50 Years of Growth, Innovation and Leadership Gaining the Competitive Edge How VoIP and SIP Trunking are Changing the Communications Landscape A Frost & Sullivan White Paper www.
Frost & Sullivan Introduction... 3 Islands of IP Communications Applications Proliferate in Enterprise Networks... 3 SIP as the Foundation of Next-Generation Communications Services and Solutions... 5 VoIP Access and SIP Trunking Services Help Bridge IP Communications Islands... 6 Defining VoIP Access and SIP Trunking... 7 Why VoIP Access and SIP Trunking?... 7 VoIP Access and SIP Trunking Adoption is Growing... 9 Conclusion... 10 CONTENTS
Gaining the Competitive Edge INTRODUCTION Voice over Internet Protocol (VoIP) technologies emerged in the mid-1990s and have since significantly impacted both enterprise and carrier networks. Today, most businesses acknowledge the value of IP telephony and VoIP in reducing costs and enabling the delivery of advanced communications and collaboration applications. Now these technologies are laying the foundation for even greater synergies between communications tools and business processes through the implementation of unified communications (UC) and communications-enabled business processes (CEBP), which can improve business agility and responsiveness. Going forward, it is practically mandatory for businesses looking to gain or sustain a competitive edge to deploy an advanced IP communications platform. As businesses increasingly adopt IP telephony and UC solutions on their premises, they are also looking to deploy carrier VoIP services to realize the additional cost savings and productivity benefits of end-to-end IP communications. Service providers have launched compelling VoIP access and Session Initiation Protocol (SIP) trunking solutions that not only lower the overall cost of communications, but also facilitate accelerated deployment of UC in a centralized location, with remote access by branch offices. Furthermore, SIP trunks help enterprises more quickly and economically adopt other value-added services, such as network-based mobility and fixed-mobile convergence (FMC). Finally, SIP trunking can be used as a migration path to cloud-based IP communications solutions. ISLANDS OF IP COMMUNICATIONS APPLICATIONS PROLIFERATE IN ENTERPRISE NETWORKS Businesses are gradually migrating to IP-based platforms and solutions. Frost & Sullivan s research shows that most businesses that have not yet deployed IP telephony plan to do so in the next few years. Frost & Sullivan s Investment Decisions in Communications and Collaboration Products and Services study, which surveyed 200 C-level executives in North America, reveals that 39 percent of respondents have deployed IP telephony in their organization, of which 59 percent increased their budgets for IP telephony over the previous 12 months and 47 percent plan to increase their usage of IP telephony over the following 12 months. About 43 percent of those not yet deploying IP telephony plan to do so over the next two to three years. Key reasons for accelerated migration to IP-based communications stated by survey respondents include technology advancements and the need to enable more cost-effective collaboration with remote sites and staff. 3
Frost & Sullivan Most Important Benefits of IP PBX Base: Users, N=78 ##1 Rankings Total of Top-Three Rankings Improve collaboration and productivity across geographically dispersed teams Help advance our corporate environmental goals Reduce costs Accelerate decision making Single point of access to multiple communications applications Improve customer service Enhance employee mobility Help improve employees' work/life balance and general welfare Reduce travel 5% 8% 9% 15% 14% 13% 13% 12% 12% 0 20 40 60 Q15. For each of the tools used in your organization s daily operations, which are the three (3) most important benefits? Source: Frost & Sullivan Frost & Sullivan s 2011 World Enterprise Telephony Platform and Endpoint Markets study provides further evidence that IP telephony has become the technology of choice for most businesses worldwide. The study finds that world IP telephony line shipments grew by approximately 14.5 percent in 2010 and are projected to grow by about 9.6 percent over the next seven-year period, to account for about 93 percent of all lines shipped in 2017. One of the most powerful drivers for the migration to IP telephony is the potential cost savings, including reduced on-net calling costs; more efficient moves, adds and changes (MACs); lower overall network monitoring, management and configuration costs; reduced access and long-distance calling costs through VoIP/SIP trunking; and lower overhead through the merger of IT and telecom staff within the organization. But the value proposition of IP telephony is evolving. Today, the majority of businesses evaluating next-generation technologies are looking to use them as the foundation for deploying advanced communications applications, such as soft clients; rich presence information; audio, video and Web conferencing; mobility; contact center; and other capabilities. Network convergence enables more cost-effective integration of various IP-based applications and platforms into end-to-end unified communications environments. What s more, comprehensive UC solutions are emerging, delivering greater value to end users, while eliminating the cost, complexity and risk involved with integrating multiple, disparate platforms and applications. 24% 31% 31% 33% 33% 33% 36% 35% 44% 4
Gaining the Competitive Edge Just as VoIP and IP telephony enabled network convergence, unified communications is paving the way to application convergence. A UC solution represents an integrated set of voice, data and video communications applications, all of which leverage PC- and telephony-based presence information. The goal is to simplify communications for the end user through intelligent presence and a unified client, and to enrich the communications experience by adding contextual access to business-process information. The major holdbacks in IP telephony and UC adoption are typically related to concerns over how to protect existing, unamortized assets and ensure continuity when migrating to new communications architectures. Therefore, most businesses are cautious in their implementation of VoIP and IP telephony and are only gradually migrating individual platforms and sites, thus creating islands of IP technologies within the company s communications environment. Frequently, businesses deploying premises-based IP telephony solutions continue to use legacy primary rate ISDN (PRI)/basic rate ISDN (BRI) interfaces to connect to service provider networks. But such siloed implementations of IP communications provide only limited benefits. For example, businesses using time division multiplexing (TDM) technologies for local access are unable to converge their voice and data access lines and/or eliminate high PRI/BRI costs. Also, using the public switched telephone network (PSTN) for longdistance calling means high toll charges and outdated billing models. Therefore, for customers using legacy connectivity options, many of the potential cost-saving benefits of VoIP and IP telephony are lost. Furthermore, integrating disparate technologies (such as IP and TDM) can result in additional equipment costs, poorer reliability and voice quality degradation due to protocol conversion via media gateways. Finally, certain features and functionality are lost when IP communications traverse TDM networks. In fact, the end-user experience in such scenarios is very similar to that of TDM telephony users, so the productivity and efficiency benefits of advanced IP applications are either greatly reduced or completely eliminated. In spite of the compelling benefits of advanced IP communications, it is likely that many organizations will continue to deploy hybrid TDM-IP architectures for years ahead. However, as the Session Initiation Protocol (SIP) becomes the de-facto standard in both enterprise and carrier networks and compelling SIP trunking offerings become more widely available, businesses can cost-effectively bridge IP islands and take full advantage of the benefits of network convergence and advanced IP communications. SIP AS THE FOUNDATION OF NEXT-GENERATION COMMUNICATIONS SERVICES AND SOLUTIONS Adoption of SIP is rapidly increasing as both CPE vendors and service providers choose it as the technology foundation of their next-generation networks and solutions. SIP has received broad industry support, which facilitates multi-vendor integration at the application layer. 5
Frost & Sullivan SIP is capable of integrating communications across a number of devices, including desktop phones, cell phones, smart phones, and personal digital assistants (PDAs). In a SIP environment, voice is just another component of a converged communications and collaboration infrastructure that typically consists of voice, video, instant messaging, conferencing, collaboration and presence. Businesses are attracted to SIP for the increased flexibility in deploying new capabilities and the possibility to integrate applications that will help them move forward on the path to converged communications. SIP supports: Communication features that are transparent to the access mechanisms Open, standards-based applications and architectures Flexible integration of multi-modal communications and collaboration environments Services across multiple platforms, servers and access devices Enhanced integration with cloud-based communications solutions Interoperability with multiple-vendor products, facilitating more tightly integrated architectures Integration with Internet technologies such as XML, VXML and Java A growing number of providers subscribe to the idea that SIP trunking is the first step to large-scale multimedia service federation coupled with cost reduction. Usage of commercial off-the-shelf IP media servers, the ability to reuse SIP servers for various functions and media other than just voice, and the prospect of reducing their dependence on expensive Class 5 switches are seen as key advantages to the adoption of SIP from a service provider s perspective. VOIP ACCESS AND SIP TRUNKING SERVICES HELP BRIDGE IP COMMUNICATIONS ISLANDS VoIP implementation has been uneven in the carrier space as well. While most carriers were quick to deploy VoIP in their long-distance networks, replacing Class 3/4 switches with advanced softswitch technologies, they have been slower to deploy VoIP in the local access network. This has prevented businesses already deploying IP telephony and other advanced IP-based applications from leveraging the benefits of end-to-end IP communications. Increasingly, however, forwardlooking providers are launching VoIP access and SIP trunking services that deliver the cost efficiencies and productivity benefits of converged voice and data networks to businesses with both TDM and IP infrastructure on the premises. SIP trunking services provide the largest benefits to businesses deploying IP telephony or other IP communications applications as they help bridge internal IP islands with service provider IP networks. By completely bypassing the PSTN, customers can eliminate the cost of media gateways, improve voice quality, enable access to advanced IP features and functionality previously lost due to protocol conversion, centralize infrastructure management, accelerate UC implementations and consolidate trunks across multiple locations. 6
Gaining the Competitive Edge Defining VoIP Access and SIP Trunking: VoIP access and SIP trunking services involve the provision of integrated circuits using VoIP or SIP technologies to enterprises that have implemented premisesbased enterprise telephony solutions (Private Branch Exchanges (PBXs)/IP PBXs or key systems). In a VoIP access or SIP trunking scenario, the service provider typically offers local dial tone, long-distance calling, and a limited set of call management and control features such as extension dialing to intra- and inter-office locations. VoIP access and SIP trunking services direct enterprise customers toward a path of gradual transition to fully converged, IP-based networks. Typically, VoIP access and SIP trunking services allow enterprises to continue to utilize their existing handsets as well as other TDM voice customer premises equipment (CPE), thereby providing some of the benefits of VoIP while preventing significant upfront investments. VoIP access services interfacing with a legacy TDM system do require the deployment of a voice gateway at the enterprise premises, whereas SIP trunking services are typically deployed with SIP-based or SIP-enabled enterprise telephony platforms where protocol conversion is not required. Session border controllers (SBCs) may, however, be needed for protocol normalization and security purposes. Increasingly, service providers are bundling VoIP access and SIP trunking services with various network-based communications applications and capabilities, such as hosted auto attendant, voicemail, unified messaging, mobility/fmc or some data services, including Web hosting, Web email, managed security, and so on. Why VoIP Access and SIP Trunking? Although in the early days VoIP and SIP trunking services helped reduce voice costs by routing more traffic off the PSTN infrastructure, they had similar functionality to that of TDM services, falling short on innovation. However, as business communication needs evolve, there is a growing interest in SIP trunking. Many of the UC services can be more efficiently deployed over SIP, including messaging, mobility, application sharing or conferencing. By opting for SIP trunking services, organizations with SIP-enabled IP PBXs or UC solutions do not need to invest in expensive gateways and other border control elements to connect their premisesbased communications infrastructure with the PSTN. The value proposition of converged access services is clear and customers that are not restrained by existing contracts can relatively easily adopt VoIP access and SIP trunking services. Adoption is mostly deterred by the somewhat limited supply and insufficient awareness of the availability of such services. Concerns over voice quality, security and overall service reliability are quickly overcome through continued technology improvements and customer education. 7
Frost & Sullivan VoIP access and SIP trunking services offer the following benefits: Cost savings from converging voice, video and data services over a single access line. Most businesses today use T1 or E1 lines for both voice and data connectivity. Increasingly, businesses are deploying fiber/ethernet services for more economical access to larger amounts of bandwidth. Local access network costs vary significantly. T1 prices, for example, range from about $200 to $1,500 per month. Therefore, the ability to eliminate T1 lines previously used for TDM voice services could result in immediate cost savings of about $2 to $15 per user per month (assuming 24 simultaneous call paths per T1 and a ratio of about four users per simultaneous call path). Cost savings from more economical delivery of voice services. Some businesses choose to maintain separate lines for their voice and data services. However, SIP trunking represents a more cost-effective alternative to legacy telecom circuits for voice calling. Subject to bandwidth availability, a SIP trunk can carry unlimited voice calls (though service providers are known to restrict the number of simultaneous calls to anywhere between 28 and 41 per SIP trunk using call-control algorithms), versus a traditional PSTN/PRI trunk that can accommodate only 24 calls per channel (in actual implementation scenarios, it can accommodate only 17.5 calls). Cost savings from free on-net calling. VoIP access and SIP trunking services enable free site-to-site calling, which typically accounts for a large portion of multi-site businesses voice costs. Most of the service offerings include company-wide, four-digit dialing plans as part of the service bundle. Cost savings from economical local and long-distance voice plans. The use of VoIP technologies allows service providers to offer compelling bundles of local and long-distance minutes or competitive per-minute rates, significantly reducing off-net voice costs. Access to advanced capabilities such as dynamic trunk/bandwidth sharing across sites. Multi-site businesses can benefit from the ability to share bandwidth across locations based on actual demand. This feature can be particularly beneficial if the business sites are in different time zones or otherwise subject to bandwidth demand fluctuations. Cost-effective and streamlined network management. Businesses deploying VoIP access or SIP trunking services can reduce the time they spend managing disparate networks and re-purpose internal resources for more strategic tasks. A single throat to choke. Converged voice and data services allow businesses to gain efficiencies by reducing the number of provider relationships and thus streamline service provisioning, SLAs, contracts and billing, and ongoing service management, troubleshooting and accountability. 8
Gaining the Competitive Edge Access to advanced network-based applications such as hosted auto attendant, voicemail/unified messaging, FMC, Web hosting, managed security, and so on. For businesses unable to deploy such capabilities on their premises due to integration challenges (with legacy PBXs, for example), CAPEX constraints, uncertainty about the potential benefits of these applications, or plans to eventually migrate to hosted communications, hosted applications bundled with a SIP trunking service represent an economical and risk-free way to gain additional benefits. E911 services: UC platforms do not always support accurate 911 routing and geographically independent 911 solutions. A SIP trunking service offering an integrated 911 capability helps eliminate the complexity and additional costs of integrating third-party 911 solutions. VOIP ACCESS AND SIP TRUNKING ADOPTION IS GROWING: In 2010, the North American VoIP access and SIP trunking user base expanded at a rate of 65.6 percent and reached 7.2 million users. Over the forecast period, the installed base is expected to experience a compound annual growth rate (CAGR) of 35.0 percent to reach 59.1 million users in 2017. VoIP Access & SIP Trunking Services Market: User Base Forecasts (North America), 2008 2017 60 55 50 Compound Annual Growth Rate (2010 2017): 35.0% 70 60 Installed Users (Million) 45 40 35 30 25 20 15 Users (Million) Growth Rate (%) 50 40 30 20 Growth Rate (%) 10 5 10 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Installed Users (Million) 2.7 4.4 7.2 11.3 16.5 22.8 30.2 38.8 48.4 59.1 Growth Rate (%) 59.5 65.6 56.0 46.2 38.5 32.5 28.2 24.8 22.1 Note: All figures are rounded; the base year is 2010 Source: Frost & Sullivan 9
Frost & Sullivan The economic downturn and the resultant tighter IT budgets forced enterprises to look for more efficient ways to migrate to IP-based communications. As cost-effective replacement options for T1/ISDN PRI circuits and expensive leased lines, VoIP access and SIP trunking services saw rapid growth in the past two recessionary years. Unlike replacing an existing premises-based phone system, which could be very disruptive, deploying a VoIP service gives businesses a quick and economical access to VoIP capabilities. Service providers are offering simple and fast deployment options and compelling cost propositions that are making VoIP access services attractive to customers, especially SMBs. Further, simple, user-based phone configuration allows end users to manage services and changes, reducing service provider technical assistance and overall management costs. Since only a small capital investment in integrated access devices (IADs), gateways or SBCs is needed to enable the service and providers are open to subsidizing the equipment or spreading its cost over the year by including it in the monthly payments, there are no major cost constraints to the implementation of VoIP access services. Increasing awareness, improving service reliability, and the addition of various survivability, failover and redundancy capabilities will drive market growth. Continued interoperability testing among vendors and service providers, as well as advancements in simplified service provisioning and maintenance will also foster continued VoIP access and SIP trunking services adoption. CONCLUSION Businesses of any size and vertical industry can benefit from VoIP access and SIP trunking services. Small businesses with minimal on-premises PBX functionality benefit from the cost savings as well as the access to additional network-based features and capabilities (such as auto attendant, voicemail, mobility, and so on). Larger enterprises, on the other hand, are looking to consolidate trunks and voice platforms, centralize management and administration, and reduce costs by leveraging self-service options instead of relying on third-party technical support. As businesses increasingly adopt IP telephony and UC on the premises, they will also seek to deploy VoIP access and SIP trunking services for the benefits of fully converged, entirely IP-based communications. 10
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