Global Headquarters: 5 Speen Street Framingham, MA USA P F

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1 WHITE PAPER Voice Transformation: The Path to Unified Communications Sponsored by: AT&T Amy Lind November 2012 Courtney Munroe Global Headquarters: 5 Speen Street Framingham, MA USA P F IN THIS WHITE PAPER Enterprise voice communications is undergoing a radical transformation, shifting from an industry defined by the PBX equipment employed for decades that enabled basic calling services to an applications-focused IP-enabled communications ecosystem. This ecosystem provides the foundation for enterprises to engage in an increasingly social, mobile, and global society, with converged applications that address internal issues such as cost efficiency and time to market as well as redefine relationships with business and consumer customers layered on top. This IDC White Paper analyzes the transformation of voice from legacy solutions to an Internet Protocol (IP)-based platform where voice over IP (VoIP) is positioned both as one of the essential applications enabled by this transition and as a critical building block paving the road to unified communications (UC). IP is the underlying foundation enabling the transformation to converged solutions, with Session Initiation Protocol (SIP) connecting VoIP transport services with applications and the key enabler allowing applications to integrate with the network. This paper also outlines the challenges enterprises face in migrating to an integrated, all-ip environment and presents strategies they should consider to successfully transition to unified communications, based on their business objectives and existing IT infrastructure. It also discusses AT&T's Business VoIP and UC solutions portfolios and includes case studies that highlight AT&T's ongoing experience working with customers on transforming their voice communications. SITUATION OVERVIEW The Evolution of Enterprise Voice Enterprises are relying on technology more than ever to control costs, manage complexity, and generate productivity gains. Yet technology elements often devoted to solving a specific need have become overwhelming to maintain and are frequently underutilized. Nowhere is this more evident than in the voice technology arena where past and present choices involving legacy and emerging systems still lay strewn across many enterprises. Further driving complexity are the rapid expansion of the virtual workforce, the growing enterprise demand to connect devices and users across multiple geographies, and the need to integrate many disparate vendors to make services and applications available enterprisewide. It is the promise of reducing this complexity and gaining the business advantages of newly converged, presence and voice-enabled applications that leads many enterprises to embark on the path to unified communications.

2 The transformation of voice from traditional TDM to more sophisticated IP-based unified and mobile-centric services means that the future growth of voice will come from integrated voice and data solutions and fixed mobile convergence (FMC) services. TDM-based voice solutions will continue to play a role in the wireline voice market. However, as Figure 1 illustrates, innovation, investment, and growth will increasingly favor VoIP services over TDM, with VoIP services revenue experiencing a five-year compound annual growth rate (CAGR) of 17.6%, compared with a -9.3% CAGR for TDM voice. FIGURE 1 U.S. Enterprise Wireline Voice Revenue by Segment, ($B) VoIP revenue TDM revenue VoIP growth TDM growth Growth (%) Source: IDC, 2012 Many enterprises have implemented or are considering implementing VoIP, a crucial step toward opening the door to an integrated voice and data applications environment. The pace of VoIP adoption varies depending on an enterprise's business objectives and existing IT infrastructure. According to IDC's 2011 WAN Manager Survey, VoIP usage is gaining momentum within the enterprise. More than 80% of respondents said their organization has deployed VoIP, up from 74% in # IDC

3 For many, deployment of VoIP begins in the WAN where toll bypass capabilities help reduce long distance calling expenses, especially intercontinental calls. As Figure 2 shows, VoIP over corporate WAN is the most widely deployed solution across all business sizes, while one-fourth of respondents have deployed a hosted VoIP solution. Of the one-fourth of respondents that have deployed an onsite IP PBX solution, 42.9% reported that they have implemented SIP trunking. Additionally, 36% of respondents with SIP trunking said they currently use UC and a further 28% plan to use it within the next year, supporting the notion that SIP investments go hand in hand with UC planning and deployments. FIGURE 2 Current VoIP Deployments Q. What types of voice over IP service does your organization currently use? VoIP over corporate WAN VoIP over broadband Hosted VoIP service Onsite IP PBX Dedicated hosted IP PBX Desktop-based VoIP such as Skype (% of respondents with VoIP) n = 810 Note: Multiple responses were allowed. Source: IDC's 2011 WAN Manager Survey Premises-based solutions have garnered much of the mindshare to date, yet businesses of all sizes are exhibiting a growing interest in hosted, cloud, and managed solutions. Such solutions require minimal to no up-front capital expenditures, thereby providing immediate cost savings that are well suited to today's uncertain economic climate. In addition, hosted/cloud or managed models offer a greater degree of flexibility and functionality than is available with TDM-based voice services, an important differentiator for businesses competing in today's increasingly complex, global, and rapidly changing business environment. Many businesses are also embarking on the migration path from legacy, TDM voice services to VoIP solutions. Survey results show that enterprise interest in migration is expanding, with 36.7% of respondents indicating their company plans to migrate some portion of employees from TDM to VoIP in the next 12 months. The top factors cited for implementing VoIP among prospective users were cost reduction/savings (66.4%), improved productivity (50.2%), and ease of management (44%) IDC #

4 FUTURE OUTLOOK Building Blocks Enabling Communications Integration Communications networks are migrating to IP to leverage the potential of IP-based communications and improve how enterprises communicate, collaborate, and ultimately achieve their business objectives. The key enabler of this communications transformation is the intelligent, IP-based network where VoIP is layered on top of the global MPLS network with termination in an IP framework (see Figure 3). Riding on top of that is the application layer, which leads to unified communications, collaboration, and other applications. Essentially, the layered network provides the building blocks that enable the evolution from individual products and applications to multiple, fully integrated communications solutions delivered over a secure infrastructure. FIGURE 3 An Intelligent Network Provides the Building Blocks That Enable Evolution to Solutions AT&T Connect AT&T UC Voice AT&T UC Central AT&T Telepresence Voice DNA (IP Centrex) Hosted IP Contact Svc SIP connected; common, highly secure MPLS infrastructure, VoIP transport services to both AT&T & 3 rd party services, on net AT&T Mobile Network AT&T & 3 rd Party VOIP/UC IP Flexible Reach (Local/LD) AT&T Application Layer AT&T IP Voice Network IP Toll Free (IP8YY) Fixed Mobile Convergence Mobile Carrier Networks Border Elements Network Gateways AT&T Global MPLS Network (IPv4/IPv6) Border Elements Border Elements Ethernet access Int l IP Networks Peer VoIP Networks Mobility Managed Router w/gateway Client or T Managed Router Broadband PSTN SIP Phone CPE BE TDMPBX IP PBX Source: AT&T, # IDC

5 IP is the first step on the convergence road map and the launch pad in the evolution away from individually deployed products, services, and applications toward a unified communications and collaboration environment. Emerging UC-based applications and solutions especially those delivered "as a service" can be added virtually wherever enterprises need them, as they need them, giving businesses the increased agility they need to maximize the way they communicate and collaborate and to add applications that change the way they conduct business as their business needs evolve. This allows for productivity increases, cost savings and efficiencies, and increased functionality not achievable in a legacy, siloed network architecture, all tailored to meet the needs of each enterprise based on its unique environment. Advanced features and functionalities, business continuity, presence, and the integration of voice and data with business applications are also integral aspects to any UC implementation. Applications Integration IP is the foundation for enabling converged solutions and the platform for applications integration. It enables UC, which, broadly defined, is the integration of multiple communications and collaboration tools with presence behind a single user interface that is accessible from almost any device, anywhere. UC provides many benefits including productivity gains, improved responsiveness to customers, and improved business interactions which together transform how enterprises conduct business. Moreover, as collaboration becomes increasingly mission critical for many enterprises, UC provides tools to help significantly improve how individual employees and teams within the business as well as suppliers and customers external to the organization interact and perform. UC is also unique in that its focus on real-time connectivity inherently points toward mobilizing the workforce. Consequently, some enterprises are prioritizing fixed/mobile plans within their UC road maps. The cost and complexity of delivering multiple UC tools in the form of premises-based hardware and software multiple licenses, expensive upgrade and support costs, and integration challenges have discouraged many enterprises from taking advantage of the benefits of UC. However, moving UC to the cloud helps reduce the cost and complexities associated with UC by bridging the gaps between offices, enterprises, and geographic locations. In addition, applications delivered as a service through the cloud enable organizations to scale and achieve the flexibility necessary to meet dynamic business requirements. Essentially, moving UC to the cloud: Speeds up time to market Invites technical innovation Accelerates business transformation Minimizes risk associated with new business ventures Helps deal with fluctuating market conditions 2012 IDC #

6 The result is that cloud-based UC supports top-line growth by increasing an enterprise's ability to respond more quickly to business opportunities and challenges while controlling costs through more efficient use of assets. Growing adoption of UC and collaboration brings with it new challenges for many enterprises as they grapple with implementing a variety of UC components to meet the communications needs of an often diverse employee base. The result whether cloud or premises-based installations is to either utilize a "rip and replace" approach or implement multiple solutions with limited integration. However, a growing number of UC installations feature hybrid "as a service" architectures, meaning that some functionality is delivered from the cloud, while other functionality is delivered via a premises-based platform. For example, an enterprise may rely on the cloud for presence, video, and Web conferencing while maintaining onsite platforms for voic and until they are fully depreciated. A cloud-based, hybrid UC solution architecture enables enterprises to leverage their existing communications investments and integrate new UC components with the goal of transforming business processes. The emergence of UC solutions has increased interest in tools to presence-enable enterprise applications. Instead of users accessing closed applications such as sales force automation tools, the integration of mobile business applications with UC and presence Mobile Enterprise Applications Platform (MEAP) allows enterprises to draw upon the presence indicators of a UC platform and merge that presence information with applications that require specific employees to expedite business processes. The result is improved time to market, product quality, and customer relations. Enabling Integrated Communications Transforming voice communications is not an all-or-nothing proposition. Rather, pursuing a phased approach that leverages the enterprise's existing investments in legacy systems, while moving the parts of the organization that benefit the most from IP down the migration path first, ensures that the enterprise is able to continue operations yet reap the benefits of integration. Because each enterprise's situation and desired outcome are unique, a range of options exist that can be tailored to meet the individual needs of the enterprise. Moreover, the guidance of a trusted advisor through the often complex transformation process facilitates a successful outcome. AT&T offers a complete business VoIP portfolio where enterprises have a choice of network-based or premises-based VoIP solutions that provide them with the level of support and the cost structure that best meet the needs of the business. In addition, enterprises have the ability to add applications either now or later that can help support and increase their organization's productivity and potentially create cost savings. 6 # IDC

7 The AT&T Business VoIP services portfolio includes the following: AT&T IP Flexible Reach. AT&T IP Flexible Reach is a SIP trunking service that delivers integrated access to customer-owned and -managed PBX and key systems. The service features unlimited local and on-net calling with off-net long distance. The key benefits of AT&T IP Flexible Reach include improved flexibility and improved return on investment (ROI), which is achieved by leveraging unused bandwidth through dynamic bandwidth allocation; maximizing existing investments by supporting on-premises equipment; and consolidating resources by converging voice and data on one network, thereby eliminating the need for separate access. IP Toll-Free. AT&T offers IP Toll-Free, an integrated toll-free service across VoIP and TDM endpoints with advanced feature capabilities. IP Toll-Free is a SIP trunking service and can be partnered with AT&T IP Flexible Reach. AT&T Voice DNA. AT&T Voice DNA is a network-based, fully hosted telephony service that allows enterprises that do not have a PBX to offer their employees and remote workers a range of advanced calling features, applications, and management tools. AT&T Voice DNA leverages AT&T-provided access, converging voice and data applications over one connection, and provides customers with more than 70 calling features including voic and conferencing and unified communications such as Outlook integration, click to dial, and the ability to extend VoIP services to select wireless devices. Key benefits to enterprises include enhanced productivity, centralized control of communications across the entire organization, and improved ROI through capital expense avoidance for PBX and key systems. AT&T Business in a Box. Business in a Box used with AT&T VoIP solutions targets small and medium-sized businesses or larger organizations with distributed locations. The product provides the capability to integrate voice and data services and is available with hosted VoIP for businesses that want a fully hosted, cloud-based VoIP solution or with SIP trunking for organizations that want a managed, premises-based solution. AT&T also offers a full portfolio of unified communications solutions tailored to meet the wide-ranging needs of its diverse customer base: AT&T Unified Communications Services. Offered "as a service," AT&T cloudbased UC Services are hosted and delivered from the AT&T cloud, feature userbased pricing, and provide enterprises the flexibility to expand as the organization grows and changes. Applications are supported by an AT&T service team that works as an extension of the corporate IT staff. The architectures support a broad range of platforms, connectivity options, and devices with the goal of simplifying the migration path to a set of capabilities that improve employee functionality and efficiency, maximize ROI, and minimize expenses. The AT&T UC Services offering consists of two tightly integrated components: AT&T Unified Communications Voice (UC Voice) and AT&T Unified Communications Central (UC Central). AT&T UC Voice is a cloud-based alternative to a premises-based IP PBX IDC #

8 AT&T UC Central is a downloadable application for PC and mobile devices that offers users, whether they are in the office or on the move, a consistent set of UC and voice features such as presence, instant messaging (IM), conferencing, and unified messaging tools. It supports a selection of wired and wireless devices and platforms, including Windows-based PC desktops and notebooks, various smartphones, IP phones, video phones, and soft phones, and delivers a consistent user experience across all devices. AT&T UC Central also supports integration with: New and existing UC apps, including presence; IM; unified messaging; ; and Web, audio and video conferencing Multiple telephony solutions, including legacy TDM/IP and PBX systems and AT&T UC Voice Microsoft Outlook and IBM Lotus Notes AT&T Connect. AT&T Connect is a hosted audio, Web, and video conferencing solution with a hybrid deployment option that includes advanced whiteboard and document-sharing capabilities for PC and Mac and mobility applications for BlackBerry, Android, iphone, and ipad devices. AT&T deployed bridges in Europe late last year and is currently deploying them in Asia/Pacific, with the goal of providing local access in an effort to reduce the costs associated with connecting to a bridge. AT&T Telepresence Solution. AT&T Telepresence Solution encompasses video collaboration environments ranging from immersive to multipurpose to personal. With immersive rooms, AT&T Telepresence Solution combines high definition (HD) video and spatial audio and enables users to collaborate with others working in different locations and companies as if they were located in the same room. Multipurpose room arrangements are adaptable to a variety of room configurations and environments but deliver an in-person type of meeting experience. AT&T Custom On-Premises UC Solutions. These solutions include UC premises-based options from a range of vendors, with AT&T providing support for pricing, sourcing, installation, and maintenance. Network services include MPLS, SIP trunking (AT&T IP Flexible Reach), mobility, and FMC. For example, AT&T IP Flexible Reach creates an IP WAN connection that delivers UC capabilities such as IP conferencing, unified messaging, instant messaging, and "presence" and is fully certified with Microsoft Lync and premises-based solutions from other vendors including Cisco. AT&T Managed IP Telephony Services (IPT). For enterprises that are looking for a dedicated solution that is cost effective and highly customizable, AT&T offers a managed IPT service capability that supports enterprises' premises-based IP PBX infrastructure. It allows internal voice and data traffic to be merged onto a single network, providing improved operational performance and a full UC application environment. IPT leverages existing investments, allowing enterprises to transition to UC at the pace that best fits their business objectives and budgetary constraints. Customers receive a comprehensive, endto-end design and deployment of a fully managed, customizable solution designed to leverage the full range of Cisco and Avaya IPT and UC technologies as well as Microsoft Lync, Exchange, and SharePoint. 8 # IDC

9 AT&T Mobile Enterprise Applications Platform (MEAP). AT&T helps customers mobilize their organizations to help increase agility, responsiveness, and profit potential. AT&T MEAP designed for larger enterprises that want to design, build, and manage dynamic mobile sales, services, and support applications provides a set of tools and an infrastructure to help connect mobile workers to designated back-end systems from nearly any mobile device. AT&T Consulting Services. Enterprises are adopting UC to help increase productivity, accelerate business processes, and improve collaboration. However, the migration to UC is complex and should be approached within a structured framework to ensure a successful transformation. AT&T offers consulting services that assist enterprises with the design and development of a comprehensive UC plan, including creating a UC strategy and road map; helping develop a technical architecture to support the UC plan; and assisting with technology acquisition, reuse, and optimization assessment, as well as deployment and life-cycle governance. AT&T also has a variety of applications that have been developed internally or in conjunction with customers as well as externally by others. The applications are available as a service dynamically or on a pay-per-use basis through an integrated and automated experience and are designed to work together with a simple and intuitive customer interface. Most of AT&T's unified communications solutions are available globally in select countries. Voice Transformation Case Studies There are many paths to unified communications, with an array of elements capable of standing alone or working together to enable migration to an integrated communications solution. AT&T has evolved its core communications capabilities into end-to-end solutions capable of maximizing the way enterprises communicate and collaborate. Working closely with customers, AT&T provides the resources, tools, and technical support necessary to develop a UC migration plan from the ground up or to create one that utilizes the customer's existing products and solutions. As Figure 4 shows, AT&T UC Services is designed with a flexible, hybrid architecture that allows customers to implement the UC solution that best meets their needs and timetable. Although customers can choose to "rip and replace" their existing solutions, cloud-based AT&T UC Services components can be easily integrated with customers' existing on-premises and hosted capabilities in an effort to maximize current investments. Customers also have the option of providing their own broadband connectivity or purchasing it from AT&T. AT&T UC Services can be implemented in several ways, including: Full replacement of existing investments Implementation of AT&T UC Services at one or more locations and integration of existing PBX or Centrex at other locations Support for home or small remote office locations using VPN 2012 IDC #

10 Support of mobile workforces with key features such as single number reach and FMC Integration with existing applications such as Microsoft Outlook, IBM Lotus Notes, or Microsoft SharePoint FIGURE 4 Hybrid Integration: Leveraging Existing Investments IP Telephony Site Large Office Existing PBX Site Integrated with Managed UC Services Voice Gateway WAN PSTN Voice Gateway PBX Centrex Site Mobile Network & FMC PSTN AT&T UC Services Wireless Home/Small Office IP Softphone VPN WAN Interworking with Existing applications Cloud components can be integrated with existing on premises and hosted capabilities, benefits include: Preserve existing investments Expand capacity Opex pay per user model Enhance functionality Provide single point of responsibility for integration Source: AT&T, 2012 Scenario #1: Voice and Data Integration with AT&T IP Flexible Reach, IPT As Figure 5 shows, in this scenario, the dedicated, physical TDM voice trunks are replaced with logical or "virtual" VoIP circuits that carry voice traffic implemented on a variety of IP-based network access services. The "new" voice traffic may also be integrated with other types of data traffic, such as site-to-site data traffic and Internet traffic, thereby taking advantage of increased versatility and lower-cost capacity. As a result, disparate local/toll, long distance, and voice facilities are consolidated onto the site's existing IP-based network access (i.e., integrated access). The benefits of integrated access on the AT&T VPN include the reduction or elimination of voice circuit costs; more secure IP handoff to IP PBX networks than is available with ISDN; network optimization, with on-net/on-net calling included; and increased trunking scalability and flexibility so that "virtual" voice channels can easily be added or removed without physical reconfiguration. 10 # IDC

11 FIGURE 5 Scenario #1: Voice and Data Integration with AT&T IP Flexible Reach PSTN AT&T Global MPLS Network PSTN Provider Edge Router AT&T MIS/PNT /AT&T VPN Customer Edge Router IP PBX/ TDM PBX Customer Equipment Source: AT&T, 2012 Scenario #2: Voice and Data Integration with AT&T Voice DNA In this scenario, network complexity is reduced through centralized communications control across the enterprise. Previously, each site managed its own private network along with equipment and IT support. In addition, it was difficult to share information between sites due to the physical restrictions of each separate network. Now, administrator and end-user portals are easy to use and accessible via the Internet using a secure log-on through AT&T BusinessDirect. VoIP offers the benefits of a converged network while gaining operational and capital expenditure efficiencies through a network-based, hosted solution (see Figure 6) IDC #

12 FIGURE 6 Scenario #2: Voice and Data Integration with AT&T Voice DNA Off Net Sites PSAP AT&T Toll Free Service 911 ILEC Local Service PSTN Local & LD via Broadband or DSL Remote Worker SIP Phones Branch Office NGBE BE AT&T CCE Local & LD via MIS/PNT BE AT&T Global MPLS Network SIP Phones Corporate Site BE Local & LD via MIS/PNT AT&T VPN BE Global Client Support Center Voice Mail Server AT&T Voice DNA Server Customer Private Network BE = Border Element CCE = Call Control Element NGBE = Network Gateway Border Element PSTN = Public Switched Telephone Network Customer Site A Customer Site B Source: AT&T, 2012 AT&T: The Voice Transformation Guide Deploying IP solutions and migrating voice and data communications onto a unified, IPbased network are complex tasks and involve a number of challenges. As detailed in Figure 7, enterprises need to assess where they are today, where they want to be tomorrow, and what business benefits they are looking to achieve as they embark on the voice transformation and UC integration process. Other key issues to consider are: When is the right time? How do enterprises protect and take advantage of their existing investments as they migrate to an integrated UC environment? How do they ensure that the transformation they undertake supports their business objectives? How will mobilization, globalization, and virtualization impact their business? 12 # IDC

13 FIGURE 7 Transformation Guide Current State Complex Solution Voice Transformation Integrated Experience: Efficiency, productivity, cost savings Unified Communications Complete Integration of Communications Legacy Voice Services PBX, Key System, Centrex Separate Voice, Data or consolidated Transport VoIP, IPT, Contact Center (hosted or on premises) Individual communication tools Integration of Voice and Data. IP Packet Transport, develop intelligent network infrastructure Extend capabilities of Wireline and Mobility features/routing Link to foundational set of contact center capabilities Enablement of communication applications Unified tools: presence, IM, conferencing, e mail, collaboration VoIP, IPT (hosted/managed or as a service) IP Packet Transport, intelligent routing Contact Center on demand feature functionality and routing capabilities Communication Enabled Business Processes helps reduce inefficiency in business process flows. Leverages UC capabilities by embedding them into process flow Source: AT&T, 2012 CONCLUSION Voice communications are an indispensable aspect of work and personal life and will continue to be one of the most widely used enterprise applications. However, enterprise voice usage and spending patterns are evolving, driven by the rise of new technologies and services, the ever-expanding demand for secure communications solutions, and the rise of collaboration as mission critical to enabling an increasingly virtual and mobile workforce. Communications networks are being transformed from legacy, circuit-switched platforms to an IP-based communications infrastructure where the potential of IP is being leveraged to integrate voice and data traffic onto a single, converged network. Voice transformation is well under way, maximizing the way enterprises communicate and collaborate and helping them achieve their business objectives because IPbased applications and solutions can be added wherever enterprises need them, when they need them. Voice transformation is an evolutionary process that entails moving from individual products, services, and applications to an integrated, converged solution with VoIP positioned as a critical application and as a foundational element to moving toward converged solutions. SIP is also a key enabler allowing applications including voice to integrate with the all-ip-based network. The move to all-ip-based networks also enables unified communications and collaboration by delivering valueadded applications and services such as VoIP, conferencing, instant messaging, and immersive video to users across the globe IDC #

14 Ultimately, for enterprises embarking on the voice transformation journey, success hinges on working with a trusted ally that can guide them through the often complex transformation process. Moreover, because each enterprise's situation, transformation road map, and desired outcome are unique, working with a collaborator that can present a range of options and tailor them to meet the individual needs of the enterprise is essential to ensuring a successful outcome. 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 2012 IDC. Reproduction without written permission is completely forbidden. 14 # IDC