Cutting-Edge Communications In Business Telecom
The phone in your pocket now doubles as a camera and an Internet device, but the one on your desk is still just a phone, right? Sorry, but if so, you’re behind the curve. A fundamental shakeup is underway in business telecommunications. Industry experts say that the hottest trends can be summed up in three terms: VOIP, wireless, and cloud.
VOIP—voice over Internet protocol—may sound a bit old hat to people who follow developments in the telecom world, but it is the underlying technology that has given rise to newer, fresher corporate buzz phrases like “unified communications” and BYOD (“bring your own device”).
The proliferation of wireless devices, such as iPads and smartphones, is pushing businesses to stop issuing standardized, company-owned phones and laptop computers to employees. Instead, companies are increasingly likely to adapt their security measures and open their communications networks—now, thanks to VOIP, one and the same as their information-technology (IT) networks—to accommodate whichever devices employees prefer. Hence “bring your own.” Cell phones and iPads also are among the technologies being unified with desktop phones, e-mail, and other media under the heading “unified communications.”
“Cloud” refers to what happens when a company offloads the storage and management of some or all of its combined IT and communications network onto a third-party host. Hosting of everything from servers to software applications has become a major global enterprise.
In a nutshell, VOIP explains why high-tech companies such as Microsoft, Cisco, and Google are now in the telecommunications business. “Cloud” explains why telecom companies like AT&T, Verizon, CenturyLink, and TDS Telecommunications have entered the data storage and IT hosting business.
VOIP Comes of Age
VOIP, basically synonymous with Internet protocol (IP) telephony, has been part of the conversation in telecommunications since about 2000. Vonage, the best-known provider in the consumer market, was launched in 2004. But VOIP “didn’t really work” until about 2006, and it “didn’t work really well” until about 2009, says Joe Hines, CEO of Voice & Data Networks, Inc., in Edina, which designs and manages communications systems for corporate clients.
If it’s true that the technology finally emerged as ready for prime time in approximately 2009, that would help explain vendors’ insistence that the economic recession so harmful to many businesses created barely a pause in the rapid spread of VOIP.
After the economy nosedived in late 2008, the VOIP adoption rate among business customers of TDS Telecommunications “actually picked up,” says Joe Kramschuster, director of commercial product management for the Wisconsin-based phone-service provider that serves markets in Minnesota.
TDS is seeing an 80 percent annual growth rate in its VOIP business, Kramschuster says. “We’ve had phenomenal growth for the last four or five years.” Likewise, Marco, Inc., based in St. Cloud, which designs and manages communications systems for corporate customers, has doubled its business over the past five years, says Steve Knutson, Marco’s chief information officer and vice president of professional services.
Marco has been selling phone systems since 1985, Knutson says. “We went through the transition from analog to digital, and then we went through the transition to VOIP.” Today, VOIP is almost 100 percent of Marco’s telecom business, he says. “That’s been the case since about 2008. Even though the economy was tanking, that’s when the products became mature enough that VOIP was easy for us to support.” He admits that business slowed somewhat in 2009, but “the floodgates really opened in 2010.”
Kramschuster says that the recession made IP telephony more attractive to some corporate customers because it can cut expenses and boost productivity. The cost savings aren’t necessarily as straightforward as in the consumer market, where users switch to VOIP service purely to lower their monthly phone bills, he says. But the economies can be significant.
For instance, Kramschuster says, when data and communications run on a single IT system, instead of an Ethernet and a separate PBX (private branch exchange) phone system, a business doesn’t need two different groups of employees or contractors to manage the two systems; the IT staff does it all. Also, a company with multiple locations doesn’t need a receptionist, incoming phone lines, and phone service at each location; a single receptionist can distribute incoming calls to various branches.
Changes to phone service also become much quicker and easier, Kramschuster says: “Everything you used to have to call the phone company to do, with VOIP you can do it on an Internet portal.”
Businesses sometimes do see the same kinds of direct savings on monthly phone bills that consumers get with VOIP. That can happen, for instance, when wireless phones are integrated with office VOIP systems, “which is the real hot trend today,” says Marc Agar, president and CEO of CA Communications, Inc., in Wayzata, a telecommunications consulting firm.
For executives traveling overseas, using cell phones to make calls to the United States can become expensive. Integrate those phones with a VOIP system, however, and calls from many countries will cost you nothing, Agar says. He knows a Minneapolis architecture firm that found itself spending $30,000 a month on cell phone bills when it sent a number of people to Europe to launch a new office, he says. When the firm integrated the mobile devices with a VOIP system, he says, “that bill went to zero.”
Cost savings aren’t the only result when VOIP meets mobile devices. Take so-called “find me, follow me” functions. An IP telephony system can be set up so that an incoming call to your direct number at the office can ring the phone on your desk, and/or your cell phone, and/or your home-office phone. The caller has no idea which one you’re answering.
Transferring mobile calls becomes simple, as well. “Hit a button on your integrated cell while you’re in your car, and you can transfer a customer to someone back in the office,” Agar says.
“Unified communications” goes far beyond seamless handoffs between landline and wireless phones. With VOIP, telephony essentially becomes just one more application riding on the company’s IT network. Voice communication can be integrated with other applications, such as e-mail, voicemail, fax, audio conferencing, videoconferencing, web conferencing, and instant messaging.
Once the economic discussion is over, “VOIP is all about the apps,” says Marco’s Knutson. With a program such as Microsoft Lync, he says, “I can use my wide area network [WAN] to do video chat, secure instant messaging, and presence management.” In presence management, he explains, “I can look at a Word document or an e-mail and see that Brian is on a call, Carla is in a WebEx meeting, and Clay is out of the office today.
“If Brian is on the phone,” Knutson continues, “I don’t want to call him, but I can [instant-message] him. Or I can right-click to share my desktop with him . . . I have a Cisco phone with a camera built in. My VP of sales in Fargo has the same phone, so when we talk it automatically starts a video call unless I put it in privacy mode.”
With a VOIP system, Hines says, you can conduct, say, a 10-person conference call, with participants in offices, cars, and airports, some of whom are calling in on standard phone lines, some using the voice-and-video capabilities of Skype or FaceTime, some even texting.
“That’s unified communications,” Hines says. “The conversation used to be about VOIP. Now it’s about what you’re doing with VOIP to bring value to your business.”
Where do organizations get IT systems that allow them to do such things? Fortune 500–sized companies such as UnitedHealth, Target, and Medtronic build and run their own network infrastructures and probably will continue to do so, Hines says. For most companies that aren’t in the IT business, however, the question is, who should own and manage the network?
As Hines puts it, small and midsize companies increasingly are inclined to say, “’I don’t want to build or manage the system, or even own it. Let somebody else deal with the spam on my e-mail system.’
“That,” he says, “is the ‘cloud’ conversation.”
But Aren’t You a Phone Company?
“Cloud computing” has landed on several snarky lists of most-hated IT buzzwords for the past few years. Knutson describes “cloud” as a marketing term for hosted or managed IT services. If the application you are using resides on somebody else’s servers, as with Google Apps, or your company’s computer network is owned or managed by a third party, you are “in the cloud.”
Whatever you care to call it, the trend is perfectly real. “Managed services” has become Marco’s fastest growing area, Knutson says. His company manages client systems “that include phones, data, video, and print.
“We can’t hire people fast enough on the managed services side,” he said in January. “We have 15 open positions for remote troubleshooters.”
The cloud business is booming worldwide. Technology-sector research firm Gartner, Inc., estimated last September that the public cloud services market would grow by 19.6 percent in 2012 to $109 billion globally. Infrastructure as a service (IaaS) represents a small part of that market, but it is the fastest-growing segment. Gartner expected IaaS to grow by more than 45 percent last year, from $4.3 billion worldwide in 2011 to $6.2 billion in 2012.
Those kinds of growth rates, coupled with the fact that business telecommunications networks are merging with IT networks, have lured a number of telecom providers into the IT-hosting game of housing and managing clients’ networks, data, and applications.
Several telcos have beefed up their presence in the colocation and hosting markets by means of acquisitions. In 2010, TDS acquired VISI, Inc., in Eden Prairie, which operates five secure data centers in three states. In 2011, Verizon bought data-storage company Terremark Worldwide, Inc., for a reported $1.4 billion. Also in 2011, the same year it acquired Qwest and became the Twin Cities’ provider of traditional landline phone service, CenturyLink paid a reported $2.5 billion for data-storage company Savvis, Inc.
Hand Off the Headaches
Why the sudden flurry of investments by telecom companies? “Recently the technology hit a tipping point where it’s more economically feasible to do a lot of things in the cloud,” explains Tyler Middleton, CenturyLink vice president and general manager for the Twin Cities metro area. “Now you’re seeing software as a service—your Microsoft Exchange Server in the cloud, your [enterprise resource planning system] in the cloud, your security in the cloud . . . . You’re also seeing infrastructure as a service, meaning that a business doesn’t have to buy servers and manage a network for peaks of activity.”
Cloud providers are making it easier every day for companies to farm out their IT systems, VOIP and all, Middleton says. Last October, CenturyLink’s Savvis subsidiary launched a program called Savvis Direct, available to businesses of any size. “You can just go online and choose the number and speed of servers you want, the operating system you want, and the applications you want,” Middleton says. “You can pay for it all with a credit card, and have it up and running almost immediately.”
What is the pitch to businesses that is compelling enough to drive what some experts say is a 20 percent annual growth rate in the cloud market? VISI CEO Terry Swanson lays it out like this: Are you a retailer or a law firm or a window manufacturer? Then why do you need the headache of building and managing an IT network? VISI will do that for a monthly fee. Then your in-house IT specialists can quit worrying about the basic infrastructure and concentrate on developing applications that help you sell goods or practice law or make windows.
When businesses turn over their IT networks to a hosting company like his, Swanson says, “they get enterprise-grade technology they couldn’t have afforded on their own. They get a data environment that’s highly secure. They change their IT model from a capital expense to an operating expense. They pay for only as much server capacity as they need. They don’t have to focus their own IT resources on running the hardware.”
Oh, and since the IT system is also the phone system, the business can quit worrying about that, too.