Open-Source VoIP Challenges Established Order

Traditional telecom types may roll their eyes at the prospect, but the emergence of Pingtel Corp., a one-year-old start-up with a software-only IP PBX solution based on the Session Initiation Protocol (SIP), marks the beginning of a new phase in the evolution of enterprise VoIP. Pingtel’s SIPxchange is one of the first plausible IP telephony solutions to come out of the open source world. We’re betting more will follow.

The Pingtel product is built around open-source code from SIPfoundry, a non-profit organization for the development of SIP-based VoIP communications solutions. SIP is a signaling protocol developed by the IETF (Internet Engineering Task Force) that enables PBX call management and advanced functionality such as presence management. SIPxchange runs on commodity servers under commercial releases of Linux, the open source operating system, including those from market leader Red Hat Inc.

Pingtel claims capital costs for a SIPxchange system are less than half what they would be for a comparable proprietary solution. SIP and Linux also offer superior flexibility and don’t lock customers in to expensive proprietary add-on hardware and software products. The company began actively selling the product at the beginning of the third quarter in 2004.

A place in the telecom landscape
Old guard telecom hold-outs who already believe VoIP is eroding the traditional high reliability of enterprise telephone systems will likely see an open source IP PBX solution as a further assault. But as Pingtel president and CEO William Rich explains, commercial open source providers like his company and Red Hat bring all the advantages of a proprietary software developer, while retaining the undoubted advantages of open source.

“What you get,” Rich explains, “is a finished software package, easily executable code in a stable distribution that is ready to install. It comes with our guarantee of quality and interoperability [with IP phones and gateways]—and it’s all backed up with 7/24 technical support and documentation, just like a proprietary product.”

SIPxchange also includes value-added components such as GUI-based management software that makes it easy to do set-up, configuration, and moves, adds, and changes.

The product is currently aimed at companies or offices with from 25 to 200 lines, but Pingtel will have a version that works for offices with up to 500 lines by summer, and a 1,000-line system by end of this year. The core PBX functionality runs at about 15 calls a second and 55,000 busy hour call completions (BHCC). These are measures of call capacity and indicate that, at least on paper, the product can support implementations with several thousand users. It’s just a question of certifying the product to work in larger deployments, Rich explains.

Cost factors
Pricing of a complete system obviously varies by number of lines, although since the IP phones themselves are the single biggest capital cost item, cost per desktop varies relatively little. The all-inclusive cost for a 50-line Pingtel IP PBX system deployed on an existing voice-ready Ethernet network is around $16,300—which works out to about $325 per desktop. Comparable proprietary systems cost between $700 and $800 per desktop, Rich says.

Breaking down the overall figure, capital costs include $1,200 for a server. (The minimum configuration is a 1.75 GHz or faster processor, 1GB of RAM and an 80 MB hard drive.) The SIPxchange software itself, which provides PBX, voice mail, and automated attendant functions, comes to $1,000.

Two 25-port voice gateways from Mediatrix Telecom Inc. run a total of $1,600. (The voice gateways connect the IP PBX to the public switched telephone network or PSTN.) Pingtel has done interoperability testing and certified gateway products from Mediatrix, Cisco and Vegastream. It has tested and certified IP phone products from Polycom Inc. and Cisco. Others will follow. Mid-range multi-line phones from Polycom cost about $250 each. Buying 50 of them adds $12,500 for the total system.

Not included in Rich’s sample pricing is the cost of the Linux operating system. Pingtel also warrants its product compatible with specific commercial Linux offerings. SIPxchange is currently certified to work with Red Hat Enterprise, Version 3. The company is working on porting it to the more recent Red Hat Enterprise, Version 4 ($350 to $800 depending on support options), as well as to Linux editions from Novell Suse.

Deployment help
“We do remove the complexity from that part of the business for the customer,” Rich says. “If the customer has Linux expertise on staff, great—but it isn’t a requirement.”

A key part of the company’s marketing strategy going forward is its “boot and go” concept, which when fully implemented will result in “absolute simplicity in the out-of-box user experience.” The goal, says Rich, is to make implementing and managing a Pingtel IP PBX so easy that “if you can figure out how to run a [Microsoft] Exchange [e-mail] server, you can run this.”

In the meantime, many prospective customers will need help implementing a system. Value Added Resellers (VARs) can provide implementation services, but Pingtel also offers a Quick Start remote consulting service that walks small companies through the installation and set-up process. It costs $1,500 and covers eight hours of support time, which is enough in almost all cases, Rich says.

Thrifty and feature rich!
The low deployment cost of the Pingtel solution is just one of the advantages the company claims for it. SIP makes it easy to integrate new applications and enables functionality that proprietary solutions cannot easily offer, such as presence management.

SIP-compliant devices broadcast their presence so that a SIP-based IP PBX is aware of their location and the call status of the user. This information can be used to continually update instant messaging-style buddy lists on other group members’ computers. Users would know before they pick up the phone if the person they want to call is available or not.

Such a system could also manage voice calling, instant messaging (IM) and video conferencing as interchangeable modes of communication and allow users to, for example, escalate an IM session to a phone call or video conference at the click of a mouse button.

The open source environment also means customers are not restricted to only using peripherals and software provided by a single manufacturer. And as with any standards-based technology, competition among vendors will bring prices down faster.

Paradigm shift
“Traditional [telecom industry] players don’t want to talk about this,” says Rich, “but SIP will bring a real shift in the balance of power, away from the manufacturer. The Avayas and Nortels, with their proprietary, closed-box products, determine the equipment and applications customers use and the pace of their roll-outs. If I’ve got a SIP environment, I decide what phones to use and which applications, and the pace of roll-out. The balance of power shifts to the user. That’s a huge change in how the industry operates.”

Pingtel has had some success already in convincing customers. It has fewer than 100 commercial deployments, but expects to have 1,500 by the end of this year—half are already in the pipeline, Rich says. The company recently launched a VAR program. It has already signed up 20 resellers and expects to add between 25 and 30 per quarter until the end of the year. As it brings 500- and 1,000-line versions of the product to market, it will add systems integrator partners as well.

“Each new systems integrator or VAR opens up a whole new set of opportunities,” Rich says. VARs have a strong incentive to sign up, he adds. Where most resellers see a margin of about 15 percent when selling conventional phone systems, Pingtel offers margins of 30 percent.

Not that it’s all clear sailing. Rich concedes that the company has some hurdles to overcome, mostly related to marketing—such as building brand awareness, convincing nervous customers that open source is not as scary as it may seem to some, and overcoming FUD (Fear, Uncertainty and Doubt) from traditional telecom vendors who claim that open source solutions are never as feature rich as their proprietary solutions.

Try it out . . .
These hurdles can be and are being overcome, he says. Customers who are unsure can download a demo version of the product and try it out on a spare server with a few lines. And customers who look at the product quickly learn that it has the features and functions they need.

While the product’s open source heritage may be a stumbling block for some potential customers, more and more see it as a plus. And for small businesses, who will typically follow the lead of a trusted VAR, it’s a non-issue. The bottom line, Rich says, is that the market is ripe for SIP-based VoIP systems.

“When VoIP first started in the enterprise, a lot of the concern was about the data network, about quality of service (QoS),” he says. “I think it’s fair to say the data networking infrastructure is becoming voice ready—thanks to Cisco. That hurdle is off the table. And there are a lot of companies now starting to say, ‘Boy, Linux does a great job for me in this area, where else can it do a great job?’ We may have some challenges, but at the end of day, we think the wind is at our backs.”

Wishful thinking or plausible optimism? Pingtel, which is currently in a second round of venture capital financing, will find out, and so will the mainstream industry. It could be interesting.

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