduction in costs of internal calls
• Reduction in costs of adds/moves

At what point do you think the new functionalities possible with VoIP will overcome the issue of cost reduction in being a major driver? What VoIP capabilities do you think will drive that?

The possibilities are endless in terms of functionality. For example, specific functionality features that can drive adoption include:

• Improved calling handling and voice features
• Integration with desktop applications
• Instant workplace access, follow-me roaming
• Integration with enterprise applications

But even more than that is the issue of flexibility. VoIP gives enterprises the ability to do things any way they want to across the enterprise — by departments, and even down to the individual. This level of flexibility will be a key driver.

What are the major obstacles or challenges in moving to VoIP at the enterprise level? How about at the equipment and service provider levels?

Major barriers for deploying VoIP to the desktop include:

• Lower QoS for voice calls, although this is becoming less of an issue
• Cost of new VoIP CPE — converged systems or upgrades to add VoIP to an existing system can bridge the gap
• Quality of new VoIP CPE — enterprises need to go with a proven solution
• Weak business case — Not all enterprises need the benefits from VoIP

We’re also seeing voice quality, reliability, security (viruses/SPAM), privacy, and network capacity as being major concerns to some enterprise users, but these are all issues that can be dealt with and solved. Again, a network assessment and ongoing network management is critical. Voice has different requirements than data. With data, you can drop a packet, and the message still gets through, but voice has to all go at once or you get a lot of cutting out. Making sure the network is and remains voice-compliant is the answer. Of course, we also see wireless competing head-on with VoIP.

There’s a lot involved in making the VoIP decision. What do you advise your clients to be aware of?

In deciding to move to VoIP, we advise our enterprise clients to consider the following:

• Capital investment — What is the initial cost?
• Existing equipment — Can it be re-used or upgraded?
• Training needs — Will users need to be trained? At what pace?
• Infrastructure requirements — Does the network need upgrading?
• Software upgrades — What needs to be done so it all works?
• Regulation — Are there regulatory issues that impact the decision?
• Falling prices for traditional voice — Cost analysis vs. needs

What is the business case for enterprises moving to VoIP?

We look at four key areas to determine the business case for enterprises moving to VoIP:

• Benefits — What are the potential benefits?
• Costs — What are the real costs (CapEx and OpEx)?
• Risks — What are the real risks (technical and commercial)?
• What is the true opportunity (strategic benefits)?

Each of these areas needs to be fully vetted to reach an informed decision and drive value from a VoIP deployment.

How is VoIP changing the process of decision making for enterprise communications? What levels are involved today, CXO?

VoIP is an issue for the CXOs, not just the IT Department. It’s important to note that the CEO, CFO, COO, and CIO all have different goals and issues with VoIP. In our research, we’ve found that:

• CEOs are most concerned with operating risks, roll-out plan and understanding the business case.
• CFOs are most concerned with costs, cost savings, depreciation/amortization, tax implications, and understanding the business case
• COOs are most concerned with operating risks, referencing sites, potential business improvements, roll-out plan, security threats, regulations, contingency plans, and understanding the business case
• CIOs are most concerned with costs, cost savings, business process improvement, rollout plan, security threats, network assessment, depreciation/amortization, selecting vendors/partners, contingency plan, and understanding the business case.

Understanding the business case is the only criterion that affects all CXOs.

What is your advice to companies thinking of moving to VoIP? What key things should they consider?

First, look beyond cost reduction — What can they expect to gain by moving to VoIP?

Second, before they do anything else, start with the network — Is it ready for VoIP? They need to check for interoperability, choose experienced partners, and do extensive testing. Third, they need to train their users so they can all use the system effectively. Fourth, they should move in stages, but quickly, so that a VoIP rollout is as smooth as possible.

Finally, they need to maintain good skills in both voice and data within the team that manages the network, and make sure the network is constantly checked for optimal voice performance.

What is your advice to the vendors? What key things should they consider?

Vendors need to realize that, while cost is important in talking to prospective customers, they need to keep it in perspective. The VoIP sale will ultimately be based on functionality and the ability of VoIP to transform enterprise communications. Vendors need to offer integrated solutions and partner, as needed, to enhance performance, so that they deliver turnkey solutions, including training. Probably most importantly, they need to sell to the C-Suite. VoIP is not just an IT decision.

Aggregate VoIP revenues are predicted to exceed $1 trillion between now and 2010. How is that so? What is the next generation for VoIP?

We at Deloitte expect a trillion dollar convergence industry to emerge from VoIP, enterprise collaboration software, mobile phone content, IP television, and networked games. In short, convergence will create new product categories and new markets. But, more importantly, in some cases, it will change the structure of existing industries, shifting the balance of power and altering the basis of competition. IT

Rich Tehrani is President and Editor in Chief at TMC.

» Return to Executive Suite Home


Technology Marketing Corporation

2 Trap Falls Road Suite 106, Shelton, CT 06484 USA
Ph: +1-203-852-6800, 800-243-6002

General comments: [email protected].
Comments about this site: [email protected].


© 2023 Technology Marketing Corporation. All rights reserved | Privacy Policy