Next Generation Telephony An Emerging Business Communications Strategy Bob Hughes Program Manager IBM CIO Sept, 2002 IBM Confidential

Next Generation Telephony

An Emerging BusinessCommunications Strategy

Bob HughesProgram Manager

IBM CIOSept, 2002

IBM Confidential

Copyright 2002 IBM Company. All rights reserved. 2

The current strategic period will see the emergence of several key technologies with voice particularly well positioned.

"The Bubble""The Bubble"

Adoption Adoption CurveCurve

Business Business ImpactImpact

Time, MaturityTime, Maturity

Innovator's Innovator's CurveCurve

Enterprise Instant Messaging

Wireless Web/WAP

Bluetooth VOIP

Wireless LANs

PDA Phones

TechnologyTrigger

Plateau ofProductivity

Slope ofEnlightenment

Trough ofDisillusionment

Peak of InflatedExpectations

< 2yrs

2-5 yrs

IBM Confidential


The voice environment is about to undergo a transition similar to the transition the data environment experienced a decade ago.

Mainframe Client/Server

CS/TDM IP Telephony1990 --------------- 1995 -------------- 2000 -------------- 2005 --------------- 2010

Proprietary OSes

App-specific UIs

3270 terminal

Open OSes

Standard GUIs

PCs

Hdwr-specific sftwr

Proprietary features

TDM phones

Open software

Standard GUIs

Intelligent endpoints

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Our basic premise is that we are nearing the end of circuit switch technology’s ability to provide annual cost/performance benefits.

For decades, enterprises have pressured current voice vendors to lower cost and increase functionality using existing technology.

In general, we have been successful. However, the opportunity to achieve continued improvements

within the circuit switched/time division multiplexing technology is becoming increasingly limited.

We must move to a new technology to continue to provide annual benefits.

This new paradigm for voice is voice/data convergence. Finally, we must gain a true understanding of “convergence”, how

voice and applications will be enhanced. We must recognize that voice is NOT just dial tone anymore.


In the WAN, prices have declined and are at or approaching prices below which circuit switching cannot go.

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

1996 1997 1998 1999 2000 2001 2002 2004 2004 2005

Domestic US Trans Europe US to UK Trans AP SW Threshold

CostPer

Minute

On/Off Rate Trends and Projections

Applied ResearchTechnologies


The transition to next generation telephony requires simultaneous development on multiple levels: IP transport, SIP protocol and Applications.

IP Transport (plumbing)

SIP Protocol Base

BusinessCommunicationsApplications

time

Focus

Base Integrate Advanced

IP Transport1. Toll bypass (WAN)

Gateways to TDMGateways to PSTNIVPN or Power9

2. Local (LAN)IP telephonesIP softphones

ApplicationsPresenceFollow-MeMulti-castingInstant MessagingEtc.

SIP ProtocolServers

Call ManagementProxyRedirectionDirectory

ClientsSIP phonesSIP softphonesMS Messenger

External Services

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A budgetary comparison between TDM and IP for the LAN showed IP preferable under both the local server and server farm based server models.

TDM vs Server Based I P Local Servers

0

200

400

600

800

1000

500 1000 3000

Site Size (in Stations)

Cost

per

Sta

tion TDM

IP

Local vs SDC Based Servers: 500 Stations per Site

0

200

400

600

800

1000

2Sites 6 Sites

Cost

per

Sta

tion TDM Local

TDM SDCIP LocalIP SDC


Industry projections for WAN VoIP shows decreasing cost per minute.

00.010.020.030.040.050.060.070.080.09

Cost perminute

Avg Off Net Carrier Revenue per MinuteIP Voice Minutes

US Retail

Note:This data covers services offeredby carriers, not IP transport overconverged corporate networks

IDC #26354Jan 2002


Industry projections for LAN based VoIP show declining cost per station.

050

100150200250300350400450

20

00

20

01

20

02

20

03

20

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20

05

20

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Cost perphone

World Side Cost per IP Phone

US $IDC, April 2002

Rept # 26977

Factors driving cost down:Competition (incl 3rd party)

Natural product life cycle

Factors driving costs up (esp high end)Color touch screenProcessing power

Infrared and wireless connectionPDA docking station


With declining cost per unit for VoIP in both the WAN and LAN, the mix of IP to circuit switched/TDM technology will shift in favor of IP.

Migration from TDM to IP Phones

02468

1019

9510

0619

9719

9819

9920

0020

0120

0220

0320

0420

0520

06

Stat

ions

Shi

pped

(0

00)

Circuit Switched IP Total

World Wide Migration WAN Voice Minutes: Cross Border

0

50000

100000

150000

200000

250000

2001

2002

2003

2004

2005

2006

Min

utes

(M

illio

n)

Circuit Switched I P Total

In-Stat/MDR“LAN Telephony:

A Billion Dollar Market”

IDC Rept #26354Jan 02


We believe the business opportunity for VoIP extends even further to new applications and architectures, in particular, for the LAN

CostPer

Station

Time

Server farm model

Softphone saves $100 per station

Softphone Lite saves $50 per station

SIP enabled Message CenterSaves T1 H/W cost

VXML apps reduce “IVR hell”May automate support functions

Unified Business Communications

Others


These opportunities extend to the WAN, also.

CostPer

Minute

Time

Voice over DSLSaves $.02 - $.05

Voice over Power9 (true convergence)Savings TBD

Local Message RecordingSaves LD cost if called # busy

IP conferencing

Other


New paradigms in voice also promise savings.

CostPer Unit

Time

Self provisioning saves $25 per station

Drop UPS requirement saves $45 per station

Desk top power saves $70 per station

Converged documentation and processesSaves local implementation effort (TBD)

Others


We have a chicken and egg situation: the size of the VoIP benefits are a function of the penetration of our VoIP infrastructure.

Benefit

InfrastructurePenetration

Number Site

s

With

IP PBX

Numbe

r Site

s

On IP W

AN

Self pr

ovisi

onin

g

Softp

hone

Lite

Conve

rged

doc

Local

Msg

Rec

VXML ap

ps

Softph

one

- - -


Voice realities in the industry and at IBM require a new way to look at business cases. We will no longer be able to rely solely on cost savings and must look to productivity and revenue enhancements.

Cost andSavings

ProductivityEnhancement

IncreasedRevenue

BusinessCase+ + =

Business Transformation

The reality of voice business case at IBM:Inventory is aging, often fully depreciated

Therefore, the case for change on solely cost/savings basis is toughThe role of functionality offered by new technology will play major part in business case

Easy to calculateEasy to implementDrive vendors for

lower costs

Difficult to measureDifficult to quantify

Difficult to quantify contributionMeasured at corp level


IBM has a forward thinking voice vision/goals/objectives statement.

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Transform IBM’s voice infrastructure into one that: Is increasingly cost effective Increases end-user productivity and

satisfaction Showcases IBM products, services and

solutions Accelerates IBM’s business advantage Addresses diverse global requirements


The IBM strategy focuses investments in new technology and looks beyond convergence for benefits

Avoid investing any new $s in TDM technology, where possible.

Look beyond the convergence on IP transport. Voice becomes “just another” IP application. Telephones become “just another” application end-

point. The ultimate payoff is in the integration of the

“voice” application with other applications. The real value in next generation telephony is in

application integration, more than IP transport. Leverage IP telephony to converge along multiple

planes. Data and voice transport. Wired and wireless services. Voice and instant messaging. Voice enablement of existing applications.

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IBM’s Next Generation Telephony Architecture is a layered architecture; and we anticipate applications that leverage services from multiple layers.

End Points

Transport, SwitchingAnd Routing

Call ControlSignaling

Service

ApplicationInterface

Applications

PhonesSoftphones

Cell PhonesPDA

Softphone LiteVideo

Power9 Ethernet IVPN Wireless GWQoS

SIP Dial Plan GK GW BW Ctl Admission Ctl PSTN/Wireless (Cell and 802.11) Interface

Directory (Incl ENUM)Presence

VXMLText to Speech

Speech RecoRouting Apps

Same TimeCalendar

Unified MessagingSmart Audio Conf

CRMMany Others

AbstractionLayer

DSL

App 1 App NApp 2 App 3

Audio Bridge

En

d to

En

d M

anag

emen

t


IBM’s experience in VoIP business cases is emerging. It is influenced by inventory of spare equipment (LAN) and implementation of new WAN

Premise (I.e. IP PBX): Individual RFPs are highly competitive and often difficult to

characterize Because we have so much TDM equipment in inventory, we do not

have many pure project comparisons of TDM vs. IP Given this, a budgetary study was completed comparing 5 yr TCO

of IP and TDM. IP was less expensive WAN:

Very successful AP WAN project Initially projected savings: up to 20-40% savings, based on site

and final access requirements EMEA RFP did not produce large savings

Current contracts show excellent cost per minute Complexity of EMEA voice network reduced candidate traffic

for IP US Power9 project promising


1-2% of Population on IP phones 25% of AP site-to-site traffic on IP IVPN EMEA WAN RFP in evaluation U.S. WAN (Power9) pilot 2Q/3Q 2002

IBM has successfully deployed Voice/Data convergence in a number of projects.

IBM Confidential

• Calgary Sales & Svc• Cisco AVVID• 450 phones

• Toronto Software Lab• Cisco AVVID• 3,000 phones

• Tel Aviv Country HQ • Cisco AVVID• 850 phones

• Singapore Sales & Svc• Cisco AVVID• 1,000 phones

• AP Inter-site• 18 sites• up to 50% of traffic

• Dubai – New Facility• Cisco AVVID• 200 phones

• India site-to-site• 2 site pilot• 8 sites if successful

In Prod

In Prod

In ProdJune PilotJune Prod

June Prod June Prod

• U.S. Power9 WAN• Cisco gateways• 5 sites

June Pilot


We have excellent communications tools and depend on them daily. Yet they don’t always work together.

On a good day:

My PC worksMy IM works

My applications workMy phone works

My cell phone worksMy PDA works

Everything Works!

But none of them really work together

What if they did?

Documents

Next Generation Telephony An Emerging Business Communications Strategy Bob Hughes Program Manager IBM CIO Sept, 2002 IBM Confidential