The recent deal between SBC Communications and Ford Motor Co. that will see SBC companies design, implement and manage an IP telephony system at Ford's headquarters and other facilities in Michigan is stoking the view that VoIP technology is finally moving into mainstream enterprise deployment.

The SBC agreement, which will utilize Cisco technology for more than 50,000 business users in 110 Ford facilities during the next three years, follows on the heels of a report from research firm International Data Corp. that predicts that the market for hosted IP voice service for business users will hit $60 million by the end of this year. IDC projects business VoIP will hit $7.6 billion by 2008, a whopping compound growth rate of 282%. That figure includes all of the applications and services that IP networks would use, not just the core service.

Brian Buffington, executive director, marketing managed services for SBC, describes the $100 million Ford deployment as "a major icebreaker" in the enterprise space. "It's the biggest enterprise (VoIP) deployment yet," he says. "It's a sign that VoIP is here to stay in the enterprise."

Buffington adds that SBC is in active discussions with several potential enterprise accounts for VoIP deployments. "We are committed to (business) VoIP, " he says, noting that large enterprises increasingly view VoIP as a reliable, cost-effective alternative to aging PBX systems. "What's driving it is the acceptance of the technology and the fact that new users are looking for new systems" either as replacements or upgrades.

ENTERPRISE ADOPTION

In Ford's case, cost savings, increased productivity and enhanced applications all played a role in the deployment decision. SBC will converge Ford's disparate communication networks into a single, IP-based network for voice, video and data. Applications such as e-mail. integrated voice and even video are expected to be included.

SBC will provide Ford with a customized solution based on SBC's PremierServ IP Telephony Platform, using the Cisco Systems IP Communications hardware. The solution will be integrated into Ford's existing communications infrastructure by consultants from Callisma Inc., another SBC company.

Buffington says discussions about the implementation began more than 18 months ago.

REPLACEMENT TECHNOLOGY

SBC's recent success seems to validate the IDC conclusion that the business VoIP market is being driven by financial considerations. As PBXs age and need replacement, corporate executives typically find that a hosted IP voice solution can be implemented with a minimal capital outlay. Expensive maintenance contracts aren't needed, and hardware and software upgrades are easily available. It's little wonder IP telephony makes sense for the enterprise, because this is one example where the new technology usually costs a fraction of the technology it is replacing. That's music to the ears of tight-fisted CEOs and CFOs looking for a strong, predictable ROI.

"VoIP is finally poised to overtake and replace the aging but reliable circuit switched infrastructure," says Will Stofega, senior research analyst with IDC. He adds that the features and functionality VoIP delivers makes it attractive to enterprise business users. Furthermore, Stofega figures service providers are perfectly positioned to benefit from this opportunity because business customers will likely turn to them to assure reliability and functionality of the VoIP service.

However, Stofega adds that to be successful, service providers may need to educate business users about the cost savings and added functionality VoIP can provide. They also need to reassure customers that any past frustrations with VoIP won't be repeated. "Carriers have to show there are real advantages," Stofega says. "This might be, for example, the ability to stay connected to the office while in the field."

Stofega adds that enterprise users are becoming much more comfortable with VoIP solutions. "Concerns like reliability, QoS and scalability are much less of an issue now," he says. "The implementations are more robust." Security concerns, however, have not yet been fully resolved.

According to a separate survey recently released in London by AT&T Corp. and The Economist Intelligence Unit (EIU), a majority of corporate executives say they will implement VoIP in the next few years, attracted by its greater functionality and flexibility, as well as cost savings. The EIU survey of 254 senior executives worldwide shows that 43% are currently using, testing or planning to implement VoIP within the next two years. Another 18% believe they will adopt it in the long-term.

Hosted IP voice
services forecast

2003       $9.4
2003      $58.5
2003     $222.3
2003     $879.9
2003   $4,012.5
2003   $7,647.9

Source: IDC

Note: Table made from bar graph.

Cathy Martine, AT&T's senior vice president of Internet telephony, says many of the larger concerns about business VoIP implementations have been rectified. "Cost studies are now easier to perform, savings are more predictable, and the questions of quality and reliability have now largely been addressed, thanks to the development of international standards and stable software and hardware solutions," she says.

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