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VoIP systems: SMB Buying Decisions

Before making the big investment in VoIP, SMBs must assess their specific needs, budgets and expectations of running voice and data over the same network infrastructure.

Voice over IP (VoIP) systems aren't just for big business anymore. A growing number of small and medium-sized businesses (SMBs) are tapping into the potential paybacks of running voice and data over the same network infrastructure.

According to an AMI-Partners Inc. report published last summer on the 2004-2005 U.S. SMB telecommunications market, 42% of small businesses and 61% of medium-sized businesses say they use or plan to use some form of IP telephony in the next 12 months.

As with all technologies, there's a lot to know before you invest. Here are some of the features, costs and issues -- specific to SMBs -- that will help you decide what's best for your business.

A basic definition: Voice over IP refers to a set of facilities for managing the delivery of voice information within an enterprise, in the form of Internet protocol packets, via IP switches and gateways.

Costs and benefits:

A number of factors determine the size of payback you can get from replacing regular circuit-switched private branch exchanges (PBXs) and telephones with a VoIP system. Be sure to conduct a careful cost-benefit analysis in advance, using the following steps:

  • Replace dial-up with IP connections. Long-distance calls within the U.S. have become so inexpensive that savings from moving to a VoIP service are likely to be minimal. Using the public Internet, while cheaper, raises quality-of-service issues. On the other hand, overseas VoIP calls cost 20% and 40% less per minute than regular dial-up, according to Nemertes Research Inc. in New York.

  • Access-line consolidation. A VoIP system enables companies to consolidate separate voice and data onto a single access line. However, this tends to be a limited option for small companies and sites that typically have only two or three lines, because it's a good idea to retain at least two lines for redundancy/backup purposes.

  • Cabling. One set of cables costs about 40% less to build and maintain than two, according to Nemertes. However, these savings can be realized only by companies laying new cabling systems: in a new building for example. Most existing office buildings already have two sets of cabling in place.

  • Client administration. A typical move, add or change takes about 10 minutes and costs about $5 on a VoIP platform, according to Nemertes. Client changes on regular PBXs take 45 minutes on average and cost about $32.50 per move. VoIP client configurations are software-defined and require minimal manual intervention. VoIP switch vendors also have been providing increasingly user-friendly administrative consoles.

Companies with fewer employees tend to save less on sheer number of moves. However, small companies with small IT staffs are more likely to have outsourced moves, adds and changes. VoIP's ease-of-use features may enable such firms to move client configuration in-house, at a cost savings of $105 per move on average, according to Nemertes.

"A good budget for tools is about $50,000 for SMBs," said Robin Gareiss, executive vice president, Nemertes Research. "And you should budget about $2,500 per IT person for training -- although you can often get a vendor to throw that in free."

Be sure to look beyond hard cost savings and consider soft productivity benefits from advanced VoIP features such as conference bridging, unified messaging, paging and IP-enabled call centers.

Expert view: Robin Gareiss, executive vice president, Nemertes Research:

"Management tools are a crucial element of a successful VoIP implementation, especially if it's in-house. Many companies go in thinking, 'Whatever tools I use now [for IP data networks] will do for VoIP; but that isn't true in about 80% of cases. A year later, you'll find you don't have enough details, real-time information, or data on what applications are using what bandwidth."

"SMBs that start out hosting their own converged IP infrastructures often end up outsourcing management to a service provider down the road, when the networks get more complex, and they want to do advanced things like an IP-enabled contact center, instant messaging, video or unified messaging. Using a service provider often makes sense for branch offices, too. The carrier does remote monitoring and troubleshooting to ensure quality and does maintenance and updates as well."

Tips and gotchas:

  • Set up a broadband connection with enough bandwidth to handle outgoing calls at peak traffic times. A rule of thumb: Each call will use 100K bit/sec. of bandwidth. Your IP router should also have a quality-of-service feature that can prioritize VoIP transmissions during heavy traffic conditions.

  • Ask your ISP for a static IP address: Dynamic IP address allocation will not work for voice calls.

  • Choose a VoIP switching device that can work with both IP-based and circuit-switched phone devices. This allows you to migrate gradually without interrupting users' phone services.

  • Consider a hosted VoIP service, such as IP Centrex, if cost-justifying an in-house switch is iffy.

Industry trends:

Growing support of the Session Initiation Protocol enables different brands of VoIP equipment to communicate. SIP ensures your VoIP switch can talk to a broad range of IP telephony devices.

VoIP systems are increasingly supporting wireless protocols and mobile phones, allowing workers traveling around a building, campus or the country -- or working from home -- to access the full feature set of a VoIP platform remotely. Some systems now support intelligent call routing, enabling the worker to tell the system where to reach him: at home, on the road, on his personal digital assistant or on his cell phone.


More leading VoIP vendors are offering low-end products targeting the SMB market. Here's a sampling:

Nortel's Business Communications Manager

Siemens' Hipath 3000 and 5000 Real Time IP System

Mitel's SX-200 Integrated Communications Platform

3Com's NBX V3000 IP Telephony Solution Up to 1,500 devices

Avaya's IP office (low end) and Definity (medium to high end)

Switchvox's Soho and SMB

ShoreTel's ShoreTel 6 - ShoreTel

Packetizer Pointers to various papers and presentations on VoIP

Nemertes Research The ROI of VoIP Industry event for VoIP; a good place to find vendors

IP Telephony with H.323: Architectures for Unified Networks and Integrated Services (Hardcover) by V. Kumar, Markku Korpi, Senthil Sengodan, Vineet Kumar, Markku Korpi, Senthil Sengodan

Taking Charge of Your VoIP Project (Paperback) by John Q. Walker, Jeffrey T. Hicks

Elisabeth Horwitt is a contributing writer based in Waban, Mass. Write to her at

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