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As cheaper option, IP telephony goes mainstream

IP telephony is now mainstream, thanks to the cost savings it can bring, according to research firm In-Stat. One small Texas city will cut its annual telecom costs by $90,000 by making the switch.

IP telephony's days as an emerging technology are over. It's now a mainstream option for enterprise voice.

In-Stat, the Scottsdale, Ariz.-based research firm, reports that in the first half of 2007, 11.1 million new enterprise IP lines were shipped worldwide, representing 80% of total business voice line shipments.

"It's going to accelerate for the next three or four years until TDM is done," said Norm Bogen, director of networking at In-Stat. He added that costs savings are the main driver behind this wave of adoption.

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Bogen said the cost savings and rich features of IP telephony are actually accelerating the replacement cycles of existing TDM PBX systems.

"Historically, the replacement cycle for a PBX system was seven to eight years," Bogen said. "What's happening is people are hearing of the benefits of IP and those replacing cycles are moving up from seven or eight years to five or six years."

Bedford, Texas, a city of 48,000 people, recently cut its annual telephone costs for its municipal departments by $60,000 by switching from a hosted Plexar telephone system with AT&T to IP Voice, an IP telephony product from Avaya Inc. aimed at small and medium-sized businesses.

"Our whole monthly phone bill was about $12,000. We cut that by $5,000," said Bill Cooper, Bedford's information technology director. "We were looking for ways to cut costs. And there were things [with IP telephony] that we couldn't do with the Plexar system. We're about to find a new third-party dial tone supplier, too. That will save us another $3,000 a month. We haven't finished the contract yet, but we'll be going away from AT&T. We'll be saving more than $90,000 a year on telephone costs."

"Every feature that we had with Plexar we are able to do with IP Office. But instead of being nickeled and dimed on each feature, we own it and we can do it," said Billy Mason, a technical specialist for Bedford. "IP Office allows us to do changes ourselves -- additions and deletions of lines. With AT&T, we had to wait for days for Ma Bell to do the process centrally."

Brian Day, a project leader with Lantana Communications, an Avaya partner, said Cooper's initial investment in hardware and software was $200,000. That included an Avaya IP Office 412 central rack-mounted unit in City Hall and 12 expansion modules in other city buildings to handle the switching for digital phones outside of City Hall.

Although Bedford converted to an IP telephony switching system, most of the city's 400 employees are using digital phones rather than IP phones. Only a handful of employees who work in buildings that were too small to justify the cost of an Avaya expansion module are using IP phones.

Cooper said the digital phones were easier on his network and far less expensive than IP phones. And he gets all the functionality he wants out of the digital phones. He isn't yet interested in some of the more advanced features IP telephony can bring on IP phones, such as pushing applications onto the screen of the phone.

"Digital phones were less prone to network problems than VoIP phones," Cooper said. "We put IP phones in two or three buildings because the cost of putting in a switch was too expensive."

Bogen said the use of digital phones on IP telephony systems is very common, especially among organizations that are focused on the cost savings benefits of VoIP rather than the other features that come with IP telephony, such as unified communications.

"The deployment of IP phones is actually lagging the deployment of IP PBX," Bogen said. "There's not a lot of reasons to change out phones today. That comes probably later in the cycle when it's time to replace an old phone. You get the same functionality. You get the calls, you get the savings. There's no additional savings to go with IP phones. The advantage of IP phones is all the other things you can do with IP telephony. A lot of people are doing that, just making phone calls. They want to save money. There's a business case for that alone, but it is less interesting today than it was five years ago because long-distance rates have dropped dramatically."

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