MARKET BRIEF Plug and Play: Managed IP Telephony

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1 MARKET BRIEF Plug and Play: Managed IP Telephony Sponsored by: NEC William Stofega September 2006 IP TELEPHONY: BENEFITS AND CHALLENGES Global Headquarters: 5 Speen Street Framingham, MA USA P F After years of hype, IP telephony has made the shift from an emerging technology to a viable business solution. IP telephony is gaining accelerated business adoption because it provides measurable cost savings, simplifies the delivery and management of communications, and facilitates convergence for more flexible business practices. Beyond lowering costs for enterprise customers, IP telephony addresses and solves real problems businesses face on a daily basis thus driving value as well as lowering operational expenditures. Today the typical business telephony situation is a fragmented, multi-generation environment of several dimensions:! Premise equipment is a mix of PBXs, key systems, and desktop phones from a variety of vendors and suppliers.! The access and transport facilities associated with voice are a hodgepodge of private trunk lines, POTS, Centrex, ISDN, Internet, and data networks.! Contracts and bills come from multiple telephone companies, maintenance firms, and equipment suppliers. IP telephony represents an opportunity to eliminate redundant infrastructure, manage all voice and data communications via a single Internet network with a single provider, and deploy the same telephony solution in every branch office one that can be administered and managed remotely from a Web-based interface by in-house staff. Through integration of business applications and communications, companies can also improve their business efficiency and effectiveness to realize a competitive advantage and grow top-line revenue. However, IP telephony also brings with it technical challenges related to converged networking and very high requirements for quality and reliability of voice communications. Particularly for smaller businesses, the tremendous business benefits that result from network convergence are offset by resource limitations at a company whose primary business is not voice communications. Often, the typical SMB does not have the time, expertise, or money to administer and monitor a converged network and make equipment updates and upgrades that are necessary to deliver secure and reliable voice communications that meets user expectations.

2 Fortunately, a purchased system is just one of several solutions available for IP telephony. This White Paper will discuss the various implementation options available to companies, and how a managed approach to IP telephony provides compelling financial and administrative advantages for SMBs. IP Telephony: The Traditional Approach As mentioned above, purchasing, installing, and managing your own IP PBX is often the most popular route for companies who have the budget and resources to maintain a long-term capital investment in IP telephony. The "do it yourself" model follows a traditional framework for IP telephony that was most prevalent during the halcyon days of the TDM PBX. In light of the complexities of IP telephony and convergence, the downward pressure on budgets, and the scarcity of affordable skilled resources, it is expected that a substantial percentage of these companies will in fact consider outsourcing as a potential strategy. This is especially the case for medium and small businesses lacking in-house technical expertise. With the "do it yourself" model, customers purchase an IP PBX, "converged" applications, implementation, maintenance, and carrier services from a variety of suppliers and deploy the system on their premises. On the plus side, the customer has complete control over system management, maintenance, and support of the system. However, disadvantages to this model include a substantial upfront capital investment, a skilled technical staff and tool set to manage and maintain the system, and the responsibility for system upgrades. Also, the entire process of purchasing hardware, applications, and carrier services is repeated on average every 8 10 years given the historical trends purchasing trends. In addition, the customer must coordinate activities with multiple vendors and service providers for service provisioning and problem resolution. Hosted IP Telephony Businesses with limited IT resources and funding for IP telephony projects may consider subscribing to hosted services such as IP Centrex or hosted IP telephony. IDC defines hosted IP voice service as an IP-based call management server housed in a carrier's central office or a service provider's network operations center that is scalable and sharable across many users. It delivers all of the features of a PBX and supports many functions not available on traditional PBX systems such as remote user, find me/follow me, Web-based management, and desktop integration. The service delivery model is a flat-rate monthly recurring cost per seat that incorporates local calls, long distance calls, Internet access, and call features. There are many names used to describe IP-hosted voice services. Other names for this include outsourced PBX, virtual PBX, virtual key telephone system, IP Centrex, or simply "ditching the switch." IDC differentiates hosted IP voice services from several other services that are closely related. These include: 2 # IDC

3 ! Centrex IP. This means IP enabling the traditional Centrex Class 5 circuit switch with IP interfaces or IP adjunct equipment to deliver Centrex services over an IP network. A typical deployment example is the use of IP trunking to extend a Class 5 switch's Centrex capability. The key to Centrex IP is that Centrex features remain resident in the traditional circuit switch and are the same for IP and legacy endpoints.! Hosted IP PBX. Some companies purchase an IP PBX and find it effective to locate the PBX platform offsite in a third-party datacenter. The datacenter delivers the security, environment, and resources to ensure reliable 24x7 service. This is a datacenter-hosting model, similar to hosted Web sites. It is primarily a real estate and managed services business model. It is fundamentally different from the hosted IP voice service model, which is scalable across a theoretically unlimited user base and is constantly upgraded with new technology and feature sets.! Hosted IP telephony. There are a handful of service providers that use telcograde technology to offer scalable, network-based business telecommunications. These companies push the PBX intelligence into the network cloud to deliver services internal and external to the corporate network. These companies position themselves as managed services providers. IDC differentiates them from hosted IP voice service providers because their infrastructure is not based on open standard IP call agents, but rather on a proprietary TDM-based architecture. Both the IP Centrex and hosted IP telephony options hold great financial appeal for customers because the upfront capital expense is replaced by a monthly recurring operational expense. Also, the service provider assumes responsibility for service delivery according to a stated service level agreement (SLA). These options are attractive for several other reasons:! They allow the business to focus on its core business activities and rely on SLAs to ensure that its service provider maintains a ready-for-business solution.! They provide protection against technology obsolescence.! They are easy to understand a single monthly recurring price includes all costs (no need to budget for unexpected or fluctuating operational expenditures).! They allow companies to translate capital expenditures into operational expenditures.! They obviate the need for the business to maintain up-to-date in-house technical expertise and management tools.! Critical areas such as security and QOS can be monitored on a 24x7 basis. In exchange for these benefits, however, the customer must accept reduced flexibility, customizability, and a heavy reliance on the service provider IDC #

4 Understandably, many businesses are reluctant to cede management control, security, and even visibility into mission-critical business communication, and IDC survey data provides some validation regarding these concerns. Figure 1 clearly points to concerns regarding a hosted solution. FIGURE 1 Primary Reasons for Selecting IP PBX Q. What was the primary reason you chose an IP PBX versus a network-based solution like IP Centrex? Dont know (2.8%) Service not available (11.1%) Lack of customization capabilities (13.9%) Did not want phone system outsourced (44.4%) Lack of features (27.8%) n = 36 Source: IDC Enterprise VOIP Survey 2005 The Best of Both Worlds: Managed IP Telephony A managed IP telephony model combines the strengths of a purchased model with those of a hosted service. In a managed IP PBX service scenario, the customer owns the PBX but contracts with an outside party, such as a telecommunications service provider, to manage and monitor the PBX from a remote location. The IP telephony equipment is deployed on the customer's premises and supports tight integration with the customer's applications and databases. This onsite integration results in the desired levels of management control, security, a rich set of calling features, and total flexibility for application integration. 4 # IDC

5 Like a hosted service, managed IP telephony outsources ongoing system administration, management, maintenance, support, and updates. In many cases there are different levels of service available, including a basic service that may include only QoS monitoring and failure alerts, while more sophisticated levels of service may include security and remote backup. Effectively, the service allows the customer to realize the full suite of benefits of outsourcing while enjoying shared management control, security, and communications flexibility. End users also enjoy a level of support they might not have had previously while supplying instant access to new services and updates. Typically, managed IP telephony services also include the planning, design, and integration of the system prior to the "turning" on of the service. From a financial perspective, managed IP telephony allows companies to translate capital expenditure into predictable operational expenditures with low upfront expenses. This service configuration is especially popular with those customers who are uncomfortable with learning the technical issues behind running an IP-based telephony system. In addition, managed IP PBX users are more likely to utilize and develop specialized applications that are intricately coupled to their voice system. As seen in Figure 2, IDC survey data indicates the management areas that businesses are most interested in outsourcing. FIGURE 2 Features Included in Managed IP Telephony Contract Q. Which of the following are included in your managed IP telephony contract? Total answering Software and hardware upgrades Security monitoring Quality of service management and monitoring Other (number of respondents) Source: IDC Enterprise VOIP Survey IDC #

6 Much of the benefit of moving to IP telephony is the ease of integration of proprietary business applications and databases with the business communications system. A managed solution allows for a tighter integration with existing applications and databases allowing for greater customization resulting in a more productive experience for the employee. CONCLUSION! IDC believes that although VoIP can reduce costs and enable seamless mobility and connectivity, an often overlooked capability is customization. Customization will allow employees to create simple applications that can help make their jobs less stressful. Some customization will of course be welcomed by corporate IT managers, but limits must be imposed on how much customization can take place.! Although the option to completely outsource through services such as IP Centrex are available, many enterprises will prefer to maintain some control over their CPE and thus tend to deploy a managed solution.! Maintaining some control over the IP PBX allows for tighter integration with existing applications and infrastructure.! Large corporations often employ a professional staff dedicated to keeping their data and telecommunications networks performing at an optimum level. Still, convergence requires that networks perform within very narrow set of parameters. Thus, proper assessment of both LAN and WAN are key to a successful VoIP implementation.! Upgrades to network infrastructure should be discussed in the context of improving performance of data applications as well as preparation for a bulletproof IP telephony implementation.! IP telephony implementation is not just about deploying new technology, it also implies cultural change to the end user and IT staff with regard to how the new system is supported and integrated into the business environment. These issues need to be mapped out well before the last handset is deployed to the desktop.! It is important to make sure customers walk before they run and that their basic telephony needs are well met before proceeding to the more complex levels of an IP deployment schedule.! A well thought-out deployment plan includes beta test with select end users to ensure a group of end users. This validates the technology as well as anticipates the problems that might occur. Flash cuts of entire networks should be avoided at all costs. 6 # IDC

7 How NEC Can Help NEC Unified Solutions' Managed IP Telephony Service (MIPT) provides SMB customers with a means of realizing the competitive benefits of IP telephony while minimizing their technology risks, business risks, and financial investment. With no upfront costs, this monthly subscription service provides customer with an onsite NEC UNIVERGE platform, converged applications, and a full complement of professional and managed services, including:! Network readiness assessment! System design and installation! 24x7 monitoring and incident resolution! Maintenance of IP telephony equipment! Management of software updates! Ongoing trend analysis and recommendations! Dedicated customer service manager The MIPT service is offered with Essential and Comprehensive options, which differ in the level of support for the customer's IP network (routers and Layer 2/3 switches) supporting transport of VoIP packets:! Essential MIPT service provides full management of IP telephony infrastructure and applications with regard to availability, QoS and software updates, as well as monitoring and incident management of the supporting data infrastructure.! Comprehensive MIPT service provides complete turnkey management of both the IP telephony and supporting IP network so that customers and their IT staffs can focus on their core competencies. Monitoring is conducted remotely from NEC's state of the art Network Operations Center, which integrates best-of-breed monitoring systems, customized notification and escalation paths, and a secure customer Web portal that provides real-time visibility into IP telephony availability and performance IDC #

8 With NEC's Managed IP Telephony service, customers enjoy:! Improved business productivity! A dedicated, feature-rich IP telephony platform! Total system flexibility and customization! Service availability, reliability, and quality backed by service-level guarantees! Lower cost of ownership at a predictable monthly rate With over a century in manufacturing and installing telecommunications equipment, NEC has the expertise and resources SMBs need to implement a successful IP telephony experience. Customers benefit from NEC's complete life-cycle approach to IP telephony, from network readiness assessments to design and installation to day 2 support. Copyright Notice External Publication of IDC Information and Data Any IDC information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate IDC Vice President or Country Manager. A draft of the proposed document should accompany any such request. IDC reserves the right to deny approval of external usage for any reason. Copyright 2006 IDC. Reproduction without written permission is completely forbidden. 8 # IDC

Global Headquarters: 5 Speen Street Framingham, MA 01701 USA P.508.872.8200 F.508.935.4015 www.idc.com

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