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The Legacy Backlash And The Flexible
Enterprise
BY GREG NESS
After 50 years of comfortable growth, two recent research reports have
shocked the once stable legacy PBX industry. Late in 2000, The Yankee
Group predicted that IP-PBX sales would exceed traditional legacy PBX
sales by 2005, based on the "superior value proposition" of the
IP-PBX. A few weeks later Phillips Infotech made a similar prediction and
even cited a "backlash" against traditional data and voice
suppliers. This comes on the heels of an estimated 10 percent drop in
legacy PBX sales for 2000. The decline in the legacy PBX is being driven
by the IP value proposition, the nature of the PBX business, and changes
in business dynamics that have occurred over the last few decades.
The key value propositions of IP voice are productivity gains and cost
savings driven by flexibility, ease of management, and robust, inexpensive
applications. Thirty-five percent of IT and telecom managers' spending on
voice systems (telephone and voice mail), for example, are for
installation, service, and maintenance, per a December 2000 Yankee Group
report. That amounts to $6.8 billion spent out of the overall $19.5
billion annually in the United States on vendors, just to install and keep
those PBXs humming along. Imagine an organization already benefiting from
sizable productivity gains driven by new capabilities, yet also reducing
their voice system costs by 35 percent or more? For example:
- Valent USA implemented an IP voice system in 1999. In 12 months they
saved $200,000 in legacy PBX expenses. All 12 sites (and more than 500
employees) are managed from one location, and enjoy applications like
unified messaging."
- NightFire installed a 100+ user IP voice system in two sites more
than 2,000 miles apart in less than three hours. That is set-up and
cutover in less than two minutes per employee.
- Musiker scales from 35 to more than 400 employees every year. The
company had to supplement a 19 line key system with pagers, phone
switches, cell phones, a live answering service, a receptionist, an
800-number, and other common backups, as the system was less than
seamless. By going to IP voice, they've reduced expenses in all areas
and have a single voice communications system that even includes the
CIO's home and a remote salesperson several thousand miles away.
These are all examples of cost savings and productivity gains driven by
a kind of flexibility that some may still have trouble believing. But they
are for real. The Yankee and Phillips reports' forecasts represent only
the beginning. Voice communications is about to catch up with the data
network. We are witnessing the beginning of the end of the legacy PBX, and
the proprietary walls between sites, users, and applications are coming
down.
FROM ASSET TO ANACHRONISM
The legacy PBX was a substantial breakthrough for the enterprise when it
rolled out about 50 years ago. It solved some critical problems.
Businesses could use one outside line to service hundreds of employees
(reducing telephony costs), and over time it delivered some advanced
features that weren't readily available to many businesses. It served a
valuable need and helped to foster a new industry of companies, starting
with AT&T.
Suppliers also had their share of benefits. The most substantial
benefit was proprietary lock-in enabled by the digital PBX. IT and telecom
managers simply could not afford the in-house expertise to manage the
legacy PBX system, from installation to ongoing maintenance; then the
digital PBX made it even more difficult to change suppliers or elect to
self-manage a system.
Over the long term, the lock-in model also meant a steep learning curve
for enterprise voice management, reduced innovation, and higher costs
driven by the need for customization. Enterprises were "coerced"
into staying with a single vendor, from handsets to line cards, with
proprietary technology at multiple points. Other handsets or hardware were
incompatible.
The legacy PBX was also a plus for CTI suppliers. Inflexibility created
a need for adjunct systems that would add new capabilities, like voice
mail and call center applications. It generated substantial opportunities,
which eventually led to the computer telephony integration boom. Suppliers
in the CT industry, however, face substantial risks if they do not quickly
embrace IP voice technology; mere interoperability around the TDM bus will
not supplant the power of flexibility enabled by the IP cloud and the
demands of the flexible enterprise.
ENTERPRISE PRESSURES BUILDING FOR DECADES
Legacy PBX technology has not fundamentally changed in the last three
decades, yet the pace of communications -- from snail mail to overnight
shipping to fax to e-mail -- has gone from days to a matter of seconds.
Fifty years ago, waiting a few days for a move, add, or change was not a
problem; but because of the increased speed of business and heightened
productivity, those days have become very expensive.
Mobility and flexibility, therefore, have become table stakes for
success in business, as knowledge workers replace factory workers, and
salaries and productivity have increased. Yet the PBX has not become any
more flexible. Business demands for teleworking, for example, have been
hamstrung by PBX technology. Remote offices and regional offices demand
their own distinct voice networks, giving an exponential rise to support
and maintenance with every new office. Teleworkers frequently alternate
between different networks for different tasks, suffering work and
communications disruptions at each changeover between networks. The legacy
PBX, therefore, has been a barrier to enterprise flexibility.
From a technology standpoint, IP enables tremendous economies driven by
lower costs, more choice and greater ease. It also levels the playing
field between customer and supplier by reducing the legacy coercion factor
cited above.
IP also creates the potential for IT and telecom managers to manage
multi-site organizations from a single desktop via the Web. It allows
suppliers to offer free applications that otherwise could cost tens to
hundreds of thousands of dollars in the legacy world, and drive those
applications to all stations, instead of a select few. It also enables IT
and telecom managers to concentrate or distribute their workforce at ease,
based on ever-changing needs.
BACKLASH WAS INEVITABLE
When you mix the demand for flexibility with the new capabilities of the
IP cloud, you have the recipe for a legacy backlash of monumental
proportions. After 50 years, the strengths and benefits of the Internet
have permeated the telecom closet, and IT and telecom managers stand to
make major gains.
Imagine businesses being able to install and manage their voice
communications without needing onsite support. Imagine voice systems so
easy to implement that they can be installed for hundreds of users in a
matter of hours instead of days. Imagine being able to manage dozens or
even hundreds of sites on multiple continents, all from a single location
with Web access. Imagine adding a user to a 12-site system in less than a
minute, with complete e-mail, voice mail, fax, and addresses determined
almost instantly.
As the IP voice market grows, expect more and more applications. The
standards-based software model will replace the proprietary model. Voice
will become an application on the network, with everything from CRM screen
pops to sophisticated queuing and 24/7 call routing and customer care
utilities, all free with a system. Teleworkers will be completely
integrated into an organization with complete voice and data connectivity,
even four-digit extension dialing into the home.
The flexible enterprise will also be driven by the instant ability for
any employee to have access to all voice network applications. Gone will
be the days of high cost, custom applications for a select few only at a
central location, or days of retooling and thousands of dollars to get
screen pops to a new worker. Gone will be the centralized, legacy PBX
architecture and the high maintenance TDM bus. Instead, expect distributed
IP architectures that offer no single point of failure, flexible single
image systems, and more applications for more workers than ever before.
The Phillips and Yankee reports spell out substantial implications for
the legacy PBX industry. First and foremost, flexibility is not an add-on.
Suppliers need to take a step back and formulate a new vision based upon
up-to-date technology capabilities and business processes. The
nontraditional suppliers have the advantage of coming to market faster
with that vision. Flexibility is a wonderful thing when it is possible.
Greg Ness is director of communications at Shoreline Communications.
For more information, please visit www.goshoreline.com.
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