VoIP High on List of Tech Investment Priorities

While not the fastest growing area of technology investment, IP voice systems will be up there—right behind storage systems and servers—for aggressively spending mid-size enterprises in 2005.

By Ted Stevenson | Posted Mar 29, 2005
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Buried about two-thirds of the way down in a just-published study—2005 IT Priorities, from London, Ontario-based Info-Tech Research Group—are some interesting data on Voice over IP.

Statistics abound, of course, on what percentage of companies overall are deploying VoIP, and 2005 IT Priorities is no exception:

  • 23 percent of enterprises already have some form of IP telephony in place.
  • An additional 16 percent plan to implement VoIP in 2005.
  • A further 24 percent report plans to have VoIP in place with three years.

But the Info-Tech study also places these adoption stats in the context of total technology spending—specifically, for mid-size enterprises.

What constitutes a mid-size enterprise? Info-Tech analyst George Goodall defined the term first in functional terms. "Mid-size businesses are workplaces with limited technical resources," he said. "You don't have big technology budgets or technical support staff. Your IT support group may be a single person." Pressed for a quantitative answer, Goodall responded "We're talking about companies of 500 to 5,000 employees." (Mid-sizedness is a relative thing.)

In the mid-size milieu (the study drew on some 1,400 respondents from companies in this category), VoIP systems rank third in spending priorities, behind cutting-edge storage facilities (SANs and network-attached storage) and servers all types—among companies with plans to spend heavily.

"Of those who are going to invest heavily this year, 62 percent are investing in VoIP. A scant one percent of this "heavy investment" group was not interested at all in VoIP," according to the report.

Growth-VoIP correlation
The study also revealed that revenue growth is a key factor in the drive to deploy IP voice. "Fully 70 percent of those that plan to invest are in the "medium to high growth" segment," the report concludes.

Info-Tech analysts see a clear link between revenue growth and innovation: In today's climate, growing companies are innovative companies, and VoIP "is a powerful new tool to drive business innovation."

The report cites a project under evaluation by McDonalds: geographically centralized VoIP call centers to take and relay drive-through orders. Trained customer-relations personnel handle the interaction and pipe the orders through to the restaurant staff, who are no longer performing customer interface duties. They can also upsell products. This kind of creative business innovation produces rewards that transcend simply cutting the cost of long-distance phone calls.

Senior Analyst Carmi Levy pointed out an additional factor driving adoption of VoIP systems: "A lot of companies installed Y2K-compliant phone systems back before 2000," he said. "That equipment is coming to the end of its useful life; VoIP is the obvious replacement," he concluded.

VoIP strengths
Levy rattled off some anecdotes illustrating the virtues of IP voice. "First of all it's really scalable," he said. "The biggest deployment in the U.S. was done by Bank of America. It links 180,000 employees in 1,500 locations, over 29 states; not bad," he commented. "But it's dwarfed by a deployment that's being planned for the Agricultural Bank of China [in the Republic of China]: They will connect 50,000 banking locations plus a call center, over a single VoIP network."

Another benefit is flexibility, Levy continued. "The Seattle Times decided to replace its switched in-building phones with an IP system. It turned out their network cabling was too outdated to support voice," he said. "So they ended up installing wireless VoIP phones."

Continuing on this theme, Levy remarked "Many companies have networks that are too rickety to support voice. When they upgrade their IP networks, VoIP suddenly becomes a no brainer. On the flip side, voice really forces companies to groom their networks, eliminating all bottlenecks, and so forth. Which in turn facilitates things like video traffic."

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