Ready for Prime Time
A new Internet-based phone technology has an un-catchy acronym: VOIP. But don't be fooled: It could make dramatic changes in the way businesses operate.
The Wall Street Journal
January 12, 2004
By Peter Grant
Bruce Cumming hardly ever touches his office phone anymore.
When he wants to call someone, Mr. Cumming simply clicks on the name in the contact list in his computer's Microsoft Outlook program. The number rings and, when someone answers, he talks to them on his speaker phone.
The vice president of National Money Mart Co., a financial-services firm based in Victoria, British Columbia, also uses his computer to check voice mail, set up conference calls, and forward calls to his cellphone, home phone or any other number when he leaves the office. Recently, on a trip to National Money's Philadelphia office, Mr. Cumming plugged his laptop into the data network there and it became his office phone, with all the features that it offers back home. If someone called his number in Victoria, his laptop rang in Philadelphia.
"When I called out, people would look at their caller ID and see my Victoria number," Mr. Cumming says. "They'd say, 'I thought you were in Philadelphia.'"
These phone features became available earlier this year after National Money Mart installed a phone system from Mitel Networks Corp. that uses a new Internet-based phone technology known as VOIP, or voice over Internet protocol.
It's not a catchy name, but get used to it all the same. At the very least, telecom experts say, most business phone systems eventually will convert to VOIP for cost savings and the wide range of new features the technology offers, like improved conference calling, and combining voice and e-mail messages on one directory, and, eventually, video phones. At most, they say, the technology could make dramatic changes in the way businesses operate, comparable to those made by the Internet and the PC.
VOIP works by transforming voice into data and then transmitting it over the Internet or some other data network in the same way text, photos and e-mail are sent. Introduced in the mid-1990s, it was one of the many new technologies that initially overpromised and underdelivered, creating great frustration for early adopters and huge losses for early investors. Some of the earliest businesses that installed VOIP were very critical of the sound quality. And even today, there are occasional kinks like echoes and shuttering sounds if data is lost in transmission. Still, enough improvements have been made to prompt businesses to take a second look at VOIP as a way of increasing efficiency and productivity and cutting costs.
By the end of this year, about 20% of the new phones being shipped to U.S. businesses will use VOIP technology, according to Yankee Group, a technology consulting firm based in Boston. By 2007 that figure should exceed 50%, and eventually almost all of the new phones shipped will use VOIP, Yankee Group predicts. Almost all of the research and development being done by phone-system developers -- including Mitel, based in Kanata, Ontario, Cisco Systems Inc. of San Jose, Calif., Nortel Networks Corp. of Brampton, Ontario, and Avaya Inc. of Basking Ridge, N.J. -- is on VOIP.
"The technology is ready for prime time," says Malcolm Collins, president of Nortel's enterprise networks division.
VOIP can make a wide range of existing phone features easier to use, because when voice is turned into data it essentially becomes another application on the computer. For example, many conventional business phone systems give workers the ability to see a log of their calls or to program phones to ring at home or on their cellphones. But activating these features means pushing a bunch of buttons on the telephone. With VOIP, setting them up just takes a couple of clicks of the mouse. Setting up a conference call with standard phones often requires the assistance of an operator. With VOIP, it involves a simple click-and-drag operation on the computer screen, putting a cursor on the names of the conferees. As people join and exit the call, their names are added or subtracted on the screen.
Features also can be combined with other data applications. For instance, voice mail and e-mail can be combined in a single directory. "It makes it easy for a lawyer who's been at a deposition all day and has to travel out of town," says Bill Costello, technology chief at Banner & Witcoff. "They can download their master mailbox to their laptop and head for the airport." The Washington-based law firm installed an Avaya VOIP system a year ago.
Then there are features that weren't possible on conventional phone systems that allow for customization. Take the police department of Bend, Ore., which installed a Cisco VOIP system starting two years ago. Police investigators wanted to verify that a suspect they were seeking was at a particular phone number in California. Technicians were able to set up a call so that it wouldn't be identified on the other end as coming from the police department, says Steve Meyers, the city's information technology director. Instead, it showed the call coming from a phony name and number. The suspect "picked up the phone and they talked to him briefly," says Mr. Meyers. "They knew where he was."
Another plus for VOIP is its portability. VOIP phones with a particular phone number can be taken anywhere, connected to a broadband connection and still receive calls at the same number. That means employees can easily and inexpensively move desks or work from home or a hotel and still get all the calls directed at their work phone numbers. They keep all the features that their work phones have, like four-digit calling to other extensions.
It's a cost-conscious manager's dream, because moving employees from one location to another can be done without a technician. In October, when Vegas.com, a business that runs one of the biggest Las Vegas Web sites, moved its operations to a larger building in a suburban office park, employees lost very little time, thanks to the VOIP phone system the company purchased from Nortel.
"We did it in groups of four," says Howard Lefkowitz, president of Vegas.com, a unit of Greenspun Media Group, Henderson, Nev. "Employees unplugged their phones, carried them across the street and they worked."
There are also savings on long-distance bills, given that VOIP calls between offices cost the same as sending e-mail. The long-distance bill of Banner & Witcoff dropped so much that the law firm received a call from a long-distance representative at AT&T Corp. after it installed its VOIP system. "They were concerned that we switched carriers," says Mr. Costello.
Always Within Reach
VOIP phone systems are proving especially useful in businesses that rely heavily on roving employees, like a hotel or warehouse. Using cordless VOIP phones, workers can stay in touch with managers as well as enter data in the business's computer system.
A maid in a hotel, for instance, can use her phone to let the front desk know when a room is cleaned or when she's running out of shampoo and conditioner bottles.
The nurses at Erlanger Health System, which operates a medical center in Chattanooga, Tenn., have been responding to patient calls faster since the hospital installed a VOIP system a year ago, says John Haltom, the center's network manager. They now make their rounds with a cart that contains a laptop with an attached phone. They use the laptop to enter patient reports. A nurse doesn't have to go back to his or her station to see that a patient has been ringing the buzzer for 15 minutes, because the calls go immediately to the phone.
"It takes the ball and chain off them," Mr. Haltom says.
VOIP also is making big changes in call centers, in some cases enabling companies to replace big centralized facilities with virtual operations.
For instance, all of JetBlue Airways' reservations agents work from home using VOIP phones hooked into high-speed Internet connections. Call centers also have begun to add features so agents can go from instant messaging to e-mail to phone communication quickly. Some businesses have set up systems to recognize certain incoming numbers and give preferred customers special treatment.
Eventually, these new VOIP features in call centers may reduce the numerous annoyances consumers often experience when calling them, like having to give an agent account numbers and personal information after having already punched them into the phone. Ravi Sethi, president of Avaya, says the company already has installed some of these new applications in its own call center. "The number of abandoned calls went down," he says. "People were happier."
VOIP will trigger even bigger changes to the workplace in the future, telecom experts predict. More employers will follow JetBlue's lead and allow employees to work from home. The use of branch offices will likely become more popular, since VOIP greatly reduces the cost of interoffice phone calls. And more companies will begin the practice of "hoteling," cutting space costs by assigning desks to employees who travel a lot on a short-term basis. "You come into the office, log into any phone and it takes on the appearance of your own phone," says Robert Filby, a manager of the consulting firm Cap Gemini Ernst & Young, which acquired a VOIP system from Cisco. "The [VOIP] technology lends itself to that."
Businesses also can expect a wide range of new features. Major telecom companies and small start-ups are busy developing new software that will incorporate video phones, voice recognition, wireless technology and other applications into VOIP systems.
"It's just like the Internet itself," says Steve Dimmit, a marketing vice president with SBC Communications Inc., which has begun offering VOIP systems to its business customers. "People are going to come up with applications we haven't thought of before."
-- Mr. Grant is a staff reporter in The Wall Street Journal's New York bureau.