This content is part of the Buyer's Guide: Choosing a VoIP vendor: A buyer's guide

Analyzing VoIP basics reveals telephony's evolution

Telephony expert Jon Arnold dissects enterprise VoIP basics -- including the technology's evolution and how it works -- and compares it with legacy telephony.

Voice over IP in the enterprise has clearly emerged as the successor to time-division multiplexing (TDM), offering businesses an overhaul of their telephony systems. In 2015, VoIP reached its 20-year milestone, so the technology has been with us for a long time. But as often happens in technology, the adoption process has been slow.

VoIP has been business-grade for many years. Its gradual adoption has reached critical mass, where most businesses now know about it and a growing number are using it. Before delving into the buying process, it's important to cover the VoIP basics, especially if you've never used it before.

Breaking down the VoIP basics

Let's start by breaking down the acronym, which incorporates two distinct ideas. Voice over Internet Protocol represents the intersection of telephony and the Internet. Telephony is the primary medium for voice -- but not the only one -- and has long operated independently from other communication channels. This approach served businesses well, as there was no need to integrate it with anything else until the Internet came along.

The Web has given rise to the Internet Protocol (IP), a set of standards that allows various forms of data to travel over a common network. Since legacy telephony -- TDM -- was not data, it initially remained separate, running on a dedicated voice network.

The prime driver for VoIP has always been cost savings, especially early on when legacy telephony was more expensive.

The common denominator for IP traffic is packetization, which transports digital packets across the Web in a highly efficient manner. The information flows at wire speed this way, with virtually no cost. Because the Web is a collection of interconnected networks, the operating principle is for packets to be routed over the most efficient path that consumes the least amount of network resources. Since many paths are possible, traffic rarely flows in a linear fashion, often making multiple hops en route to the final destination.

This approach is the polar opposite of TDM, which operates on the principle of a closed circuit between two parties. By having a dedicated connection, TDM calls are always clear, private and secure. But those circuits cannot be shared while in use, and compared to IP, TDM is a highly inefficient model for managing network resources. This is a key reason why the cost of legacy telephony is so high.

VoIP's pioneers recognized the opportunity and worked on bringing these worlds together. Once they could find a way to packetize voice, it could be added to the IP data stream and, from there, dramatic cost reductions in telephony service became possible. Early efforts were plagued by poor quality, but as the Web matured and broadband supplanted dial-up service, VoIP overcame those issues. Today, it is a bona fide replacement for legacy telephony.

Enterprise VoIP basics and components

When purchasing VoIP, businesses must understand two components are involved: the phone system and the service. They can be purchased together as a service, in which case there won't be any integration issues since the phones will already be IP-enabled. As explained above, VoIP travels on the data network, and the phones must be IP-based for the packets to convert into voice signals. Legacy-based phones are built around analog or digital technology, but will only work on the dedicated voice network -- not an IP network.

Although many businesses have sunk costs in legacy phone systems that are still going strong, they can still use VoIP -- so these businesses are not prevented from starting down this path now. To IP-enable these phones, you need an Analog Telephone Adapter (ATA) or comparable peripheral for each endpoint. ATAs aren't expensive and provide a great bridge to continue using legacy phones until it's time to replace them -- along with getting the cost savings from VoIP today.

For businesses that have no existing telephony system configured, going with a full VoIP service and IP phones makes sense. With phone vendors and service providers both transitioning from legacy to VoIP, greenfield opportunities have many options to consider.

A different scenario could be a trigger event where the existing phone system needs to be replaced. Whether a breakdown occurs or capacity issues simply reach a point of no return, a change has to be made. This will likely lead to a wholesale switch for both the phones and the service.

How enterprise VoIP is sold

With legacy telephony, the two components -- phones and service -- were separate and not packaged as a system. Your incumbent carrier had a monopoly on the service, so there was no question about where to buy. Similarly, incumbent telephony vendors managed to keep customers captive with proprietary phone systems that were complex, inflexible and costly. In short, switching costs were high and choice was limited.

VoIP presents a broader playing field, mainly due to standardization. A core hallmark of the Web is using open systems that support interoperability. As a result, all IP phone systems will work with all VoIP services, so businesses can mix and match in ways they never could before.

Another twist with VoIP is that vendors can offer the service as well. The lines are blurring between carriers and vendors, as hosted VoIP is offered by a range of providers. Most telephony vendors offer their own turnkey VoIP services, hosted either in their own data centers or via third parties.

Businesses can choose to buy each component separately or as a service -- either from a vendor or a carrier. Each carrier has partnerships with IP phone vendors -- with a range of models and price points to choose from to make an all-in-one purchase. Beyond that, other channels cater to other types of buyers.

For small businesses -- especially small and home offices -- VoIP can be purchased online and, in some cases, even provisioned and managed. At the higher end, businesses can buy via dealers or resellers who are more involved with evaluating services to assist with the decision-making and deployment.

Why businesses buy VoIP

The prime driver for VoIP has always been cost savings, especially early on when legacy telephony was more expensive. Competition has driven prices down, so the savings are not as significant -- but still worthwhile. Many variables go into the total cost of telephony, but businesses can expect to reduce this expense in the range of 20% to 30%.

As the cost advantage shrinks -- and as IP communications mature -- businesses are starting to take a more strategic view of VoIP. A key benefit, aside from saving on telephony costs, is network convergence, where voice traffic is ported to the data network. With VoIP, telephony becomes a data stream, so there's no longer a need to maintain a separate network. This creates another form of cost savings by consolidating all media streams on to a single network.

Network convergence also creates an opportunity for IT to provide employees with a richer and more flexible set of communications applications. VoIP has a broader feature set than basic telephony, as it can integrate voice with other applications like click-to-call. This allows IT to switch from a costly, limited form of telephony to a richer alternative that does more than simply replicate TDM.

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