By some projections the hosted IP telephony (HIPT) market is either going to be big or simply huge. InfoTech, for example, says that 25% of total telephone line shipments in the next 3 to 5 years will connect into HIPT services. For reference, there are approximately 400 million telephone lines worldwide. They also anticipate that HIPT revenue will grow from $31 million in 2005 to nearly $6B in 2010! That is staggering growth. Meeting that demand are service providers, over 60 of them offering HIPT services in the US with another 60+ outside, according to InfoTech.

HIPT can thank Centrex for its rosy outlook. One of the reasons HIPT is projected to grow so fast is that Centrex customers proved that the market responds favorably to the outsourced, centralized management model. HIPT services are distance independent, meaning that they can satisfy demands of global or multi-national concerns as well as local or regional organizations with the same feature set. Large organizations with many offices in one geography, such as the US, can gain the same benefits. Centrex services were notorious for their slow response and high fees for moves, adds and change (MAC) request. While HIPT service provider MAC fees differ, response to them is the same; most offer changes within 24 hours thanks to the mobility features of IP. The HIPT experience or feature set is deeper and up to date as well, making HIPT the Centrex replacement.

Three HIPT Service Types

There are three primary HIPT service options being offered: 1) a service provider offers a dedicated connection manager (IP PBX) exclusively for your company´s use; 2) a service provider manages your connection manager on your site as well as associated end-points (some refer to this arrangement as a managed service); and 3) a service provider offers a connection manager which serves many companies much like the PSTN works today. Traditional service providers such as Sprint, Equant, Telecom Italia, COLT, AT&T, Verizon, British Telecom, et al., are offering HIPT services. Service providers offer installation, ongoing maintenance and management, plus end-points (handsets and softphones) while managing the connection manager and associated connectivity. The larger service providers have been aggressively incenting corporations to move off of frame relay to their MPLS platform, which is the transport for their HIPT service offerings. All of these service providers are offering Avaya, Cisco and Nortel connection manager equipment and associated end-points as part of their HIPT solution.

The Hybrid Public/Private IP telephony Deployment Model

With the IP telephony or convergence implementation decision focused on ?¬¢‚Äö?ᬮ??¨when will I?¬¢‚Äö?ᬮ¬¨?? vs. ?¬¢‚Äö?ᬮ??¨should I?¬¢‚Äö?ᬮ¬¨??, many planners are now examining their deployment approach. The public vs. private question is starting to gain weight in these deliberations, thanks to the growing number of HIPT offerings. This public/private decision is common in IT as it is considered for a wide range of infrastructure services such as mainframes, data centers, storage, applications and communications. In communications many IT planners are focusing on a hybrid public and private model vs. one or the other. The model that is emerging is one that utilizes HIPT service for outpost, small, remote and regional offices, with private IP telephony installations at large campuses or headquarters facilities. In short, the model is go public where you don´t have staff and stay private where you do. Clearly two of the biggest issues to consider when analyzing the public vs. private question are: 1) how much control do I want; and 2) is the three-year economic picture favorable?

At small or remote offices, most IT organizations have little to no control already, so a public IP telephony solution is easy to accept on the first criteria. But the thinking for public services at remote sites transcends this one, yet very important, issue. Private IP telephony cost is too high for the remote and branch locations of most organizations. Some have suggested that acquisition cost for the remote office is moot. This thinking follows from the fact that connection management is usually centralized across two large sites leaving end-points as the largest capital cost component in the remote office. The difficulty with this thinking is that gateways are required at the remote site too which require local survivability and thus add acquisition cost. HIPT services provide both gateways and end-points.

As to end-points, there is still much uncertainty around standards and their impact on pricing. As SIP or Session Initiation Protocol end-points gain momentum, expect $600 to $800 end-points to drop to $100. HIPT insulates organizations from this dynamic and potential dead end. The biggest cost component in the economic evaluation of the public/private remote office IP telephony decision is the fact that connectivity, support and operations, over large distance, dominates total cost of ownership which will drive most toward HIPT solutions. For example, with HIPT IT staff do not have to control or manage software versions, configuration, maintenance, etc.

Helping to reduce HIPT connectivity cost is SIP trunking. SIP trunks from service providers, as detailed in Sprint´s March 9th announcement , will provide a direct IP connection to a service provider´s HIPT service reducing local toll charges and simplifying network configuration. Equipment suppliers such as Avaya support SIP trunking which is certified with service providers. Cisco´s unified Call Manager 5.0 is rumored to support SIP trunks and end-points when it ships later this year.

Since most small, remote and branch sites are equipped with less IT staff, their readiness for IP telephony is uncertain and questionable. HIPT service providers routinely perform a readiness assessment as part of their deployment service. If you´re big enough the cost is free. Outside of control and economic considerations in the public/private decision, integration with existing systems is another important criterion especially for sites with little to no IT support. This again is another benefit of HIPT as the service providers will either integrate or replace legacy systems while implementing the HIPT service.

Risk Mitigation Strategy

Security and reliability concerns tend to be part of the ?¬¢‚Äö?ᬮ??¨how much control am I willing to give up?¬¢‚Äö?ᬮ¬¨?? decision. Reliability can be managed with service provider SLAs (Service Level Agreements) while many service providers are differentiating their HIPT solutions with security offerings; for example, AT&T is offering Aurora to its customers. Aurora is a threat management system used in its Global Network Operations Center for 24/7 real time comprehensive information security management.Aurora provides real time data correlation and security monitoring of the internet and its transport services. It also provides AT&T customers with situational awareness reporting, active incident investigation and case management plus trending analysis and predictive security alerting across all systems, networks and intelligence inputs. Look for most service providers to offer network security monitoring services. In addition, HIPT offerings are housed in secure, redundant and hardened data centers, which are much more secure than a telecom closet in a branch. Also service provider HIPT data centers utilize shared power, physical security, backup, and HVAC all of which are state-of-the-art. As mentioned above local survivability is an option with remote office gateways, but I strongly recommend it as it increases the reliability and availability of the HIPT service.

Technology obsolescence is always a concern and risk to be mitigated. HIPT does provide mitigation of technology obsolescence as the service provider owns and manages the equipment plus upgrades, eliminating this risk and task from IT staff, which is non trivial for a large number of offices spread over large distances. The hybrid model may not eliminate the complex evaluation and negotiation process of IP telephony equipment as many will undertake this task for their largest facilities, but an HIPT decision will relegate the small, remote outpost and regional sites to a service provider selection process, which is far less complex than equipment purchase decisions. Also the astute planner can sign an HIPT service contract with a service provider that is usually a shorter time frame than a business would consider the depreciation period of hardware; i.e., seven to ten years. The time horizon flexibility allows planners to hedge their bets by using HIPT for a time duration until standards, service delivery and technology have matured to a level that comforts the IT planner. This economic flexibility option is generally not available in the private IP telephony purchase option.

CIOs and their staffs are interested in HIPT solutions for a number of reasons. HIPT services allow CIOs to insulate their business from standards fluctuations and pre-standard equipment, which is the current state of the industry. To this end, HIPT offerings provide flexibility to change out IP end-points, while private implementations are usually locked in by the choice of the IP telephony equipment supplier. However, both Avaya and Nortel will connect Cisco IP phones into their connection manager. HIPT, for sites with no IT resources, enables faster implementation of IP communication applications and mitigates risk and uncertainty of deployment and integration over a large number of geographically dispersed sites. E-911 is a major concern in the IP telephony industry as costly third party services are required to register end-points with emergency service organizations, and the installation of one analog PSTN line per site just for 911 service is usually required. HIPT services offer solid E-911 services eliminating the need for both the analog line plus the end-point registration service.

Another key consideration for small, remote, outpost offices is that they change more frequently than regional or headquarter sites. The HIPT solution offers greater flexibility to accommodate this scaling up and down of sites and personnel since HIPT services scale in direct proportion to bandwidth connecting the facility to the service. When a new office opens, all that would be required is local bandwidth, a gateway plus end-points and the HIPT service is operational. The same is true during facility closure.

While the hybrid model is most favorable for large organizations, HIPT services may find a warm reception from multi-nationals, mid-range firms and small enterprises.The balance between economics and control will guide most CIOs in their decisions. The good news is there are choices available to companies as they plan to build out their converged networks.

Posted 21 March 2006 at 7:34 am under Lippis Report, Avaya, Unified Communications & Comm.-Enabled Business, Enterprise Mobility. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.