Friday, July 11, 2008

Is VoIP Really Happening?

I've cited Carl Weinschenk's IT-Finance Connection portal a few times, and his latest post on Wednesday caught my eye. Titled "The Case Against VoIP", Carl asks some basic, but important questions that help explain why VoIP hasn't yet taken over the world - at least in the business market.

His focus is on IT departments and the things they need to take into account when considering VoIP. While his points are basic, they are critical elements and stark reminders that VoIP isn't necessarily for everyone. There are lots of ways to spin this logic, of course. In his first point, Carl argues that as the cost of TDM service has dropped, telecom costs may not be that much cheaper with VoIP, so cost savings is not the driver it was a few years ago.

Maybe so, but Carl doesn't parse out the issue enough to contrast the service with the equipment. First generation IP phones for VoIP were orders of magnitude more expensive than legacy desk phones, and early on that was a real deal-killer. Now, the cost of the phones is pretty much on par, so on that count, VoIP can save you money. There are many other aspects of the TCO equation of course, but I'll leave it at that for now.

While I do agree with Carl's overall conclusion: "There are many organizations that can get by quite nicely without VoIP" - I'd have to say there many other factors beyond everyday IT-level issues to really make the right decision. It's hard to put an ROI metric on productivity, and when companies start falling hard for the UC pitch, VoIP is a given, as it becomes part of much bigger story line.

Anyhow, stepping back, Carl isn't the only one out there raising questions around VoIP's lack of mainstream breakthrough, and that's why I'm writing about this. Garrett Smith had a post last week along these lines, and it will lead you to some other posts that make for interesting reading.

As big a fan of VoIP that I am, Carl's premise puzzles me too, which of course means you have to be careful listening to what the vendors tell you. There's tons of growth and good news stories out there - no doubt - but whether it's enteprise, SMB or residential, VoIP still has low market share. In the consumer market, if you take the cablecos and triple play bundles away, VoIP is in the low single digits for market share, and we all know how successful Vonage has been!

Ike Elliott has a great post about that from earlier this week, btw. I'm putting cable aside in this case because their success with VoIP comes pretty much as part of the bundle. They wouldn't be putting up these kind of numbers if they sold it as a standalone service.

Without delving too much further into the prospects for consumer VoIP, I will say that the future is much brighter in the mobility world. Michael Arrington had a nice post today on TechCrunch about how well Truphone's application on the new iPhone is working for VoIP. Now, that's a growth story, and am sure I'll be posting more about that soon.

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ipcom said...

Posted by: PhoneTool

VoIP is happening but nowhere near the speed one would think from all the hype that surrounds it. The biggest obstacle to it's uptake is the word "free." That seems to be the only factoid that most commentators retain and sadly it's true in only limited circumstances.

ipcom said...

Posted by: Simon Gwatkin


Interesting post. From the research reports I read (and these are quite a few) both enterprise and SMB IP based deploments are growing at a significant pace (but did slow in Q1 of this year for obvious macro reasons). The census data is also interesting.

If you strip out those companies that have no employees (holding or shell companies) the significant majority of businesses employ less than 20 people. This has not been the target market for the majority of IP vendors until recently. However, those businesses of any size that see the value of IP applications (teleworking, mobility, presence, vertical specific implementations and, to a growing extent, applications and devices that increase energy efficiency and/or reduce carbon footprints) are and will continue to move to IP. My view is also that SMBs could be concerned about the complexity of IP comms and particularly UC and we have dealt with this a) by offering a complete managed services capability to allay any customer concerns in this area; and b) by radically simplifying the deployment and management of applications.

Another issue to consider is that there may be evidence in some quarters of a wait-and-see attitude as UC matures. Some vendors have generated a deal of market hype that could put off some buyers in the short term at least.

Residential is different and not an area that I concentrate on. Nevertheless my experience is that, particularly outside of NA, consumers are deserting wireline connections and are just using their cell phones as there main communication device. This is probably a reflection of the liberalised policies that are in place regarding tariffs, short term contracts, subsidies, SIM card portability and the like.