Any Calls For Enterprise LAN Telephony?

Over the past few years there has been a lot of talk about Voice over IP (VoIP) solutions, and in truth, VoIP means different things to different people — i.e., linking disparate locations or traditional PBXs over an IP WAN for a toll bypass type of application; enabling voice calls over the Internet; IP-based public telephone networks; IP-based private telephone networks. So it’s no wonder why it’s been difficult to gauge excitement for VoIP as a technology.

Given this confusion, a number of vendor product announcements for LAN telephony over the past six months have gotten little more than a yawn.

However, upon closer inspection, the LAN telephony market is one that’s on the rise as businesses take another look at their voice and data network infrastructures.

Putting the fear factor aside, and the fact that many companies simply prefer to do things the way they’ve always done them, (and run separate voice and data networks,) LAN telephony is gaining ground in the corporate sector. “Products finally work the way they’re supposed to,” says Brian Strachman, senior analyst at Cahners In-Stat Group.

Additionally, he notes that the technology is straight-forward to implement. There’s a lot of functionality built into the IP handsets, web-based administration tools simplify management and costs are competitive with traditional PBX systems.

Four major networking companies recently announced new offerings in their respective LAN telephony product lines.

  • In late April, Cisco Systems announced seven new software and hardware IP telephony products aimed at increasing personal productivity, reducing operational costs and ensuring flexibility for corporate and branch office locations.
  • In March, 3Com introduced new networked telephony hardware and applications.
  • Avaya also made some VoIP announcements last month highlighting new software, increased system capacity and new third-party partnerships.
  • Also in May, Mitel announced two new integrated communication products.

Cisco and 3Com reportedly are the market leaders in this technology space, but a handful of other vendors offer LAN telephony solutions as well, including Ericsson, Siemens, Nortel, and NEC.

While buying new technology for technology’s sake has never been a big motivating factor for most businesses, the key reason for companies to take a look at LAN telephony today is total cost of ownership. “Not only are these systems cheaper to buy, but they’re cheaper to maintain,” Strachman says.

He estimates that IP telephony including the data cabling and router costs run about $400 per user, on average, depending on application — and these costs buy you a voice and data network. By contrast, he conservatively estimates a traditional PBX system at about $600 to $800 per user, including maintenance, but that’s for just voice.

Still, even given the competitive pricing for LAN telephony solutions, companies aren’t going to rip out their legacy circuit-switched PBXs and replace them with IP telephone systems.

“What we’re seeing customers do is a staged migration,” says Hank Lambert, director of product marketing at Cisco. He adds that enterprises might opt to replace old PBXs with new IP solutions or select certain groups or departments for migration to IP telephony. Branch offices or new office sites are also good candidates for LAN telephony installations.

According to Greg Sweig, product manager at 3Com, about a half-million PBX systems are replaced yearly in the U.S.

“A lot of customers who are thinking about replacing existing systems recognize that a shift to IP telephony is underway,” he says. While some businesses are adopting a wait and see attitude about LAN telephony, others are making purchases.

TCO (total cost of ownership) might be the biggest selling point now for LAN telephony but two years from now, applications will be the biggest driver for technology adoption, says Strachman. “IP telephony will enable applications that won’t be available on traditional PBXs,” he says. In the same way that the PC model opened the market for third-party applications on the computer, IP telephony makes it possible to run independent applications, not simply proprietary ones which is the model for traditional PBX systems.

Strachman believes that LAN telephony adoption is on the upswing and recommends that any organization thinking about adding on to a PBX consider the IP alternative. However, he notes that many vendors with their feet in both the traditional PBX market and the emerging LAN telephony market aren’t in a hurry to see users abandon circuit-switched technology. “The PBX market is big business,” he says.

Lynn Haber writes on business and information technology from Norwell, Mass.