IP Telephony's Three Phases
The IP telephony market is entering its third level of maturity. The first phase was one of experimentation of Voice over IP (VoIP) transport and proprietary communication signaling built on a Personal Computing (PC) platform. This experimentation phase led to a stable and reliable IP telephony platform built upon a hardened Linux foundation. For some suppliers, IP telephony solutions are now at the same reliability, availability and performance levels of traditional time division multiplexing (TDM) telephony solutions. With the design center of IP telephony hardware based upon a traditional computing model, cost and performance has followed Moores Law, doubling performance at half the cost every eighteen months. Cost benefits have propelled IP telephony solutions up on the adoption curve with 50% of all new phones shipped now being IP phones.
The Replacement Phase
The industry is currently in the second phase of IP telephony, which is largely a replacement for legacy voice services with favorable return on investment. This second phase of IP telephony has offered IT management the ability to deploy a new enterprise voice solution with 15% to 50% savings, depending on installed base. Thus the IP telephony market currently offers economic efficiency and mobility as its key value proposition. But the current phase offers little strategic value to an organization.
The Strategic Value Phase
The third phase of IP telephony is based upon a value proposition of strategic value versus economic efficiency. Two new industry developments are propelling this new phase. First, the rapid adoption of a protocol called SIP or Session Initiation Protocol. SIP, in short, standardizes the signaling of calls or communications between different types of devices/end-points from different vendors such as IP phones, IM clients, soft phones, smartphones, etc. Perhaps more importantly, SIP also simplifies the writing of communication applications. The second development is the introduction of web services in a SOA (Services Oriented Applications) context, to write business applications which incorporate communications. SIP combined with web services is enabling the linking of business process with communications, delivering strategic value to a company. In short, web services and SIP are empowering IT to automate business process by easily adding communications into that process; the result being high strategic value to business process. Thus the third phase of IP telephony is called the strategic value phase.
But most of the industry, especially retail banking is in the replacement phase and for good reason. The VoIP vendors and service providers are offering strong economic motivation to transition from the old TDM model of enterprise voice services toward IP telephony. Case in point is SouthTrust Bank which merged with Wachovia Corporation in November of 2004.
SouthTrust Bank Background
SouthTrust Corporation is one of Cisco's first and largest IP telephony deployments and it is now successfully deployed. SouthTrust Corporation alone was a $51.9 billion regional holding company headquartered in Birmingham, Alabama before it was acquired by Wachovia. This Fortune 500 financial services company employs nearly 13,000 people and operates almost 800 banking and loan offices and 850 Automatic Teller Machines (ATM) in nine states.
SouthTrust services include traditional retail banking, corporate and commercial banking, mortgage banking, brokerage and trust services, and insurance products. 2003 revenues were $2.3B while net income was $705 million. Prior to the Wachovia acquisition, SouthTrust had grown through a merger and acquisition strategy of its own, over the years and as most companies that grow this way, it inherited multiple different key systems, PBXs and networks to manage. An effort to rationalize the cacophony of disparate systems was underway at the same time it required more wide area bandwidth to support increased data traffic. Capital and operational economic efficiencies realized through consolidation of vendors and equipment types drove a converged network review.
The bank understood early on that it could realize savings in both local access and long distance (LD) voice trunking charges if it consolidated voice and data into IP. It had a Frame Relay (FR) data network that linked each branch, and they were able to add separate PVC for VoIP traffic, thus supporting voice and data traffic on a single T1 access circuit terminated into AT&T's frame relay and voice network.
This strategy would prove out handsomely with a 40% reduction in local charges and leased lines, a 75% drop in move/ add/change expenses, a 95% reduction in conference calling expenses and a 60% decline in outbound long distance charges, SouthTrust estimated its annual savings at $5.7 million. That's nearly a full percent of increased net income, or put another way, the network architects were able to add $5.7M of profit to SouthTrust annually.
Carl Owen, leader of the SouthTrust project and now senior vice president and head of converged networking for Wachovia, says the ability to control the system centrally has significantly reduced the operational cost of the converged voice and data system which is not included in the $5.7M savings above. Building on SouthTrust's experience, Wachovia plans to deploy IP telephony across most of the merged company over the next two and a half years, covering about 65,000 phones, according to Owen.
SouthTrust's vendor selection was Cisco for data networking and IP telephony, with AT&T's frame relay integrated access providing transport, plus local calling service. Delta Communications was used for long distance calling, as all off-net voice calls were backhauled to SouthTrust Birmingham facility.
The Devil Is In The Details
SouthTrust installed IP telephony in 790 sites in 9 states with more than 10,500 IP phones deployed. They had over thirty sites that have been operational for more than 3 years. They had built three new data centers in Atlanta, Houston and Orlando. There are three Corporate Offices, two in Atlanta and one in Birmingham. There are two call centers in Atlanta. The centralized call processing in Birmingham processes some 8,000,000 calls per month. There are some 6,000 integrated voice mail and e-mail boxes in operation. So what are the economics behind this IP telephony deployment at SouthTrust? Millions of dollars of savings per year. For example, SouthTrust has realized savings in the following areas:
* Local Service 40%
* Long Distance 60%
* Move/Add/Change 75%
* Maintenance 50%
* Conference Calling 95%
In the process not only have the network architects at SouthTrust improved its corporate bottom line, but they did so with state of the art equipment and new features/attributes that the network did not possess before its implementation. For example, SouthTrust saw a 6 fold increase in bandwidth. It received all new voice and data equipment. Desktops now have desktop video. With the mobility benefits of IP telephony, SouthTrust is now better prepared to recover from potential disasters. It also has a network architecture that can accommodate more changes, i.e., an easier acquisition by Wachovia and the ability to add new competitive IP communication applications. Also, with voice delivery as software residing on a few centralized servers, the cost to add more IP phones does not require a large capital outlay as in the days of PBXs.
Most of the cost savings above came from facilities, operations and maintenance cost reductions. In short, IP telephony can drastically reduce wide area communication spend. This reduction in monthly expense is usually much greater than the cost of new hardware or capital.
The major characteristics of the SouthTrust network are the following: VoIP over FR is used for on-net calling and backhauling long distance off-net traffic to the central PSTN gateways at headquarters; the backhauling of long distance off-net traffic to a centralized location is a key cost saver as it increases volume to a service provider delivering steeper discounting; VoIP over Ethernet is used for on-net calling in the campus or between two extensions in branch sites; local off-net calling from a branch to the PSTN is accommodated by AT&T's Integrated Access PSTN gateway.
The Hub-and-Spoke network topology of the original FR network is preserved with the hub site at the headquarters location, while FR bandwidth to the branch offices has been expanded from 56 K or 64 K to 256 K for small and medium branches and to 512 K for the larger branches. Compressed Real-Time Protocol (CRTP) is used on all branch PVCs. Each branch is equipped with a PVC for VoIP and one for IP traffic. For companies that have a greater need for inter-site communications I recommend MPLS and start to move away from FR since FR cost will increase over time. Also, I view the hub and spoke architecture as too rigid for most retail applications.
Standard QoS features like FR Traffic Shaping (FRTS), Low Latency Queuing (LLQ) and FR fragmentation are enabled to preserve voice quality across the IP network and to gain WAN bandwidth efficiency. Cisco's SRST (Survivable Remote Site Telephony) is deployed in all branches to protect IP Phone survivability. Emergency calls to 9-1-1 are handled by SRST and a local voice gateway to allow the call to complete via analog Foreign Exchange Offices (FXO) to the local Central Office (CO). Non-emergency local calls are also handled during a WAN outage, but these will be routed via the local voice gateway's PRI access into the AT&T network. Cell phones offer another level of redundancy as well to WAN outages.
The Call Manager (CM) and Unity deployment in the network is based upon a centralized call processing model used with a Publisher and Subscriber CM cluster in each five geographic regions. Each cluster manages approximately 100-150 locations. There is a single Unity server per region. Number portability was used to transfer BellSouth Direct-Inward-Dial (DID) numbers from the old voice network to AT&T for the new network. Cisco 7960 IP phones are used. G.711 compression is used for calls within a site, and G.729 is used for calls across the WAN. Fax is handled via the PSTN.
In addition to economic considerations, SouthTrust decided to deploy IP telephony knowing that it provided a foundation for IP communications, their new business platform. All of the above did nothing to add strategic value to SouthTrust. What SouthTrust did was reduce cost and perhaps most importantly set it up for the third phase of IP telephony, the strategic value phase. SouthTrust knew that over time it would want to add value to its branch offices with features or applications such as:
* Rich media for e-Learning, stored locally, but centrally managed
* Multi-site videoconferencing capabilities
* Unified messaging for branch personnel
* Increased bandwidth in order to deliver rich media through ATM machines for advertising and promotions These strategic initiatives are only now possible since SouthTrust/Wachovia has deployed a platform that delivers communications enabled business process.
It's A New World
With IP telephony solutions being economically viable, reliable, stable and available nearly all enterprises are either in a planning or deployment posture. There is no alternative to IP telephony other than a delay strategy. An enterprise could wait until legacy systems are fully depreciated or until their TDM system is so old that vendor support and replacement parts have diminished and are no longer available. The entire IT vendor community including network equipment and software suppliers plus service providers will increasingly offer new products and services with deep IP telephony hooks and features, increasing value to IP telephony deployments. The IP telephony deployment decision has transitioned from one of should I deploy to when should I deploy.
With the convergence of voice and data at the network layer a fait accompli, the entire IT industry has started to shift its focus and investments toward tightly linking communications to business process. In short, convergence is moving up the stack to the application layer. There are strong economic drivers fueling Internet and web technologies, best practices and rapid agreement on standards. For example, OASIS (Organization for the Advancement of Structured Information Standards) is a not-for-profit international consortium that drives the development, convergence, and adoption of web services standards more than any other organization. Founded in 1993, OASIS, backed by the
World Trade Organization (WTO), has more than 4,000 participants representing over 600 organizations and individual members in 100 countries.
Web Services Opens Communications To IT Developers
With web services being the new programming interface for IP telephony, communications programming will no longer be the province of an elite and relatively closed community of programmers. In fact, a general purpose corporate IT developer with web services skills will soon be able to program communications just as well as those with years of communications programming experience. This new emphasis on business communication applications based upon web services and SIP will further shift IP telephony architecture, design and purchase decisions toward IT management and business stake holders and away from telecommunications management and communications developers.
Business communications applications means a development focus on business process alignment with communications. Business process is either structured or unstructured. Structured business process could simply be the levels and number of signatures required to open a purchase order, or the human resources life cycle that tracks an employee from hire to retire. The links of a supply chain or levels of a distribution system and the communications which control them are structured business process with strong cause and effect consequences. The hundreds of e-mails, voice calls and instant messages per day which most knowledge workers respond to is a less structured form of business process, but it is process. Office productivity communication flows, be they voice calls, instant messages, voice mail, faxes, e-mail, conferencing, etc., are all examples of unstructured business process. When you're communicating you're engaged in either a structured or unstructured business process. Unfortunately, unstructured means a loose coupling or alignment between communications and business process. This is about to change.
At the epicenter of both structured and unstructured business process is collaboration or the ability for employees, partners and suppliers to move work flow, and satisfy customers. The movement of information over converged IP networks has been a boon to corporate productivity. Nearly every corporation in the global economy has benefited from IP networks as they have enabled the extracting of delay, both human and system, in business process. In business process it's not just humans who have to engage another human in communication to move work product forward; it's the inability of humans to react to situations in microseconds. Communications-enabled business process can. For example, a triggered event that automatically engages the right personnel or applications or an alert that automatically puts in motion a business process to address a situation is communications-enabled business process. Communications-enabled business process can be event driven with an ability to sense a business scenario which triggers an event and the ability for the enterprise to respond in real time, if required.
Deeply embedding communication into the business process offers the following value: improves knowledge worker productivity, enables the business to respond in near real time to situations, and enables Business Communication-Activity Monitoring or (BCAM). Creating a business application enabled by communication for situational context is at the heart of IP telephony's third phase. A rules driven communication environment which is tightly linked into business process will enable enterprises to realize strategic value from IP telephony solutions.
So what are the killer applications? The answer is there is no single killer application, but many smaller, customized applications that in their totality are the killer application. Many enterprises have started their own application development efforts by extracting delay associated with unstructured business process with click-to-call and click-to-conference tools while in the process aligning communications with business needs. Just like IT focused on automating structured business process such as transaction processing over the past forty years, removing delay to organize knowledge workers into conferences will be one of the first applications to be automated and integrated into business process. The ability to improve communications between organizations and remove impediments in the value chain is of high strategic value to most concerns.
Strategic Alignment of Communications to Business Process
There is a strategic alignment of communications to business process taking place. Re-enforced corporate branding, enhancement of customer service and improved internal communications are all options to this new alignment. Corporations do not have to re-engineer business process to reap the rewards of communications-enabled applications though. Web based on-line banking services that offer a click-to-call feature is a simple and powerful way to improve customer service in retail banking.
Communication-enhanced business process is allowing the enterprise to realize its profit drivers and corporate initiatives, whether those initiatives are to increase customer satisfaction, grow revenues, engage in inter-company market development, extend brand, expand operations or improve productivity.
Open IT Programming Interfaces For Communications
Just like mainframes gave way to mini computers which gave way to PCs connected on LANs, the PBX has given way to IP telephony. Mainframes were expensive and hard to program which extended the time for application development. Mainframe-based IT application development projects were often late, over budget and didn't meet business objectives due to their complicated programming interfaces. Client/server-based applications were easier to write and often developed by IT within business units. The result of this shift from centralized to distributed application development was quicker time to market and application development being conducted closer to the business which increased the project's potential for meeting business requirements. Clearly the client-server model has given way to internet technologies and increasingly, web services.
IP telephony is being folded into, and over time will be controlled by web services. With SIP and web services business communications applications are being written by IT departments tightly linking communications to business process. The change in programming interfaces to one that is friendly to
IT departments will both hasten application development and link communication applications to business stakeholders. With programming access available to a larger developer community, rapid innovation and creativity of new communications-based business applications will also flourish as the cycle of proprietary to open has shown before.
With IT empowered to mold, shape and inject communications into business process, IT can play a major role with executive management in constructing an agile and customer-facing corporation. Communications-enabled business applications add a new dimension to a variety of business related activities including person-person, system-person, and system-system communication driven activities. Businesses with communications-enablement will differentiate themselves from other non-communications-enabled business. Daily decisions are made by executives based upon market/competition/disaster events. Executive decisions put an organization in motion and often result in a series of downstream decisions, facilitated by the enterprise's communications infrastructure. The more efficient and linked the communications system is with the business the more agile the enterprise. Unfortunately, businesses could not realize a 360 degree communications view of their business, until now. Communication will be driven by the rules of the business in this new world.
Migration Strategy For Developers
IT and now the communications industry often transitions from proprietary to open programming interfaces. The days of vertically integrated proprietary communication application development are limited. Providing programmers separate layers to mix and match will be the basis of a transition or migration plan. Communication Application Programming Interfaces or APIs are destined to be common with IT development practices. This does not mean to say that TSAPI, JTAPI, CTI, etc., will disappear, but their use will fade over time as developers embrace web services and SIP as the primary way to write applications which link communications with business applications. Developers should be able to continue to use familiar APIs, mix and match APIs with communication web services, or transition to communication-based web services altogether. The underpinning communication capabilities should be reflected through either API set consistently. Communication APIs and their derivative application works must support a higher level of abstraction above them. Migration and transitional developer support will be the basis of competition between IP telephony equipment suppliers. While migration is important to the communications developer, the new business application developers should not be forced to deal with the complexities of telecommunication networks and systems.
Some developers may have the view that today's telephony technology allows for a great deal of flexibility. For example, developers can write programs that turn calls into e-mail and/or audio files. Developers can offer contact center agents the ability to communicate with customers via chat sessions too. But to enable these communication services requires developers to cross communication silos of e-mail, v-mail, chat, instant messaging, etc., all with their own set of complexities. IP converges application silos onto one network, but the application integration is still too complex and brittle. To cross these silos developers often find themselves with an "n-squared" problem to write to and most importantly to maintain. The "n-squared" problem is unsuitable for use as a foundation for business-critical processes.
Communications-Enabled Business Process: Solving the N-Squared Problem
SIP will go a long way toward solving the n-squared problem for developers. SIP simplifies multi-modal sessions, meaning communications between different end-points be they hard IP phone, softphone, IM client, mobile phone, smartphone, etc. SIP will set up and tear down communication sessions with a single set of primitives. When you reach out to someone, SIP tells you which media that person would like to use to communicate with you. For example, Jane needs to communicate with Joe and Sally to address an important customer issue. Jane request a session with Joe and Sally. Joe is on a smartphone while Sally is currently in a conference call. Sally responds to Jane's request via an IM and specifies this as her preference while Joe is available on his smartphone. The session takes place with Joe on his smartphone, Sally on IM and Jane on her softphone. Multi-modal access is powerful because it extends reachability, but it must also be simple to use and access to be useful.
This kind of flexibility to reach people is but one example of how communications enabled business applications will increase productivity and customer satisfaction. On a larger scale, SIP will enable agents in retail banking contact centers to reach people throughout the entire enterprise based upon rules of engagement. More on this later.
From the example above, SIP enables seamless connectivity of networking elements and end-points so that both developers and more importantly employees need not be concerned with individual nuances of each communication silo. SIP does make networks flatter and more distributed, eliminating discontinuities between communication silos, but it still requires SIP developers to understand the complex behavior of telecommunications networks and systems.
SIP is a major underpinning, albeit not the only one, for communications-enablement. SIP does little to provide backward migration of an embedded base of systems to gracefully migrate towards IP telephony. There are still many features only available through traditional communication resources. This is another key differential point between IP telephony suppliers. Some suppliers will expose all communication resources, be they SIP features or non SIP-based features, across a SIP or TDM network to the business developer, without their needing to know the intricacies or transactional behavior of the individual communication resources. And at this point in time Avaya is clearly leading the way with its AES or Application Enablement Services platform.
In the reality of today's mixed communications world, a SIP developer can use SIP to expose communication features, but this requires a SIP skilled developer. With web services communications exposure of SIP and legacy features is enabled to any IT developer. In short corporate IT developers in retail banking or any industry will be ale to utilize SIP features without knowing how SIP or any communications protocol. In short, web services abstracts and hides SIP and other communication protocols into a set of common primitives such as make a call, hang up call, transfer call, conference call, etc which can be molded and shaped to meet retail banking business requirements.
Customer Facing Organizations
Communications enabled web services can transform a business by creating a customer facing organization. The evolution of the contact center is expanding in both the agent pool to include knowledge workers and linking agent interactions with business applications. Agents are increasingly requiring more access to enterprise resources thanks to web services providing the programming interface into business process. Agents have been building ad hoc ways of reaching back into the enterprise. Many leverage public IM services to find experts within their own enterprise to address customer issues. This has opened up security issues, is not measurable and does not provide journaling. The effectiveness of the agent reaching into the enterprise for assistance is situational upon the agent's experience and the size of their professional network. Enterprises can systematize this and measure it so knowledge workers can be part of an agent's network.
Web services can tighten the linkage between agents and their enterprise back office systems. After an agent's interaction with a customer and transaction is completed, the enterprise needs to know what occurred and take action upon it. This linking of agents to back office systems and enabling a more structured way in which they can reach into the enterprise are opportunities for adding strategic value to an enterprise.
There are a tremendous amount of details to review and sort through as you plan your converged network. There are a few stability points upon which to build but that just lets you be creative about the type of converged network structures that are possible. To do this right, CIOs have to map business requirements/process into network requirements and get your CEO and board engaged early on. The job of the CIO is to be a business partner to various corporate divisions/stake holders making sure their requirements are met in the converged network architecture. With business profit drivers in hand and translated into network requirements, the CIO can start the process of design, financial model development and review. For most companies converged networking delivers significant cost savings as SouthTrust proves. But the largest gain will come from transforming business process through communications. The good news here is that the vendor and service provider industry are offering strong economic incentives to build the new business communications platform.
Nicholas J. Lippis III is a world-renowned authority and industry consultant on advanced IP networks, communications and its benefits to business profit drivers. Mr. Lippis works with CIOs and executive IT managers of Global 2000 companies on network and communications architecture, design, economics and implementation including Barclays Bank, Kaiser Permanente, Sprint, Worldcom, Cigitel, Avaya, Cisco Systems, 3Com, Eastman Kodak Company, Federal Deposit Insurance Corporation (FDIC), Hughes Aerospace, Liberty Mutual and Schering-Plough. He publishes the Lippis Report to over 47,000 IT executive management subscribers. www.lippis.com
