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A strong case for Converged Networks

An all-in-one network not only offers savings in communications cost but also offers many value-added services. That's why more enterprises are upgrading their WANs for voice and video

Voice over IP has been the buzzword this year among most Indian enterprises. VoIP isn't new, but it's only in the last couple of years that it has gained prominence here. With the government loosening certain restrictions on VoIP usage in April 2002, most Indian enterprises have been focused on voice-enabling their IP networks.

This huge interest in Voice over IP is clearly reflected in our research findings. The survey statistics reveal that the biggest slice of the IT budget is allocated for Converged Networks (this comprises of voice and video over IP).

This is understandable. In the recent past, amongst the economic downturn and slow growth registered by most companies, one of the few ways to squeeze more profits is by cutting costs. And voice communications is one area where costs can actually be reduced significantly. According to an industry estimate, 70 percent of a company's communication costs are in the form of intra-office STD bills. By implementing a VoIP solution a company can actually reduce intra-office communications costs by as much as 60 percent. After voice, the next step is Video over IP networks—a cost-effective video conferencing solution.

In both cases, voice and video packets are transported over an existing data network (the corporate WAN). This concept of 'Converged Network' seems attractive because, with minimal additional investment one gets the benefit of voice and video as well.

Besides cost savings VoIP also presents value-added services like integrating voicemail, video, e-mail and fax (universal Inbox). Another advantage is that when it comes to voice, IP networks are easier to maintain than switched networks.

VoIP becomes cost-effective for enterprises that already use leased lines on a WAN. Enterprise VoIP solutions make sense if inter-office communication bills exceed Rs 50 lakh, says an industry analyst.

For this survey, we considered VoIP and Video as the two main infrastructure segments for Converged Networks. From the survey IVR (Interactive Voice Response) emerged another focus area for enterprises.

About 97 percent of the survey respondents (who have Converged Network as their focus area) have registered an increase in their requirement. The average rate of increase in requirement for Converged Networks is 63 percent. This is the highest average among all technology verticals.

As expected, 83 percent (this also includes those upgrading their existing VoIP infrastructure) of the survey respondents said they have a requirement for VoIP in 2002-03 while 53 percent have already invested in VoIP. About 47 percent of the respondents have expressed their interest in video on the network and 43 percent said they have existing infrastructure for video. From this we can infer that CIOs are definitely aware about the benefits of VoIP and video on existing networks.

Vendors have anticipated this requirement much in advance and the market is flooded with VoIP solutions. There are IP phones, VoIP gateways and interfaces available, and network integrators can tie all this into the existing enterprise WAN. One can choose either an end-to-end solution or just voice-enable existing routers and interface these with existing EPABX equipment.

The biggest slice
This huge interest in Converged Networks is also reflected in the investments that enterprises are making in this area. As mentioned earlier, our survey statistics reveal that the biggest slice of the enterprise IT budget is for Converged Networks. On average, companies have allocated Rs 368 lakh for implementing Converged Networks.

There is an interesting trend here. Despite government restrictions on VoIP, the budget allocated for Converged Networks was significantly higher last year, about Rs 508 lakh, as compared to this year (Rs 368 lakh). This implies that most companies have started implementing VoIP solutions last year itself, even before the government removed certain restrictions on the use of VoIP in enterprises. Prior to April 2002, VoIP was only allowed over a private closed network.

Though the average amount allocated for Converged Networks has reduced this year, it is still the highest among the other IT verticals.

The data also reveals a sizable chunk, about 37 percent, of the companies have allocated up to Rs 25 lakh on Converged Networks.

Verticals
Our survey indicates that VoIP usage is the highest in the Banking/Services sector.

About 67 percent of respondents from the Banking/Services sector said they already have an existing VoIP setup. For 2002-03 the requirement for VoIP is the highest in the IT/Telecom sectors closely followed by the Banking/Services sector. Around 89 percent of the respondents from the Banking/Services and 91 percent from the IT/Telecom sectors said they have a requirement for VoIP.

As for video, 64 percent of IT/Telecom companies said they used video over IP networks and 60 percent of respondents from the manufacturing sector said they have a requirement for video.

Real cost saver
While IT Heads are aware of the benefits of Converged Networks, the key factor driving growth here is cost savings. In the survey, three out of four respondents said they were going for a VoIP or video conferencing solution in order to save costs. Converged Networks will be more common as enterprises realize the ROI and cost-savings.

We are already seeing an influx of vendors and network integrators offering VoIP solutions. With increasing competition, we can expect equipment costs to fall further. Vendors are aware that enterprises want to protect their investment in communications infrastructure, so they will offer solutions that interface with legacy communications equipment. For instance, existing switches or routers that can be voice-enabled by a minor software or hardware upgrade.

Companies with huge communication overheads, or customer-service oriented companies like Call Centers will be the major adopters of Converged Networks.

Research Snapshots

  • The biggest slice of the IT budget is allocated for Converged Networks
  • 83 percent of the survey respondents said they have a requirement for VoIP in 2002-03
  • Three out of four respondents are going in for VoIP or video to save costs
  • VoIP usage is the highest in the Banking/Services sector
  • VoIP becomes cost-effective for enterprises that already use leased lines on a WAN
  • The average rate of increase in requirement for Converged Networks is 63 percent, the highest among all technology groups
  • Most companies started implementing VoIP solutions last year itself, even before the government removed certain restrictions on the use of VoIP in enterprises

Top 5 benefits CIOs SEEK

  • Cost savings
  • Better customer service
  • Reliable communication
  • Faster business decision making
  • Ease of deployment

 

 
     
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