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Issue of June 2004 

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Better solutions can elicit more interest in Convergence

Interest in Convergence technologies is low, but this is expected to change with the introduction of more efficient and affordable solutions. by Brian Pereira

It has often been said that convergence of voice, video, and data networks can result in significant cost savings. The applications, mainly VoIP and Video Conferencing, and the benefits they bring to business, have been the main reasons for investing in this area.

But Convergence has been the least significant area of interest. In fact the base is just 57 companies (out of the 254 that participated in this survey). Overall, not many companies (18 percent) have invested in Convergence. Last year just 14 percent invested in Convergence and 13 percent plan to do so this year.

The bandwidth crunch as well as QoS and technology issues have left a bad taste in the mouth of those who have used convergence solutions. This has prompted most companies to wait for better technology. The waiting period might soon end as more efficient connectivity solutions such as 10G Ethernet over copper and MPLS are around the corner.

High-speed core networks with a MPLS backbone will resolve the bandwidth issue. The same can be said for 10G Ethernet technology. MPLS can also offer consistent QoS markings for converged networks.

The survey found that those who have invested or plan to invest in Convergence plan to step up investments in the coming year. On average, they spent 11 percent of the IT budget on this segment in the last one year, and plan to increase that to 14 percent in the next one year.

On average, the FMCG/consumer durables company is likely to spend 25 percent of its IT budget on convergence in the next one year. The number of shopping malls and retail outlets, especially in urban areas, is growing at a high clip and much investment is going into infrastructure.

Speaking in IP tones

It makes acute sense for enterprises with several branch offices to invest in VoIP. The savings on internal calls can be phenomenal. For instance IDBI Bank uses IP phones for communications between its various branch offices. In 2002 it saved Rs 5 lakh on internal calls.

Besides cost savings, VoIP phones offer many convenient features that corporate executives will appreciate.

56 percent of the respondents have VoIP infrastructure and 33 percent plan to invest in this technology.

The average number of users for VoIP within enterprises is 39. The cost of IP phones may be perceived to be high. Could that be the reason why few users within an enterprise actually get to use an IP phone? According to the survey, 37 percent of the respondents say there are less than 10 users and 31 percent say they have between 10 and 50 VoIP users in their organization.

Messaging killed the video star?

When Video Conferencing was introduced in the corporate world, vendors spoke about how it would cut down travel expenditure, not to mention negating travel time. The idea was to facilitate group communications across distant locations. However, almost the same functionality can be had at a fraction of the cost using Internet technologies such as instant messaging. Online services now offer free IM tools that are now video enabled—users just need to invest in a Web cam.

26 percent of the bases of convergence users have invested in video technology and 24 percent plan to do so. The average number of users for Video is just six.

Research Snapshots
  • Last year 14 percent invested in Convergence; 13 percent plan to do so in 2004-05.
  • On average, companies spent 11 percent of the IT budget on Convergence last year and plan to increase that to 14 percent in the next one year.
  • Of those who have invested in Convergence, 56 percent invested in VoIP and 26 percent invested in Video conferencing.
  • 33 percent plan to invest in VoIP and 28 percent plan to invest in Video Conferencing.

NM Suggests
  • One needs to consider the benefits of convergence technologies before adopting either VoIP or Video Conferencing.
  • Before implementing VoIP, think if your existing network infrastructure can support it. In certain cases one may have to upgrade the infrastructure to ensure decent voice quality.
  • One may have to invest in Quality of Service (QoS) tools to ensure optimal voice quality where the usage of VoIP is high.

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