Realizing the Promise of Converged Voice and Data Networks

© 2002 Frost & Sullivan www.frost.com 1

Realizing the Promise of Converged

Voice and Data Networks:

Converged Communications for Today’s Enterprises


Table of Contents

Executive Summary.................................................................................................................... 3

Overview of Enterprise Telephony Systems ................................................................................. 4

Enterprise Telephony Solution Requirements .............................................................................. 6

Circuit Switched, Packet Switched and Converged Technologies .............................................. 7

Circuit Switched (KTS and PBX systems) ............................................................................. 7

Packet Switched (IP-PBXs)................................................................................................... 7

Converged Systems (IP/TDM) .............................................................................................. 8

Market Dynamics ................................................................................................................... 9

Overview of the Market Potential for Enterprise Solutions ........................................................ 11

High Value SME/Branch Office Applications ......................................................................... 13

Basic Voice Mail/Auto Attendant ....................................................................................... 14

Unified Messaging / Communications ................................................................................ 15

ACD Systems and Contact Centers .................................................................................... 16

IVR (Interactive Voice Response) Systems .......................................................................... 17

The Intel® Converged Communications Platform ..................................................................... 18

Total Cost of Ownership (TCO) Analysis ................................................................................. 18

Results and Analysis ............................................................................................................. 19

Conclusions on the Total Cost of Ownership Analysis ........................................................... 21

Intel Converged Communications Platform Opportunities......................................................... 22

Enterprise Opportunities....................................................................................................... 22

VAR Opportunities............................................................................................................... 23

ISV and Developer Opportunities .......................................................................................... 24

OEM Opportunities.............................................................................................................. 25

Intel Converged Communications Platform: Key Benefits .......................................................... 25

Appendix ................................................................................................................................. 27


Executive Summary

This report examines the current state of enterprise telephony systems in North America,focusing on the profound changes introduced by the convergence of voice and datanetworks. Traditional TDM (Time Division Multiplexing) implementations such as KeySystems and PBXs are gradually being replaced by next-generation solutions (convergedplatforms and IP PBXs). Ongoing changes in customer requirements and marketdynamics suggest a growing market acceptance of converged communication systems,particularly in the SME (Small and Medium Enterprise) segment.

The Intel�Converged Communications Platform is a communications system that offersa wide variety of co-resident applications, integrating sophisticated voice and datacapabilities at a lower TCO (Total Cost of Ownership) while delivering simpleinstallation, maintenance and administration for small sites, multi-sites and branchoffices. The platform enables enterprises to select packet switching, circuit switching, orboth for voice calls, allowing them to better leverage their investment made in oldervoice equipment. The key objective is to allow customers to gradually migrate to IP andadd applications as their business needs evolve. The system also enables a broadselection of voice and data software applications, such as Auto Attendant, ContactCenter, CRM, IVR, Software PBX, Unified Messaging and Video Conferencing,optimized for the SME environment.

In order to establish itself as one of the leaders in the SME space, the message from theIntel solution to the marketplace is Simplicity, Flexibility and Applications. Intel’sstandards-based enterprise telephony offering represents an innovative approach in theIP Telephony industry, since it is premised upon a build-to-order delivery model thatdelivers a lower TCO by having several applications reside on the same platform, orstack of platforms.

Intel’s strategy presents ISVs, OEMs, VARs, and system integrators with the opportunityto coordinate their efforts to offer a reliable solution. Intel has committed substantialresources in developing specific programs in order to address the needs of each of thesegroups. The Intel� Converged Communications Solution Provider Program enablesdistribution channels to fulfill customer’s expectations for one stop shopping for theirvoice and data needs by offering applications from a vast application ecosystem. TheIntel Converged Communications Value Network enables its members to rely uponvaluable resources including Intel’s strong marketing arm, extensive channel networkand multiple promotional opportunities.


Overview of Enterpr ise Telephony Systems

The emerging voice and data convergence has introduced profound changes in the enterprise

telephony landscape. Two dynamic and evolving system designs are making inroads on traditional

phone systems by fully satisfying small enterprise, medium enterprise, and branch office

communications requirements: the IP-PBX and, alternatively, converged communications systems.

Traditional Systems

TDM (Time Division Multiplexing) systems, the traditional enterprise telephony installations,

come in two basic configurations: Key Telephony Systems (KTS) and the Private Branch Exchange

(PBX).

� The KTS, the smallest office phone system, is a local multi-line telephone system

enabling users to access several trunks coming into the premises. The KTS simply

connects the incoming call to the station that requests it.

� The PBX is an in-house telephone switching system interconnecting telephone

extensions to each other, as well as to the outside telephone network and may include

functions such as least cost routing for outside calls, call forwarding, conference calling

and call accounting.

Converged Systems and IP PBXs

Expanding user interest in the benefits of a unified voice and data network has given rise to new

approaches supporting IP: the converged communication system and the IP PBX (Internet Protocol

Private Branch eXchange).

� A converged system (also known as hybrid or IP-enabled) is a TDM (circuit switched)

system offering additional, optional IP capabilities, such as IP station or trunk

interfaces.

� The IP PBX is based upon a LAN-connected call-processing server, either proprietary

hardware or a PC-based server, that can execute telephone switching functions, such as

dialing voice calls and support LAN-based Ethernet telephones.

Figure 1 outlines some of the features and characteristics of the approaches, as well as a basic

profile of the typical customer for each.


F i g u r e 1 – P r e m i s e - B a s e d E n t e r p r i s e S o l u t i o n s

System Features and Characteristics Typical Customer Profile

KTS

� Intercom use, call waiting, callforwarding, call transferring and callhold

� Incoming calls are visible to all phones.

� No switching between trunks andlimited number of ports.

Small to medium-sized enterprises and branch

offices having up to 250 telephone

connections looking to reduce the number of

lines to carrier.

PBX

� Fully programmable system providingintelligent switching between trunks

� May include functions such as leastcost routing for outside calls, callforwarding, conference calling and callaccounting.

� Requires substantial training oroutside expertise to administer moves,changes, and other features

Typically geared towards large enterprise

customers. Some cost-effective models also

compete against key systems in the Small and

Medium Enterprise (SME) marketplace

Converged

� Systems offering the significant savingsthat features such as VoIP can deliver

� Has the reliability of the traditionalPBX

� Exhibits a feature set similar to PBXs

� Ease of administration

SMBs/SMEs wishing to migrate to IP at a

gradual pace and want to establish a

communications infrastructure to support

growth, as it’s needed. Would like to add

functionality to address specific business

needs such as UM, IVR, or contact centers.

IP PBX

� Systems delivering a set of essentialPBX functions

� Lacking commonly available featuressuch as "do not disturb" functions,feature keys, paging, off-hook voiceannouncement, networking, ACD-based call center capabilities and E911connectivity.

Enterprises seeking integrated voice

networking and cost savings via toll bypass-

type-applications, new small satellite offices

desiring networking to larger central offices

with sharing of resources such as centralized

voice mail.

Source: Frost & Sullivan


Enterpr ise Telephony Solut ion Requirements

There are certain essential business goals that must be met by enterprises considering either a

change in or expansion of their phone system. Figure 2 summarizes these objectives.

F i g u r e 2 – P r e m i s e - B a s e d E n t e r p r i s e S o l u t i o n s B u s i n e s s N e e d s

Customer Expectations Business Requirements

Investment protection: approximately 75

percent of the investment in existing voice

networks is in endpoints, trunks, applications

and end-user training

Leverage investment in legacy equipment

Gradual migration path preferred over

forklift type upgrade

Cost savings: lower costs for items such as

maintenance and long distance; automation of

certain functions (receptionist, etc.)

Lower Total Cost of Ownership (TCO)

Branch office toll savings

Low failure rate: system has to function

continuously with minimal amounts of down

time

High overall system reliability

Ease of system management: simple Operations,

Administration & Maintenance (OAM)

Simplicity and integrated architecture

Straightforward capacity expansion

Productivity software: easily deployed

applications that increase employee efficiency,

improve customer service or promote revenue

generation

Provide unmatched choice and flexibility

Standards-based applications


As a result of the foregoing requirements, an increasing number of small and medium businesses

are considering IP Telephony as the core of their next generation communications solutions.

These companies are seeking a way to merge their voice and data networks in order to maximize

skilled resources, lower total cost of ownership, and consolidate management requirements all

while maintaining voice quality, feature set, reliability and scalability. Despite this trend, the

early indicators show that the actual implementation of IP Telephony demands a more gradual


migration path, with an environment that supports both legacy TDM and IP-based systems as a

precursor to a full IP implementation.

Circuit Switched, Packet Switched and Converged Technologies

In order to fully understand this migration path, the solutions available to enterprises must first be

introduced. Enterprise CPE telephony solutions may fall in one of three categories:

� a circuit switched prototype (TDM-based PBX systems)

� a packet switched architecture fully supporting IP native phones

� a converged system matrix that can support IP, TDM or a mix of both

Circuit Switched (KTS and PBX systems)

As summarized in Figure 1, there are two types of TDM-based systems: KTS and PBX. The

TDM/circuit switched approach has been the system traditionally used by enterprises and the

Public Switched Telephone Network (PSTN).

Key systems originally targeted the SME segment due to their restriction for incoming trunks and

extension lines. In the simplest of key system configurations, anyone can answer the phone. The

KTS simply connects the incoming call to the station that requests it.

PBX systems offer much more flexibility. A PBX is equipped with ports whose functions can be

configured by the customer. For example, for an 80-port system, a customer may choose 10

trunks and 70 extensions or 25 trunks and 55 extensions. In addition to their larger size, PBX

systems also entail more advanced applications such as inter-site networking capabilities.

The distinctions between PBXs and key systems are getting increasingly blurred, as key systems

continue to add more advanced software features and more cost-effective PBX models are

introduced to compete for the smaller office locations.

Packet Switched (IP-PBXs)

Packetization entails voice being translated into easily managed packets and then sent on the data

network and reassembled at their destination.


� Deploying a full IP PBX solution – IP-based PBX systems that can support LAN-based

Ethernet telephones. The system can be based on a call-processing server and distributed port

equipment cabinets, all linked via a switched Ethernet backbone. PBX systems with external

VoIP gateway servers have also been lumped into the IP-PBX category. This solution usually

entails a forklift update, and as such, it is typically considered for brand new deployments

(particularly in the SME segment or for new remote offices), or as a replacement for legacy

TDM-based PBX systems.

Converged Systems (IP/TDM)

There are two approaches that could be taken to deliver IP functionality to a TDM-based matrix

architecture. One involves “IP-enabling” the existing PBX systems via IP adjuncts (trunk cards or

IP servers) enabling customers to leverage their investment on existing voice networks. Another

alternative is deploying a flexible converged platform that can support circuit switching (TDM),

packet switching (IP) or both.

� “IP-enabling” existing PBX systems – some customers may take a "wait-and-see" approach,

opting to deploy the newer IP PBX technology at a more gradual pace instead of choosing a

more drastic forklift approach. For enterprises thinking about migrating from circuit switched

to packet switched systems, the IP enabled approach makes sense because it minimizes the risk

by keeping the PBX's base TDM matrix while supporting IP telephony applications and

appliances. In addition, by adopting this gradual migration strategy, they can protect their

original investment in TDM based PBXs.

� Deploying a converged system – other customers may instead choose to deploy a solution that

can flexibly adapt to their needs. A converged system can enable SMEs to operate in a

telephony environment supporting TDM, IP or a mix of both. Whereas this approach does

involve a replacement of the TDM PBX switch, the customer can migrate to IP at their own

pace – a little at a time or all at once. Furthermore, this option allows end users to enjoy the

savings that VoIP can deliver in addition to the reliability of the traditional PBX.


Market Dynamics

Once the options are understood, an enterprise must choose between them. We now examine

some key factors affecting the decision-making process associated with a telephony system

purchase. Market conditions directly influence how enterprises operate: as the dynamics change,

so does the business planning. Figure 3 illustrates how factors such as economic conditions,

technology drivers and product features interplay with each other. This analysis will help identify

the current enterprise telephony issues and how they will affect the industry in the future.

F i g u r e 3 – E n t e r p r i s e T e l e p h o n y M a r k e t D y n a m i c s


From an economic perspective, companies are seeking to reduce their expenditures, deferring

unnecessary acquisitions and postponing purchases that cannot be readily cost-justified.

Simultaneously, they are looking for ways to leverage their investment on existing voice networks,

to maximize their return on investment for new telecom infrastructure, and to consolidate existing

equipment.

These enterprises are also looking ahead to technological improvements that will enable them to

incur the benefits of open systems. Another enhancement they desire is simplicity in maintenance

Key:

MACs: Moves, Adds & Changes

OPEX: Operational Expenditures

QoS: Quality of Service

ROI: Return On Investment

• Cost• Protect Investment• Maximize ROI• Equipment

Consolidation

• Cost• Protect Investment• Maximize ROI• Equipment

Consolidation

• Open Systems• Simple MACs• Scalability• Reliability

• Open Systems• Simple MACs• Scalability• Reliability

• Feature Breadth• Interoperability• Administrative Ease• New apps

• Feature Breadth• Interoperability• Administrative Ease• New apps

� Lower TCO� Reduced OPEX� IP Telephony QoS� Higher Employee

Productivity� Enhanced customer

experience

INDUSTRY ISSUES:

Enterprise Telephony Market Dynamics

EconomicFactors

TechnologyFactors

ProductFactors


activities such as MACs (Moves, Adds and Changes), which can significantly lower their

operational costs. Furthermore, companies are concerned about factors such as the reliability and

the scalability of new telephony systems.

Finally, from a product viewpoint, corporations are seeking new features that can enhance their

customers’ contact center and web portal experience. They are also looking for a telephony

system that can interoperate with other systems and peripherals, and that can be easily

administered either on-site or remotely. In addition, the quest for higher employee productivity is

fueling the search for new multimedia applications that can be instrumental in achieving this goal.

These prevailing market conditions suggest a paradigm shift in the enterprise telephony market. A

single converged network can bring many benefits to a company, including simplifying the back

office and reducing cost, both from an equipment and integration perspective. Hence, there is a

growing consensus that the next corporate telephony system purchase will no longer be a

traditional TDM-based product. Instead, the platform of choice will be either a circuit-switched

converged communication platform with substantial IP telephony capabilities, or alternatively, a

pure packet-switched IP PBX solution.

Based on the current economic climate, the converged system is likely to become the platform of

choice, because it represents a gradual approach in migrating towards a converged voice and data

network. This IP-enabled alternative makes sense because it minimizes risk by protecting the

original customer investment on legacy TDM-based equipment, while supporting IP telephony

applications and appliances, as well as operating transparently to the end user when routing over

the data IP network. Furthermore, there is an extensive installed base of circuit-switched PBXs

that can be upgraded to support IP capabilities. Many PBX installations since 1990, and the

majority since 1995, are prime candidates for an upgrade to a converged system platform.

From a technology perspective, the converged platform design makes sense because it can greatly

simplify MACs, as this can be a time consuming and complex task that often entails a service

technician visit and can cost of between $125 and $200. In addition, the converged platform

approach allows users to tap into a vast array of new multimedia applications being offered in the

marketplace. Data networks can handle voice calls, video calls, unified messaging, and

cooperative whiteboards as well as chat sessions. Another key driver is the SNMP feature

enabling corporations to remotely manage their network equipment located throughout dispersed

branch offices.

In order to further accelerate the migration from a TDM-based to a converged environment,

vendors and distribution channels must carefully articulate the value proposition of IP Telephony.

They should highlight that in a privately controlled LAN, toll-quality voice is achievable if the

bandwidth requirements are met, voice traffic is prioritized, and special coding and packet loss


concealment techniques are used. In conclusion, the interplay of economic, product and

technological factors point towards an increasing market acceptance of converged communication

systems.

Overview of the Market Potent ial for Enterpr ise Solut ions

Given the market dynamics outlined above, the potential for enterprise communications is

encouraging for some solutions. Prior to the current slump facing the enterprise segment of the

telecom business, conventional wisdom dictated that the increasing voice-data convergence trend

would eventually lead to the rapid obsolescence of the traditional TDM-based PBX. Even though

the concept of replacing circuit switching with packet switching as the primary transmission

mechanism has merit, the statistics have initially shown a much more subdued adoption rate than

previously thought.

Despite some growth, the market size has not reached the levels suggested by some bullish

predictions made 12 to 24 months ago. In fact, most prognosticators have revised their forecasts

downward. Initial North American estimates show that in calendar year 2001, total TDM-based

(KTS and PBX) shipments declined roughly by 12% from 2000 levels. Combined with a 10% drop

in 2000, last year’s shipments were down more than 20% from 1999’s record shipment levels.

F i g u r e 4 - E n t e r p r i s e T e l e p h o n y Y e a r l y S h i p m e n t B r e a k d o w n , N o r t hA m e r i c a 2 0 0 0 - 2 0 0 6


On the other hand, IP PBX stations shipments showed exponential growth, as can be anticipated

for a technology offering in its early adopter years. Despite the fact that the IP PBX growth was

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

% li

nes

2000 2001 2002 2003 2004 2005 2006

Year

Enterprise Y early S hipment B reakdow n, N orth America 2000-2006

P B X K TS IP P B X & C onverged S ystem s B as e y ear is 2000


impressive, particularly in the midst of a market downturn, the number of IP PBX stations

represented less than 5 percent of the total number of enterprise lines shipped in 2001 and less

than 3 percent of the total lines in 2000. Figure 4 illustrates our forecast for the various solutions

in the enterprise segment.

The early consensus forecasts for 2002 indicate another down year for the PBX market, but

shipment totals are expected to drop by a much smaller percentage, with an increase anticipated

in the second half of 2002. Just as some of the issues such as reliability, scalability and feature set

parity were being gradually solved, the economy started to falter. In the US, the slowdown has

been more pronounced meaning new purchase deferrals, shaken customer confidence and an

increased competition in the marketplace.

However, the economy alone was not the only factor contributing to the overall PBX market

sluggishness. Additional factors such as customer confusion regarding IP telephony, reservations

about investing in an evolving technology and the extension of the useful life of PBX systems

installed in the earlier part of the last decade also justified the lower numbers. Customers are

faced with choices such as IP-enabling their existing legacy equipment, purchasing a

hybrid/converged system (supporting both TDM and IP) or acquiring a “pure” IP PBX.

Companies may be delaying their purchase decisions for the time being, but they are not canceling

their plans to buy. Instead, they are electing to wait until the new technology has proven itself to

be reliable, with a good performance and sufficient feature sets. Some enterprises, opting to IP-

enable their TDM-based systems, have extended the useful lifetime of this equipment. All these

factors have contributed to the downturn in the PBX marketplace.

However, the ongoing evolution of the traditional PBX epitomizes the potential inherent to a

disruptive technology and represents the tangible result of the convergence between voice and data

networks. Despite a slow initial market adoption of VoIP and IP Telephony, the IP and IP-

enabled PBX technology frontier is undoubtedly poised to grow explosively from 2002 to 2007.

The disruption wave of an emerging technology goes through several stages. Initially, there is a

period of euphoria as new possible potentials are discussed. As early adopters begin to implement

the technology, the discovery phase is reached. At that point, the limitations and real capabilities

begin to be unveiled, and problems start to be solved. Finally, if the technology is to succeed, a

plateau of realism is attained. IP Telephony currently is in this cycle, since it will eventually

become an accepted technology. However, in the short term, IP Telephony will likely be

implemented in areas of organizations that can receive the most impact, instead of being widely

deployed across major corporations.


Figure 5 shows the potential for IP Telephony in the enterprise through a forecast for IP PBX and

IP enabled lines from 2000 to 2006 for North America. The total includes converged systems

and IP PBX line shipments. A station can be a digital set with IP adapter, a desktop IP phone or a

PC client soft phone. As Figure 5 illustrates, IP Telephony holds the potential of a disruptive

technology that is expected to take North America by storm in the upcoming years.

F i g u r e 5 - I P T e l e p h o n y S t a t i o n F o r e c a s t , N o r t h A m e r i c a


High Value SME/Branch Office Applications

Several applications, such as auto attendants, unified messaging, contact centers, IVR and

conferencing, among others, are already available for the IP Telephony solutions, including

converged communications platforms. These applications present a wide gamut of options for

business communications systems.

As voice and data convergence is increasingly adopted in the enterprise, these applications will

become the true differentiator in choosing a particular solution.

IP P B X a n d C o n v e rg e d S y s te m F o re c a s t (N o rth A m e ric a )

0.0

2 ,000.0

4 ,000.0

6 ,000.0

8 ,000.0

10,000.0

12,000.0

14,000.0

2000 2001 2002 2003 2004 2005 2006Ye a r

Stat

ions

(000

s)

B as e y ear: 2000


Basic Voice Mail/Auto Attendant

The Automated Attendant can be thought of as a live

receptionist that answers incoming calls 7 days a

week, 24 hours a day. Using a voice prompt, it plays

a list of options to a caller. When the caller selects

his option, automated attendant can route the call to

an extension or mailbox within the organization, or

directing the caller to the Company Directory or a

designated “live” operator. Greetings can be

recorded for the appropriate time of day, letting

callers know whether the company is open or closed.

The business status of the company can also be

changed remotely by the administrator, which can be

useful in areas that frequently experience hazardous

weather conditions. Significant numbers of North American enterprises are expected to begin

adopting Auto Attendant applications beginning in 2003, as shown in Figure 6, fueling the market

to almost $160 million in 2006. Speech technology will be the key driver, as legacy systems

requiring callers to manually key in a person’s name get replaced by newer products featuring

speech recognition and text-to-speech capabilities instead of pre-recorded voice prompts.

F i g u r e 6 – A u t o - A t t e n d a n t M a r k e t F o r e c a s t ( N o r t h A m e r i c a )


Characteristics

� Works as receptionist, 7 days a

week, 24 hours a day

� Typically bundled with most

telephony system offerings such as

voicemail

� Routes calls to extension, mailbox,

Company Directory or operator

� Greetings can be recorded for time

of day and non-business hours

� Business status (open/closed) and

company greeting can be changed

Auto Attendant Forecast (North America)

0.020.040.060.080.0

100.0120.0140.0160.0180.0

2000 2001 2002 2003 2004 2005 2006

Year

Reve

nues

($ m

illion

)


Unified Messaging / Communications

Unified messaging is an advanced message

management solution that provides single-point

access to voice, e-mail and fax messages and enables

end-users to access any of these messages anytime,

anywhere, from any endpoint device including

telephone sets, PDAs, PCs or terminals. The

minimum UM requirement is to have a single client

interface, from which end-users are able to retrieve

all different message types. The enterprise UM

application resides on the corporate LAN (local area

network) or PBX (private branch exchange), enabling

users to access all of their messages via any endpoint device. Unified Communications is a

comprehensive set of services blending features such as real-time communications (e.g. real-time

response to a message within the same call session) to an UM-based suite. As Figure 7 shows, we

expect enterprises to steadily increase their adoption of this application. The forecast is premised

upon the increasing number of mobile workers and a migration from legacy voice mail systems

that has an inflexion point in 2002.

F i g u r e 7 – E n t e r p r i s e U M M a r k e t F o r e c a s t ( N o r t h A m e r i c a )


Enterprise UM Forecast (North America)

0.0

100.0200.0

300.0400.0

500.0600.0

700.0

2000 2001 2002 2003 2004 2005 2006

Year

Reve

nues

($m

illion

)

Characteristics

� Single-point access to voice, e-mail

and fax messages from any device.

� User flexibility: message retrieval,

creation and sorting.

� E-mail apps typically supported:

Lotus Notes, Microsoft Exchange

or Outlook, Eudora and Netscape.

� Real-time UC features include find

me / follow me and reply


ACD Systems and Contact Centers

ACD systems are defined as the integral hardware

and the software that answers and routes large

volumes of inbound calls, e-mails, web-chat and

VoIP requests to a group of contact center agents

based upon instructions stored in a database.

Different types of ACD systems include proprietary

ACDs integrated with a key/hybrid or PBX system,

stand alone hardware-based ACDs, software-based

ACDs sold in conjunction with a server, and IP-

ACDs.

The contact center systems market is rapidly

changing, with vendors increasingly offering contact

routing platforms. Figure 8 illustrates the market

forecast showing the steady growh of the contact

center equipment market. Key catalysts include the

growth in customer service conducted via telephone

and the increased deployment of skills-based routing. Revenues in this forecast include ACD

systems, as well as CTI (Computer Telephony Integration), web collaboration tools, and software

such as e-mail management, workforce management, quality monitoring and CRM.

F i g u r e 8 – C o n t a c t C e n t e r M a r k e t F o r e c a s t ( N o r t h A m e r i c a )


Characteristics

� Ability to provide systems capable

of routing and queuing queries

from multiple contact channels,

including: e-mail, web chat, VoIP,

Fax and Traditional voice

� Move from hardware-based to

software-based ACDs: systems are

becoming a software layer

� IP and server-based ACDs are

making inroads into the market by

offering cost, feature and easier

integration benefits. The uptake of

this product in contact centers is

expected to grow as customer

confidence in the use of data

technologies for telephony

Contact Center Forecast (North America)

02,0004,0006,0008,000

10,00012,000

2000 2001 2002 2003 2004 2005 2006

Year

Reve

nues

($ m

illio

n)


IVR (Interactive Voice Response) Systems

The emergence of new technologies such as speech

recognition integration and VoiceXML (voice extensible

mark-up language) has re-ignited the IVR systems

market, converting IVR systems into advanced voice

portals by integrating the Internet with the telephone.

The technology connects the caller with information on

the web, providing a new channel for business-to-

business (B2B) and business-to-consumer (B2C)

transactions. Speech recognition is expected to

revitalize the market through the generation of new

demand and upgrades/replacements of installed systems.

Whereas DTMF systems can offer only a limited choice

of transactions/information access to the caller, speech

recognition overcomes this impediment by providing a

"live agent" type of experience. The text-to-speech

(TTS) software enables the IVR system to read out textual information from the back-end

databases to the caller. In a call center environment, IVR systems are indispensable to offload

routine calls from agents since the system handles the caller's information/transaction needs and

allows V-commerce over the phone. These factors underlie the optimism illustrated in Figure 9.

F i g u r e 9 – I V R S y s t e m s M a r k e t F o r e c a s t ( N o r t h A m e r i c a )


IVR Systems Forecast (North America)

0

500

1,000

1,500

2,000

2,500

2000 2001 2002 2003 2004 2005 2006

Year

Rev

enue

s ($

mill

ion)

Characteristics

� Market typically segmented by

size in 3 groups: small (up to 13

ports), medium (13 to 46 ports)

and large (above 46 ports).

� Typically, most ports offer only

DTMF capabilities, with speech

recognition as a value-added

option for customers seeking to

voice-enable their interface.

� New IP technologies have

propelled the market for

Interactive Web Response and

IP-based IVR systems.


The Intel® Converged Communicat ions Platform

The Intel Converged Communications Platform solution is one of many different telephony system

options available to enterprises. In order to better assess the cost and benefits of Intel’s solution,

this analysis compares the full range of enterprise telephony systems considered thus far in this

report.

The next-generation systems category includes server-based systems (e.g., Altigen and Vertical

Networks) and IP-based systems (e.g., Cisco, Nortel, and Shoreline Telecommunications).

Communications platforms enable users to run various third-party applications on it. The Intel

Converged Communications Platform is a good illustration of this approach.

The Intel platform is a standards-based enterprise telephony offering based upon the Intel�

Dialogic� CT Media� server software that enables the incorporation of enhanced applications

delivered by members of the Intel Converged Communications Value Network. The key promise

of this new breed of system is that an open and standards-based platform will empower customers

to gain access to enhanced applications that were previously either unavailable or out of their

price range, when their only option was proprietary PBXs. In the following section, we proceed

to investigate some of the advantages of the Intel approach in terms of a TCO (Total Cost of

Ownership) analysis.

Total Cost of Ownership (TCO) Analys is

In order to better assess the potential benefits of the Intel Converged Communications Platform,

our detailed TCO analysis compares the total price of each of the four available solutions (i.e.,

KTS, PBX, a next generation platform and Intel’s product).

Three distinct system sizes were considered to better characterize the SME (Small and Medium

Enterprise) segment: a 20-station system, a 50-station system, and a 100-station system. The

following set of applications were chosen for each system: Fax Server, IVR, Call Center and UM

(fax server discounted if UM solution is chosen). We spoke with developers such as Artisoft for

their TeleVantage CTM Suite, TriVium Systems about their CRM application, Connect-IT about

their contact center application, and Excendia about their soft PBX and UM applications.

Pricing assumptions are outlined in more detail in the Appendix. The cost of PBX and KTS

equipment reflects pricing from market leaders (Avaya and Nortel). The cost of next generation

systems was determined from a weighted average of the available pricing data and estimates made

by industry experts.


The analysis presented here are based on

the following set of assumptions:

� The life span of each system is

assumed to be 6 years.

� Each system is assumed to grow at

50% over its life span.

� The total cost of ownership for the

basic telephony system and

applications is comprised of the

following: original equipment costs,

add-on equipment costs (as

described above), installation

charges and contract maintenance

fees (including costs for MACs for

KTS and PBX systems)

� MACs (Moves, Adds and Changes)

occur as prescribed in the Appendix;

each MAC is expected to cost

roughly $125.

� Next-generation systems (IP PBXs

and converged systems) do not

require a dedicated service

technician to perform any MAC.

� Full details are provided in the

Appendix.

Results and Analysis

Basic System Configuration

For enterprises simply desiring a telephone system with

voicemail or unified messaging, the TCO analysis shows that

the next-generation systems typically represent the least

expensive option. In general, these systems are inexpensive

and easy to install, whether server based or IP based. As

most next-generation systems come standard with unified

messaging rather than basic voicemail, their value

proposition is very appealing. The analysis of a basic system

configuration is shown in Figure 10 below:

F i g u r e 1 0 - T o t a l C o s t o f O w n e r s h i p p e rU s e r f o r T e l e p h o n y S y s t e m w i t h V o i c e m a i l


Basic System With IP Telephony Capabilities

Adding IP capabilities to a phone system can substantially change the per user cost. So if a

company wants to add IP capabilities immediately or in the near future, it may want to consider

an Intel Converged Communications Platform. This system comes IP enabled while the other

systems require additional software and/or equipment. Figure 11 shows the analysis when the

system is IP enabled.

Platform Type

20 Initial

Stations +

10 Added

50 Initial

Stations +

25 Added

100 Initial

Stations +

50 Added

Key System $848 $805 $793

PBX System $1,150 $1,037 $930

Next-Gen System $776 $697 $660

Intel Converged

Communications

Platform

$863 $807 $791


System with IP Telephony Capabilities

and Additional Applications

As soon as a company needs more than

voicemail or unified messaging from its

telephone system, the Intel Converged

Communications Platform becomes a

viable option. Because of the high initial

costs of a formal call center, the PBX

price drastically increases compared to

the basic system, as shown in Figure 12.

However, not only are the ownership

costs associated with the Intel solution

lower, but the ability to use third party

applications makes it easier for

companies to actually get the

functionality they need rather than

having to make do with the one or two

options presented by the system vendor.

Figure 12 summarizes the TCO results

for an IP-enabled system counting with a

full suite of applications (IVR, Call

Center, Fax and Unified Messaging). As

Figure 12 shows, the Intel solution can

be a more cost-effective solution than the

alternatives for enterprise

communications systems.

For a more thorough breakdown by

application type, for each platform size,

please consult the Appendix.

F i g u r e 1 1 - T o t a l C o s t o f O w n e r s h i p p e rU s e r f o r I P - E n a b l e d T e l e p h o n y S y s t e m w i t hV o i c e m a i l


F i g u r e 1 2 - T o t a l C o s t o f O w n e r s h i p p e rU s e r f o r T e l e p h o n y S y s t e m w i t hA p p l i c a t i o n s ( I P - e n a b l e d , I V R , C a l l C e n t e r ,F a x , a n d U n i f i e d M e s s a g i n g )


Platform Type

20 Initial

Stations +

10 Added

50 Initial

Stations +

25 Added

100 Initial

Stations +

50 Added

Key System $988 $917 $905

PBX System $1,290 $1,149 $1,042

Next-Gen System $967 $822 $768

Intel Converged

Communications

Platform

$863 $807 $791

Platform Type

20 Initial

Stations +

10 Added

50 Initial

Stations +

25 Added

100 Initial

Stations +

50 Added

Key System $1,720 $1,540 $1,442

PBX System $2,055 $1,794 $1,608

Next-Gen System $2,025 $1,425 $1,197

Intel Converged

Communications

Platform

$1,404 $1,244 $1,137


Conclusions on the Total Cost of Ownership Analysis

The open architecture and attractive ROI of next-generation telephony systems can be quite

enticing to companies searching for a basic telephone system. This appeal has been one of the key

factors compelling traditional KTS and PBX systems vendors to offer some form of server or IP-

based system. However, once a company needs the flexibility to grow and to use a wide array of

applications, there are challenges in proving the value proposition. For instance, adding unified

messaging and IP support significantly increase the cost of key systems and PBX systems whereas

some next generation systems may entail an additional investment to add IP support (i.e., an extra

dedicated server running Microsoft Windows� NT or Windows� 2000). Companies requiring

more functionality than offered by a basic configuration can achieve some savings by using a

platform that enables third-party applications to run on it. One of the main TCO advantages of

the Intel architecture is the savings incurred by having several applications reside on the same

platform, or stack of platforms, as illustrated by Figure 13 below.

F i g u r e 1 3 – I n t e l C o n v e r g e d C o m m u n i c a t i o n s P l a t f o r m A r c h i t e c t u r e


This makes Intel’s offering particularly attractive to the SME segment, because the price of each

application server is amortized over fewer users. The greatest opportunity for the platform lies in

situations such as a new branch office seeking free long-distance calls (via IP) to the head office or

access to the corporate voice mail system (also via IP), with the PSTN acting as a fail-over

mechanism.

ConvergedSystem UM Server

Call CenterServer

Auto AttendantServer

OtherApplications

Corporate LANCorporate LAN

IP Phone Digital Phonew/ IP adaptor

IP Softphone

Corporate LANCorporate LAN

Intel® ConvergedCommunications

Platform

IP PhoneDigital Phone w/

IP adaptor oranalog phone

IP Softphone

AutoAttendant

Soft PBXFax

Server

VoiceMail


There are many additional advantages associated with the Intel approach that go above and

beyond the standard TCO analysis. One important feature is the platform’s ability to enable

applications only to specific employee groups in a straightforward fashion (for instance, all “road

warriors” can have Unified Messaging while the rest of the company only has voice mail

capabilities). Other “soft-dollar” benefits include a higher availability, native distributed

architecture, better future proofing, and the accessibility to a plethora of enhanced applications

provided by the Intel Converged Communications Value Network. We now proceed to take a

further look at some of these additional benefits delivered by Intel’s solution for enterprises,

VARs, ISVs and Developers, and OEMs .

Intel Converged Communicat ions Platform Opportunit ies

Enterprise Opportunities

From an enterprise perspective, the Intel Converged Communications Platform addresses several

key issues. Intel channels such as Paracon and their VARs can position the product as a solution

to common concerns by customers in the SME space. The main benefits associated with Intel’s

solution are manifold:

� Ease of Installation: an Intel solution site can be installed in less than 30 minutes, given the

simplicity of the steps that need to be taken: connecting the phones, outside lines and the local

LAN, followed by plugging the chassis into a power outlet. Subsequently, the distributor

channel can perform other operations such as setup additional phone extensions, customize

voice mail and auto-attendant, establish system alarms and install third party applications.

� System Reliability: features such as power failover, automatic system reboot and restore,

remote mirroring over the Internet and the ability to deploy a multiple system setup without

having a single point of failure (i.e., if one unit fails, the rest continue to operate without any

interruptions), all contribute to a higher Mean Time Between Failures (MTBF) rating

� Remote Administration Facilities: key differentiators in this category include the ability to

perform remote management from a single location and have the changes propagate

throughout the system, simple troubleshooting procedures and the ease in setting up threshold

alarms to warn service people about certain conditions. The user interface is intuitive and

web-based, delivering a common look-and-feel experience to the end-user.


� Simplicity: all software can run in a single server rather than in a distributed architecture with

multiple servers (one for each application).

� Lower TCO: when factoring in costs for additional applications such as call center and unified

messaging, MACs and maintenance; major benefit is the co-residency of the software on the

same platform as opposed to having a dedicated server for each application.

� Wider Range of Applications: since Intel’s platform supports the ECTF (Enterprise Computer

Telephony Forum) S.100 Revision 2 media APIs (Application Programming Interfaces), the

S.410 Revision 2 specification (JTAPI) and other industry standard APIs, customers can have

access to a larger number of software offerings from ISVs (Independent Software Vendors).

The end result is more choice and better prices. A limited number of applications can

conceivably force platform customers to pay for more features than they actually require.

Intel’s product also comes pre-loaded with Artisoft TeleVantage CTM Suite software built on

top of the CT Media Enterprise Softswitch Framework. This application provides full PBX

switching, automated attendant and basic voice mail capabilities. Other add-on applications

include CRM from developers such as TriVium Systems, contact center from ISVs such as

Connect-IT and soft PBX and Unified Messaging from companies such as Excendia.

VAR Opportunities

VARs from the data world have demonstrated a keen interest in the enterprise telephony system

market, because of the high margins in delivering custom applications such as call center and

unified messaging solutions. Resellers from the voice world will also embrace the new potential

benefits of Intel’s new “build-to-order” delivery model, typically entailing several distinct vendors.

This new strategy represents a paradigm shift from the past, when buyers usually acquired a

system from a local vendor that represented one of the large voice equipment vendors. The old

approach locked the customer into expensive, proprietary solutions that frequently did not

integrate with other vendors’ products. In order to meet VAR requirements, Intel developed the

Intel Innovative Technology Provider program. Participants receive technical training and

support, business development resources, preferred access to demos, sales incentives and

discounts, among other benefits.


ISV and Developer Opportunities

ISVs (Independent Software Vendors) can benefit immensely from the architectural design of

Intel’s solution, the Intel Converged Communications Value Network program and the extensive

developer support offered. The Intel Converged Communications Platform enables developers to

design and implement standards-based products as modular components that can interoperate

among each other as part of a complete open systems architecture. This network is a consortium

of ISVs, IHVs (Independent Hardware Vendors), OEMs (Original Equipment Manufacturers) and

consultants, whose primary objective is to facilitate the development of telephony applications.

From an ISV and developer vantage point, the following opportunities make Intel’s platform an

attractive value proposition:

� Intel approach: Intel’s strategy integrates core technologies (such as IP telephony, voice and

media processing, multi-node scalability and speech recognition) onto a single platform. This

scheme furnishes a good base for robust, flexible, scalable and easily upgradeable solutions

that can maximize a customer’s legacy equipment ROI.

� Standards-based development: the platform supports ECTF’s S.100 standard via Intel’s CT

Media telephony server software. This interface separates the application from the telephony

resources, allowing applications to be written once and deployed on circuit switched networks

(traditional TDM), packet switched networks (IP) or both. ECTF’s S.410 R2 standard (JTAPI)

and Microsoft’s TAPI 3.0 media and switching APIs are also supported.

� Intel Converged Communications Value Network: as a member of this program, an ISV can

tap into valuable resources including Intel’s strong marketing arm, extensive channel network

and multiple promotional opportunities that can be instrumental in shortening its time-to-

market. Furthermore, the program enables developers to be regularly briefed on product

roadmap changes and to collaborate with each other on cross-business and technology

development strategies. The key advantage is being able to count on Intel’s marketing team

for activities including product promotion across Intel channels, PR, collateral and VAR

educational support, among others.

� Extensive developer support and services: ISVs will also benefit from the developer network

support offered by Intel. Third parties, such as G3 Nova, provide additional services for

developers, including interoperability testing and the outsourcing of engineering resources.


OEM Opportunities

The Intel platform also offers OEMs the opportunity to tap into the extensive Intel Converged

Communications Value Network of software developers. Vendors can OEM Intel’s platforms and

utilize applications from an existing, fully-developed ecosystem of application vendors. Such a

partnership can substantially augment the functionality of a vendor’s platform, thereby improving

its product’s market positioning.

Intel Converged Communicat ions Platform: Key Benef its

The main advantages of the Intel approach are flexibility, ease of installation, maintenance and

administration, a lower TCO (particularly for the small enterprise or branch office desiring to run

applications such as call center and unified messaging), and a better leveraging of the investment

made in older voice equipment. In summary, Figure 15 illustrates how Intel’s solution fulfills the

telephony system demands of small and medium businesses.

Frost & Sullivan believes the Intel Converged Communications Platform can meet the pressing

SME business requirements for fully featured cost sensitive, easy to maintain advanced

communications solutions. Moreover, it represents an innovative approach in the IP Telephony

world. In order to establish itself as one of the leaders in the SME space, the message from the

Intel solution to the marketplace is Simplicity, Flexibility and Applications.

The challenge presented by the new Intel approach to ISVs, OEMs, VARs, and system integrators

is that they must coordinate their efforts to deliver a solution that is reliable and offered in a

timely fashion. In order to address this issue, Intel, a technology powerhouse with considerable

resources, has invested significant effort in developing specific programs in order to address the

needs of each of these groups.

The platform design allows for easy initial deployment, administration, and a single point of

storage for all applications and straightforward expansion capabilities. The wide array of

standards-based applications can enable customers to generate revenues and increase their

employee’s productivity. Based on this assessment, the Intel Converged Communications Platform

is well poised to compete in the converged systems market in the small/medium and branch office

enterprise segments.


F i g u r e 1 5 – H o w I n t e l ’ s A p p r o a c h M e e t s t h e S M E B u s i n e s s R e q u i r e m e n t s

Business Requirements Intel Converged Communications Platform

Leverage investment in legacyequipment such as analog phones

Gradual migration path preferred overforklift type upgrade

Platform supports a wide range of legacy voice equipmentsuch as analog caller ID phones.

Hybrid system allows IP capabilities to be progressivelyincorporated as needed. The system can be configured asTDM only, mixed TDM and IP or IP only.

Lower Total Cost of Ownership(TCO)

Branch office toll savings

Savings in MACs, maintenance/admin and application costs.

Gateways provide full connectivity among all phones via VoIPor the PSTN, enabling least cost routing.

High overall system reliability

“Rack and stack” approach means that there is no singlepoint of failure: service interruption in one unit does notdisrupt other units and the applications running on them.

Server runs the Windows 2000 Server Appliance Kit, anoptimized version of the Windows 2000 OS for dedicateddevices: in the even of a power outage, critical extensionsremain functioning (trunk lines failover solution).

Simplicity and integrated architecture

Straightforward capacity expansion

Web-based administration accessible via LAN or dialup;unified interface for system configuration.

Modular design enables flexibility to deploy as much asrequired and then scale up as the business grows.

Provide unmatched choice andflexibility

Standards-based applications

One platform running multiple applications instead of adedicated server for each software; wide array of ISVs.

ECTF S.100 support via CT Media; ECTF S.410 (JTAPI) andMicrosoft TAPI 3.0 media and switching APIs also supported.



Appendix

TCO Analysis Assumptions

MACs (Moves, Adds and Changes) are expected to occur as follows:

� Annual telephone moves per employee (can typically be between 15 to 30 per 100

employees; we assume the more conservative number, 15)

� Annual number of staff additions (customarily in the range of 7 to 10 per 100 employees;

we are assuming the 50 percent growth figure over the 6 years expected lifetime)

� Annual number of telephone change requests (usually from 5 to 10 per 100 employees; we

are assuming the more conservative figure, 5). Note: this variable represents the number

of service change requests, including adding a set feature, modifying a service class,

upgrading a set type, changing a set feature key, etc.

� MAC cost – this figure is derived by combining the costs of these activities into one

average cost. The actual amount can vary depending upon the stipulations established in

the SLA, however, typically the cost ranges from $125 to $200 per MAC. Hence, we are

assuming a cost of $125 per MAC.

� It is assumed that the administration capabilities of next-generation systems (IP PBXs and

converged systems) eliminate the requirement of a dedicated service technician to perform

any MAC.

Equipment costs:

� Because pricing for all the different telephony systems is not available, a straightforward

approach could not be used. Rather, pricing was determined for each category based on

industry experts and available data. As a result, the pricing used does not represent an

individual vendor or product, but represents an approximation of what customer might

pay for a particular size and type of system or application. It is important to note that

costs for installation, maintenance contracts, and system and application configurations


do vary, so the estimates are not meant to be precise and are not likely to exactly mirror a

request for proposal.

� Nortel Networks and Avaya have dominated both the key system and PBX market for

many years, accounting for approximately 50% of all systems sold. As a result, most

industry pricing estimates for these types of systems reflect the pricing of Nortel Networks

and Avaya. The pricing of competitive products has not been low enough to significantly

alter estimates. As a result, the pricing in this report will more closely reflect that of

Avaya and Nortel Networks.

� As server-based and IP-based systems have entered the market, the pricing has remained

little changed from that of the key system with which they compete. Rather, vendors have

attempted to include more features as standard, including voicemail, often in the form of

unified messaging, and basic call center functionality. In order to best represent this

segment of telephony systems, we have used pricing that is more in line with the 3Com

NBX system as it is one of the lower priced systems and has been touted as the market

share leader for IP PBX systems.

TCO Analysis Breakdown by Application Type (for each platform size)

The TCO analysis begins with a breakdown of costs by application types loaded on each

enterprise solution. The costs associated with a 20 + 10 station system are illustrated in Figure

16. Figure 17 expands the analysis by showing the costs for a 50 + 25 station system, whereas

Figure 18 shows the costs on a larger 100 + 50 station system.


F i g u r e 1 6 - T o t a l C o s t o f O w n e r s h i p B r e a k d o w n p e r U s e r f o rT e l e p h o n y S y s t e m w i t h A p p l i c a t i o n s ( I V R , C a l l C e n t e r , F a x , a n d

U n i f i e d M e s s a g i n g ) – 2 0 + 1 0 - S t a t i o n S y s t e m

Configuration Key System PBX SystemNext-Generation

System

Intel Converged

Communications

Platform

System + VM $848 $1,150 $776 $863

VoIP Support $140 $140 $191 Included

UM Upgrade $188 $222 $272 $128

Fax Server $112 $112 $112 $52

IVR $142 $142 $273 $71

Call Center $290 $290 $401 $290

Total $1,720 $2,055 $2,025 $1,404



U n i f i e d M e s s a g i n g ) – 5 0 + 2 5 - S t a t i o n S y s t e m


System

Intel Converged

Communications

Platform

System + VM $805 $1,037 $697 $807


UM Upgrade $158 $180 $172 $81

Fax Server $85 $85 $85 $49

IVR $149 $149 $122 $74

Call Center $232 $232 $224 $232

Total $1,540 $1,794 $1,425 $1,244




U n i f i e d M e s s a g i n g ) – 1 0 0 + 5 0 - S t a t i o n S y s t e m


System

Intel Converged

Communications

Platform

System + VM $793 $930 $660 $791


UM Upgrade $135 $163 $138 $59

Fax Server $75 $75 $75 $48

IVR $144 $144 $67 $55

Call Center $184 $184 $149 $184

Total $1,442 $1,608 $1,197 $1,137


Documents

Realizing the Promise of Converged Voice and Data Networks