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Issue of July 2005 

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The age of enterprise convergence

Since IP has emerged as the default format for voice, data and multimedia, the time has come when enterprises will benefit from convergence, notes Alok Shende

The headwinds of enterprise convergence have created waves of possibilities for next-generation Indian enterprises. Key business issues, including competitiveness, customer satisfaction and employee productivity all have a touch point within this convergence matrix.

The shift to IP architecture means the adoption of a standard that the world at large is investing in

Today’s enterprise networks carry legacy architecture that ranges from proprietary standards to architectures that came into vogue during the past two decades. However, the shift to IP architecture means the adoption of a standard that the world at large is investing in.

Vendors and service providers have created an entire context of advanced technologies and open standards around the IP platform that is ushering in economies of scale and lower prices for end-point devices: either IP telephony or video conferencing devices for customers.

As voice, data and multimedia agglomerate in IP packets, a cornucopia of possibilities emerge. IP convergence constitutes a coming together of voice, data and video traffic on an open IP platform, and hence IP convergence spans networks, transmission, end-point devices and users.

Technology diffusion cycle

Alok Shende

The traditional technology diffusion cycle kick starts when innovators who need solutions to address complex challenges experiment with a new technology and start adopting it once the benefits from the said technology permit them to create a business case for their enterprises. With time, other constituents come to know of the case studies through word of mouth, and this creates the next wave of adoption. The short history of adoption of IP convergence makes for an interesting story.

In contrast to the large enterprises that have traditionally been at the vanguard of adoption of solutions that have transformative potential, IP convergence was adopted by smaller enterprises whose need for quality was probably was not as high. At the same time, IP convergence provided immense cost savings.

Swift growth

For example, one of the early solutions adopted by mid-market enterprises in the mid-nineties was ‘Fax on Internet.’ This also gelled with the evolutionary quality of IP networks since the early generation of IP networks did not meet the quality standards demanded by large enterprises.

As service providers invested in backend technologies for IP networks such as high-end carrier class routers, IP compression, and MPLS, the quality of IP networks has come to a point where IP networks will become the dominant standard for not only data but voice and video as well.

The market growth for IP telephony in India substantiates the underlying story for IP convergence. The market for IP telephony has grown from $0.1 million in 2000 to $54.4 million in 2004, and is further expected to grow at a CAGR of 25.6 percent to reach $268 million in 2011.

Benefits of convergence

IP convergence holds transformative potential for Indian enterprises primarily due to three classes of benefits that will accrue to the adopters: reduced communication costs, reduced total cost of ownership (TCO), and applications as the long-term driver.

Reduced communication costs

As bandwidth prices fall, enterprises will spend less for the shared bandwidth, which will result in lower voice and video cost per minute. Further, enterprises will be able to provide remote access to local call numbers. Current regulatory rules prevent connectivity between closed user groups and the public switch telephony network, essentially precluding the possibility of inter-company IP telephony.

However, enterprises can skim off gains from lower costs for intra-office communication. Communication costs between employees spread across different offices of the enterprise can constitute as high as 40 percent of overall communication costs. For example, a leading public sector bank has deployed 3,000 IP telephony end-points to rationalise intra-office voice telecom spend, while an IT major has significantly reduced inter-city travel for its senior managers through video conferencing.

Reduced TCO

Enterprises today have two different classes of networks to manage: one that transmits voice and the other that transmits data. IP convergence leads to unification of voice, video and data networks, and concomitantly brings down the deployment of resources for maintenance and administration of the network. Centralised operations and integrated systems management lead to resource optimisation.

Applications, the long-term driver

While a lower cost of communication has an instant appeal for many enterprises, the real story unfolds when applications are deployed on the IP telephony platform. Anecdotal evidence suggests that enterprises which have targeted revenue enhancement through IP convergence have gained higher return on income compared to the communication cost-saving aspect of IP convergence.

Standards such as Session Initiation Protocol (SIP) have created a baseline for inter-operability for IP telephony applications, paving the way for enterprise-scale deployment in a heterogeneous environment that exists in most enterprises.

Another key development in the self-service application has been the VoiceXML (VXML) platform. A VoiceXML application is basically a Web application with a voice user interface. Some of the key benefits of developing VoiceXML applications are that the technology provides Internet access to telephone users, follows an open standard, provides an XML-based markup language, and leads to speedy development.

SIP and VXML are leading to the development of applications that manage voice just like any other application on the desktop, and that can be easily integrated with any other applications. While there are numerous applications that are coming up, the ones that have gained significant traction include collaborative working, an agile workforce, unified messaging and IP contact centres.

Managed Service Providers

The emergence of managed services has created a logical option for many enterprises that have a genuine interest in gaining the benefits of IP convergence but are challenged due to issues of initial capital investments or commitment to ongoing maintenance and support.

Some of the drivers for the emergence of Managed Services Providers (MSPs) in the coming years are the continuous pressure to reduce capital expenditure and the increasing need to optimise internal operations and reduce operating costs. MSPs enable earlier deployment of new applications and services, and leverage the specialised expertise of the vendor / channel / service provider to manage complex networks.

Compelling need

There is a compelling need for enterprises today to engage in a proactive analysis of what the emerging enterprise convergence play has to offer.

But before CIOs propose a business case for convergence to their management boards, they will need to draw a roadmap to navigate the speed bumps arising out of legacy architecture as well as incoherent transition maps, and, most importantly, justify budgets for investments.

Also, since IP telephony is likely to be the base for future application development, it’s critical to choose vendors who have a platform that adheres to open standards, and who provide a clear forward path for technology integration.

The author is Director, Information Communications & Technology, Frost & Sullivan India.


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