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Value, Risks and Rewards of VOIP

Zeus KerravalaVice President, Enterprise InfrastructureThe Yankee Groupzeus@yankeegroup.com

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the Yankee Group

the Yankee Group The Premiere Global Telecom,

Technology, Wireless, Media and Internet Commerce Market Research and Consulting Firm bridging the old and new economies

30 years as strategic adviser to many of the world’s largest network service providers, equipment suppliers and enterprise e-businesses

More than 100 Technology Analysts with a Special Focus on Enterprise and Carrier Networks, Internet Commerce and Infrastructure, Wireless Technology & Services

Zeus Kerravala Vice President

Oversees Yankee Group’s Enterprise Infrastructure services

Focus on enterprise hardware and software infrastructure, Internet data center infrastructure, carrier edge

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the Yankee Group• Core Practices Extend

Worldwide• Europe • Latin America• Asia Pacific

• Customer Focus• Investment Banking and

VCs• Buy-side Investors • Vertical Markets

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Enterprise Challenges

Improve user productivity through the use of technology.• Competitive advantage vs. necessary evil

Increase revenues while lowering cost.

Mobilization of the workforce

The need to unify all communications platforms.• Conversable technologies

Align IT with business process

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The New CIO Mandate

NowTime

Tactical Strategic

Bu

sin

ess

Val

ue

Importance of Technologyto the Enterprise

Past CIO Metrics:Bandwidth, CPU, Memory,Database/System Availability

Future CIO Metrics:Productivity, Revenue,Cost, Profitability, Process

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State of VoIP

Adoption Results• 2002 – 10% penetration of line shipments

• 2003 – Forecasting 25% for 2003

• 1 Million IP Phones sold in 2001

• 2 Million IP Phones sold in 2002

• Projecting 3 Million in 2003

• Projecting $10 million in soft phone for 2003

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Telephony Line Shipments

0

2

4

6

8

10

12

14

16

18

2002 2003 2004 2005 2006

Total Phone System

IP Telephony

(Millions)

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Adoption Results for VoIP

2002 adoption was 10%

Respectable, but held back due to:

• Legacy vendors have been slow to develop

IP Telephony solutions

• Reliable VoIP has been difficult to manufacture

• End-users have not been properly educated on what exactly is

available, and what the true costs of owning a phone system

are

• Indirect channel either from voice world or data world have not

quickly adapted to new environment

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67%

0%

33%

0% 0%

1 2 3 4 5

1.No Interest 2.Not deployed, but interest 3.Deployed in trials 4.Departmentally deployed 5.Fully deployed across the company

What is the status of VoIP in your organization?

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Value Risk

IP Telephony Value and Risk

Gain a competitive advantage

Lower TCO than running separate systems

Improve efficiency of end users

Will increase user productivity by unifying collaborative apps

It’s about voice OR data

Competitive disadvantage if performance is erratic

Increase TCO if pre-work and analysis is not done

Will lead to inefficiency if not deployed correctly

End-users will not use new applications if the experience is not consistent

It’s about voice AND data

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The Changing Value Proposition

What we have been saying: • VoIP, Convergence, Multicast, Layer2, Layer3, QoS,

Switching, TDM, PSTN, etc.

• Value Proposition: TCO savings, IT improvement, etc

What we should be saying: • It’s about managing and using information and

communications better

• Value proposition: Driving business value through productivity improvements

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Tomorrows Requirements: Extending the Enterprise

Partner

Employee

E-Mail

IP Voice

TDM Voice

Web Information

Call Center

Faxes

Voice Mail

MobilePhone

Messaging

IVRUsing and Managing Information

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The New Value Proposition

Lower TCO

Improved IT Process

Streamline BP

Competitive Advantage

Incr

easi

ng R

OI

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IP Telephony Benefits

TCO Savings: Less cabling, equipment, savings on toll costs, network savings

Improved IT Process: Reduced MACDs, ease of configurations, streamline staff

Streamlined BP: Unified messaging, collaboration, travel benefits

Competitive Advantage: Presence software, speech req, IPT apps

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50%

25%

0% 0%

25%

1 2 3 4 5

1.Greater than 125% the cost of TDM 2.101% to 125% the cost of TDM 3.The same as TDM 4.75% to 99% the cost of TDM 5.Less than 75% the cost of TDM

Audience Response:What savings/premium do

you expect VoIP to yield?

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Networking Trends IPT Impact

Networking Trends will Drive IP Telephony Adoption

Networks will be packet optimize

Web services continue to drive app. integration

Network and computing platforms will be simplified through standards

Voice platforms will be adapted

to packetized networks

The phone and PC become key

voice/data integration points

Third-party software vendors

will develop vertically oriented

“deadly” applications

Telephony will be come an application on the data network

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Phone-Based Integration

Source: Cisco Systems

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PC-Based Integration

Integrated Video

Presence Application Integration

Source: Mitel

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What This Does to the Business

Talking Collaborating

Delayed Real Time

Delayed

Media Restrictive Media Adaptive

Reactive Proactive

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Pervasive Communications

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IT Investment

RO

I

ROI from decreasing IT cost

ROI from increasing employee productivity

Productivity Impact of IP Telephony

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Convergence Risks Voice and video are real-time applications extremely

sensitive to delay, jitter and packet loss

Businesses demand five-nines availability for voice

Need PSTN-like call quality

• New features and functionality do NOT compensate for poor call quality

Large networks require network audits and upgrades

QoS must be implemented

• Best practice on the LAN

• Mandatory for WAN

Inaccurate TCO and ROI calculations

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75%

0%

25%

0% 0%

1 2 3 4 5

1.Cisco 2.Avaya3.3Com4.Nortel5.Other

Who Is Your Preferred VoIP Vendor?

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Recommendations IP Telephony will happen – be ready

Perform a network assessment

LAN, WAN, servers, cabling, management, power

Choose a test bed for deployment

Assess what you learn from the test bed

Review sample business cases, calculate TCO and ROI

Success depends on planning and having an effective management infrastructure

“Measure twice, cut once” (and proactively manage the quality of the cutting)

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Thank You!

Zeus Kerravala

Vice President

Enterprise Infrastructure

The Yankee Group

617-956-5000 phone

zkerravala@yankeegroup.com

http://www.yankeegroup.com