VoIP: For The Money

August 29, 2005
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GRAND RAPIDS — In 1999, Rockford Public Schools developed a new program for advancing education for K-12 students in partnership with 3Com Corp. by transforming computers into access points to all kinds of information, from the Internet to the Discovery Channel.

All communication in and out of the classroom goes through a single workstation that serves as the computer, television and telephone, removing old teaching and learning barriers. The $8.6 million, 8,000-user converged Ethernet network integrated voice, video and data years before similar efforts at Ford Motor Co., Boeing, University of Michigan and Bank of America.

In 2000, the Rockford case study was inducted into the Permanent Research Collection on Information Technology at the Smithsonian’s National Museum of American History in Washington, D.C.

This year, when Gainey Transportation Services underwent its own convergence of voice and data, it wasn’t to alter the direction of the trucking firm or pioneer new technology, but to save $60,000 a year.

Gainey’s 12-year-old telephone system was a mishmash of digital transmission over analog lines. Each of its 10 locations had different phone systems. Most locations didn’t have voice mail, and long distance bills were in excess of $3,000 a month.

“There were a lot of things that we were looking to do, but that we weren’t able to do with our system,” said Eric Pell, Gainey director of information systems. “Our CEO, Harvey Gainey, finally said he was sick of it, get a new one, and one of the things we also wanted to accomplish was to upgrade our infrastructure on the networking side. So we looked at the VoIP (Voice over Internet Protocol) option.”

At a cost of $364,000, Gainey contracted Moss Telecommunications in Grand Rapids to install a converged enterprise network from 3Com that enabled its nationwide offices to operate as a single entity.

Now the locations can communicate with each other with four-digit dialing — for free — and all long-distance calls are routed through the Grand Rapids office where the rate is a third the cost of other locations.

The wires were already in place for both upgrades, Pell said, so there was savings right from the start. Also, Gainey’s IT staff is comfortable maintaining and administering the IP-based system, whereas troubleshooting the analog phone system required outside support.

“We figured we could save some money,” Pell said. “It was pretty easy to get into.”

As of last year, more than 130,000 small and mid-sized U.S. businesses had adopted VoIP; AMI Partners predicted another 110,000 would do so this year. Gartner Dataquest predicts that enterprise spending on IP phone systems in North America will more than double during the next few years to $4.2 billion in 2007.

Analysts such as Gartner, IDC and Yankee Group all are in agreement that 2005 will be the first year that more VoIP products ship than traditional phone systems, an inflection point that could spread its share of worldwide corporate lines from 4 percent to 44 percent by 2008, according to a recent Radicati Group report.

“Just about every field we talk to has been looking at VoIP,” said Ron Spencer, Moss director of technology. “Your super-large companies have been looking at it for awhile, but there were components missing for the small and medium enterprise markets in the past.”

“Everyone is ready to look at it now,” said Jenny Fanning, president of CPR Inc. “Maybe eight years ago, they weren’t ready to look at it or understand it. Now it’s just a matter of grabbing them and selling to them that they will find better functionality at a much lower cost quickly if they make the move now.”

CPR is a particularly strong example of how VoIP has changed. It has been selling VoIP since 1998, first as a 3Com dealer and later adding Cisco products, but has only been using the technology for its own operations for a year.

Even when the firm moved into its new location in Cascade, it did not implement a VoIP system, even though a suitable network infrastructure was in place.

“We had a real dependence on our call center and none of the management packages supported that yet,” Fanning said.

At the time, CPR’s VoIP clients were small deployments with 20 to 40 users that were looking for a cheaper alternative to the traditional phone market.

“Now it’s light years better,” Fanning said. “They started out with the hardware, then tweaked and added call management packages. That became the compelling reason to switch, that and the cost savings you experience with dropping lines.”

Now, VoIP is integrating with other technology. CPR has introduced Fax over Internet Protocol to its customers. Wireless Internet and mobility have been embraced, as well. At its headquarters, CPR technicians’ phones are routed through their laptops, which are routed through the facility’s Wi-Fi network.

Ottawa Wireless has introduced the VoWi-Fi service to its municipal Wi-Fi deployments in Rio Rancho, N.M., and Grand Haven.

Spencer noted one creative use of the call center packages: It’s a low-priced option for small companies to project a big-company presence.

The instant contact among locations and call routing system have already added efficiencies at Gainey, Pell said. The firm is looking to eventually integrate its customer service information database with Caller-ID for performance tracking and service efficiencies, as well as keystroke-dial.

While Fanning believes that the increased functionality will drive the technology, she admits that, however sophisticated the means, the end goal of VoIP is cutting cost.

“Customers are saying yes because price points have come down, functionality has gone up, and the telco savings have been dramatic,” she said. “You could be looking at payback in a year and a half.”

“To tie into some of those applications is where the real big piece is — to do some of those large enterprise features at a reasonable price,” agreed Spencer. “But what it really boils down to is saving money. Because of a whole slew of reasons, you can save money.

“Whether you’re saving money because the phone system costs less to maintain or because you’re more efficient, either way you’re saving money.”    

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