VoIP services held up well during the recent recession, along with IT security. Now, hosted VoIP services are gaining in appeal for smaller companies for reasons of cost and convenience, observes Star's Hugo Harber

In 2009, economic pressures reduced the growth rates of many IT sector products and services, although sales in IT security proved one of the most resilient in the face of recession as something that small and medium-sized enterprises (SMEs) simply cannot risk doing without. However, there was, reportedly, one other area that held strong, albeit from a small base.

In March last year, a survey by research firm IBISWorld showed that voice-over-IP (VoIP) services topped the list of IT sectors that were defying the recession. With a projected revenue growth of 20.1 %, VoIP services bucked the downward trend and sales look set to continue to rise through this year as organisations look for ways to embrace the cost and performance savings that VoIP promises.

This rising demand is, perhaps, not surprising when we consider that VoIP can offer significant cost savings on local and international calls compared to traditional PBX fixed line systems. Equally important, it also offers business leaders the opportunity to have a transparent and predictable view of a company's communications costs, something that many finance departments struggle to have a clear view of, let alone can effectively forecast for.

VoIP has long been heralded as poised for mass-market adoption, and we are now starting to see that this is the case not just for larger enterprises with 1,000-plus staff but also for companies with 20 employees and upward. This rise in demand with SMEs was borne out by a recent survey carried out by Star. The study revealed that among those businesses with 100 employees or fewer, 41% have already deployed VoIP technology since it was first introduced in the late 1990s. A further 20% of SME respondents said they are looking at deploying VoIP within their business over the coming year, showing a 50% increase in the penetration of IP telephony over the next 12 months.

These findings also reflect research conducted by Synergy Research Group where IP Telephony was found to be the fastest-growing segment of the European enterprise market in 2009.

So what are the factors driving this upwards trend amongst SMEs? A business can stand or fall on its communications technologies, and increasingly, organisations require telephony systems that are not only cost effective but can help to deliver better customer services, and can enhance productivity. This is where VoIP can really deliver over traditional PBX systems. Beyond what is, perhaps, the most compelling reason - cheaper calls - there are a number of factors driving the demand.

As VoIP is based on software rather than hardware, it can be easier to maintain, upgrade and scale up or down. With IP telephony, SMEs can also add functionality and flexibility to their communications to deliver an enhanced level of customer service, such as directly connecting Web users with customer support staff and using automated functions such as call forwarding and three-way calling, all of which are rapidly becoming essential tools in our 24/7/365 world. VoIP is also the route to more advanced applications that converge together, much like the oft-cited Unified Communications philosophy. What this actually means is that we are seeing facilities like "presence", mobility solutions and rich-media conferencing converging voice, data, application and video technologies and services.

Whilst there are clear business benefits, as with any emerging technology there are a number of factors that businesses should be aware of before making any commitments. The central and over-riding issue with VoIP is ensuring that call quality and reliability are of a sufficient level so that there are no issues such as jitter and latency, which can result in a poor user experience. There are a number of factors that can impact a high quality of service and these can range from IP networks not being ready for real-time communications to organisations employing VoIP technology from more than one vendor.

Real-time applications such as VoIP are more sensitive to network imperfections and high-quality VoIP relies upon consistent, stable and low-latency network connections. However, most existing networks are built upon technologies that were not originally designed to provide these. As with any complex environment, VoIP requires telephony experts as well as network specialists which, for an SME, could mean further investment in training or recruiting personnel with these specialist skills.  In fact, SME respondents in our recent survey also revealed that the leading barrier to adopting this technology is a lack of in-house expertise.

So, does that mean if you don't have the in-house expertise required to manage a VoIP system then this technology is not for you? No. Hosted and managed IP telephony can free organisations from the management distraction of overseeing the network, hardware and software and return a consistent, reliable and guaranteed high level of service.

Demand for hosted VoIP is certainly gaining ground as SMEs look to embrace the cost and performance benefits of IP telephony; not having to manage it themselves just makes the proposition all the more compelling. In fact, Illumine Consulting now estimates that the hosted VoIP segment of the market is growing 11% quarter on quarter.

With a hosted VoIP solution there are no set-up costs or capital expenditure and no hardware to buy, run or maintain. Moving communications costs to a managed operational cost expense, with a fixed price, per user, per month, also makes for more predictable budgeting and billing for the finance department. Critically, the quality of service is managed by the service provider with the expertise and performance management systems in place to ensure that call quality is consistent and flawless.

What seems apparent is that only the largest enterprises want to continue investing in their own infrastructure and internal IT services whilst small and medium-sized businesses are no longer viewing this as a sensible way to apportion their limited IT resources. Instead they are looking to invest on-premise where it makes sense to do so and then access other technologies via service providers, without the cost of ownership bundled in and all the inherent financial and operational risk that involves.

In this way they look to get more from existing resources, so they can focus their attention on key business objectives and ultimately increase the value of their business. Managed services provide the best platform for delivering on these promises for VoIP as well as many other business-focused technology solutions.


Hugo Harber is director of convergence and network strategy at Star

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