Fighting for the Phone


Business 2.0: VOIP technology is appealing and a potential money saver, but large companies should take their time in switching to it. (PDF)

The latest technology battle is over the office phone. Voice-over-Internet-protocol technology is the new force ready to take on the tried-and-true private branch exchange (PBX). With nearly $2 billion a year at stake, it comes as no surprise that this normally staid business is suddenly a game of one-upmanship and, yes, more than a little hype.

The myriad news releases and breathless media coverage make it seem like office VOIP networks will take over the business world tomorrow morning. But the case for office VOIP is even more overstated than that for consumer VOIP. For example, Insight Research of Boonton, N.J., claims that the number of IP phone extensions — a healthy indicator of the deployment of office VOIP — will grow to 56 million, four times the current number of lines, by 2009. During the same time, old-fashioned phone extensions will drop by almost half, from 80 million to about 48 million.

The slow growth of IP lines shows that the technology doesn’t make any business sense, at least for now. I’m a big believer in technology, but I also understand that VOIP will win only if corporate IT managers are convinced it will save them money. It’s just not clear that it will.

The new VOIP PBX boxes are about a third cheaper than old-fashioned PBX boxes. But VOIP handsets cost about $600 each — twice as much as the old technology. That’s the lion’s share of the cost of a transition, as you need a handset on every desk. Since many companies upgraded their office phone networks during the run-up to 2000, they have little incentive to upgrade again during this decade. Why shell out $12 million if the phones will work fine for another 10 years?

An upgrade might make sense, however, if the IP network were less expensive to run. With VOIP, a company can get rid of the IT staff that manages the phones, but that won’t save much cash. Most of the cost is in the calls themselves. But voice service is getting cheaper all the time: The price for regular voice traffic is now down to 2 cents a minute. “VOIP never was and never will be the least expensive way to deliver voice to the enterprise,” says Bob Rosenberg of Insight Research.

In reality, it could take a decade for VOIP to become the standard in the workplace. Pete Wilson, CEO of Telwares, a telecom consultancy based in Destin, Fla., thinks VOIP will gain favor with consumers and small businesses but that large companies will take their own sweet time in making the switch. He says, “Penetration into enterprise will take a lot longer than people think.”



Yes, u have any info or links for info regarding Consumer and VOIP? like maybe comparison stuff and if its really worth going taht route. I’ve been finding many Compnaies using Voip are not listing any hidden charges and the fact that some type of broadband connection is required perferably through the company using voip. been finding that consumers using their regular phone service still out-performs voip service and still costs alot less than Voip service . so it looks to me that Voip is not good for most consumers at this stage in time.


Have you seen the Cisco/Polycom co-branded VoIP conference phone ? It’s much more than that $$. Of course it only supports Cisco Call Director (and NOT SIP) so it is really useful …


Hey Om, I can get ya a Polycom for $249……………

$600????? What ya been smokin’ besides those cigars???



Billy… thanks for the post and great points you bring up. it is clear for me that the key reason is the timeline. actually the hype around this subject has become so high that i had to write the piece. while trying to address a complex issue in 400 words is quite a challenge, i feel i have been able to convey the “hang on, wait a minute” reasoning in the piece. that said, your comments are very very welcome.

Bill Bush

I wanted to touch base on a couple partially correct statements in your piece. The “slow” growth of IP telephony is still happening faster than the migration from analog to digital, faster than dial-up to broadband computing, faster than typewriter to word processor, etc. IP telephony does more for less money than TDM, bot not for everyone and not at the same time. With that said, it IS coming; we will never go back to TDM. You talk about the lower cost of the primary PBX box, but counter it with the cost of the phoneset; not an equal comparison. The price of both the handsets and PBX are going down, AND they are easier to upgrade, AND they are easier to program, AND are easier to troubleshoot, AND easier to support….AND they do more, especially regarding unified communications, and contact center capabilities. Regarding “getting rid of IT staff”, that misstates the impact. IT and telecom staffs need to expand their skills to manage and optimize converged networks, and the best ones will keep their jobs. Not a reason to put off the move to IP telephony. Regarding large companies taking their sweet time to adopt IP telephony, they are doing that to justify the sunk costs of the TDM systems, and many will ride them until they are fully depreciated or fall apart. Even large companies (especially multi-site/multi-nationals)will see the value of IP telephony and will begin to convert their systems, either to add capabilities/capacity, reduce costs, or gain a compettitive advantage. With all that said, I agree with the timeline for the most part, but there is clear momentum (beyond the hype) and as time goes on, there will be more and more VoIP accelerators and less and less decelerators.


Why don’t they just connect a headset to the computer? Or some similar gizmo with a keypad and speakerphone? That should cut down costs considerably. And then a VoIP softphone can be used which will be triggerred by the key presses on this gizmo.
I’m close to zilch on technology, so maybe this sounds ridiculous, but these are just my thoughts.

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