Is P2P VoIP the Next Revolution for SMEs?

Can peer-to-peer VoIP eliminate the need for a PBX? At least two vendors think that's exactly the case.

By Sean Michael Kerner | Posted Oct 13, 2005
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Peer-to-peer technology isn't just for file sharing; it can also provide a robust phone system—without the need to provision, deploy, or pay for a PBX. P2P VoIP may well be a revolutionary technology, bringing traditional PBX functionality to business at a fraction of the traditional cost.

The P2P VoIP space recently made headlines with Avaya's acquisition of Nimcat Networks. Nimcat isn't the only player in the space. Its acquisition has served to shine a spotlight on P2P voice technology, and has drawn attention to its competitors, including Popular Telephony and its Peerio platform.

"The acquisition of Nimcat by Avaya seems to have ‘validated’ our technology segment," John Appler, vice president of sales at Popular Telephony told VoIPplanet.com. "We have received a tremendous amount of interest from major players since that event took place."

Appler figures that part of the reason for the attention Peerio has been receiving is that it is a second generation enterprise P2P architecture. In his estimation, the current Peerio platform is an order of magnitude more scalable than previous architectures, and is protected by patents and patent applications.

As with Avaya's Nimcat, Peerio's technology essentially equips users with traditional PBX telephony features without the need for actually building out a PBX. A Peerio- (or Nimcat-) enabled device automatically discovers other units on the network, creating a virtual exchange without the need for additional hardware. In the case of Peerio's SOHO edition, even a soft phone can be used to enable the PBX functionality.

There are some misconceptions about business-strength P2P VoIP. "Sometimes people associate any P2P offering with consumer P2P voice or file sharing offerings," Appler explained. "However, in the case of second-generation enterprise P2P telephony systems, encrypted data and call control information is actually stored more reliably than if it was stored on a central call server or PBX."

"Once they understand that concept and the redundancy algorithms for accomplishing it, the uniqueness of our value proposition becomes clear."

That value proposition means that costs are reduced by around 80 percent as no central PBX or server is required. According to Appler, the software rides 'for free' on an existing IP phone, PDA, or PC platform. Furthermore, when you plug Peerio-enabled devices into a corporate LAN, they have the inherent ability to find each other, form dialing communities, and automatically assign extension numbers. Appler asserts that this capability enormously reduces installation costs and ongoing expenses for moves, adds, and changes.

"Peerio is much more scalable and reliable than previous offerings and the P2P communications methodology does not negatively impact network performance," Appler said. "Even in large deployments of thousands of lines, data can be distributed very evenly and retrieved very efficiently with a highly predictable number of queries."

The market opportunity
While P2P VoIP is not for everyone, it has the potential to serve the small business segment quite well.

"It plays very well in the small office or highly distributed organizations where it doesn't make sense to put in a PBX," Infonetics analyst Matthias Machowinski told VoIPplanet.com. "It's going to be hard for the traditional vendors to be cost competitive in that environment."

Frost and Sullivan research manager Elka Popova is also bullish on the prospects of P2P VoIP. "Cost-efficient plug-and-play solutions such as the Nimcat and Popular Telephony technologies have the potential to revolutionize the market," Popova told VoIPplanet.com.

In Popova's opinion, Avaya's Nimcat acquisition proves just how important the technology is. "It shows Avaya recognized the threat—and the potential—and was quick to acquire Nimcat soon after Nimcat launched its products," Popova explained. "P2P solutions are most likely to gain traction among smaller businesses and branches and maybe some telecommuters."

Larger businesses however are less likely to choose P2P VoIP, according to Popova. Due to issues of scalability and redundancy, and concerns over features, they will probably stay with PBX. "So, while the ultimate potential for P2P is relatively large and untapped, it will remain limited to about a third of all business lines in the U.S.," Popova said.

Peerio or Avaya/Nimcat? Who leads?
Infonetics' Machowinski commented that end user companies tend to be fairly conservative about telecom deployments and consider PBX functionality to be very important. "When you put the power of the Avaya brand behind it, it is very reassuring to buyers; they know they're going to get something that works," Machowinski said.

Peerio is not without its advantages either, according to Machowinski. In particular he noted the Skype Gateway service that allows for Skype In/Out connectivity for Peerio users.

Frost and Sullivan's Popova noted that Peerio and Nimcat offer similar value propositions to channel partners and end users. "Popular Telephony has been, however, more successful in developing partnerships," Popova said. "Also, the Peerio solution can support a number of other applications in addition to IP telephony such as file storage and sharing. Both companies are innovators and pioneers, though. We have given both companies awards for their accomplishments."

Ultimately, though, as P2P solutions will benefit small businesses the most, there is one key criterion which will likely push SMEs to choose P2P VoIP:

"The target market is very cost conscious," observed Infonetics' Machowinski, "so a lot of the time, price is all you need to compete."

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