In the fall of 2005, Internet service went down at D.W. Morgan, a supply-chain and logistics company in Pleasanton, California. No big deal, right? Networking problems strike businesses all the time. But what for many businesses might have been an annoyance quickly became a crisis at D.W. Morgan. That's because the company had recently spent $55,000 installing a new phone system that transmitted voice calls over the Internet. No Internet service meant the phones wouldn't work. "In business, you're only as strong as the weakest link among all your vendors," says Grant Opperman, the company's president and chief strategy officer.
VoIP, or voice over Internet protocol, is one of the hottest trends in communications. According to the Yankee Group, some 8.5 million consumers have ditched their landlines, looking for lower bills and more flexible, customizable phone systems. But for a business, the road to reliable service with VoIP can be rocky, fraught with network outages, costly infrastructure upgrades, dubious call quality, and laborious project planning. "Voice is a finicky application to run over the network," says William A. Stofega, a research manager at the technology research firm IDC (NYSE:IDC). "If an e-mail arrives five minutes late, you don't usually know or care, but if there is any kind of voice delay, you know it."
Conventional phone systems transmit sound directly over the phone lines of telephone companies. Internet telephony converts a speaker's voice into small bits of data. Those data "packets" are pumped over the same data network that routes e-mail and webpages and are converted back to voice when they reach their destination. Companies such as Vonage (NYSE:VG) and Skype (NASDAQ:EBAY) offer Internet telephony to consumers and small businesses, while major corporate VoIP providers include Nortel (NYSE:NT) and Lucent (NYSE:ALU). Internet service providers, such as Verizon (NYSE:VZ) and AT&T (NYSE:T), provide the actual voice service that runs over the network.
D.W. Morgan, which seeks to provide clients with real-time information about the status of their supply chains, was eager to try the high-tech approach to phone calls. So back in 2004, when the company, which had just under 100 employees, moved to a new headquarters, it installed 25 Cisco Systems (NASDAQ:CSCO) IP phones with the help of a local firm specializing in IP communications. But before D.W. Morgan could make the most of the new technology, it had to work out a few kinks. For starters, there was a pronounced echo when there was heavy traffic over the voice or data network. "If someone was downloading a video or a few people were on a conference call, you'd start to get garbles and echoes," recalls David Morgan, the firm's CEO. To address the problem, a Cisco engineer reconfigured the T1 connection so that one circuit was dedicated entirely to voice traffic. The fix eliminated the echoes.
The next rough patch came about a year later, when Internet service--and therefore phone service--went down for almost an entire weekend. Following the incident, the company purchased a second T1 line from a different provider as a backup. Now, if the first line fails, the second one can be put into service in about 10 minutes. Today, D.W. Morgan supports IP phones at six U.S. offices and overseas in Singapore and South Africa. Morgan says the phones save the company thousands, if not tens of thousands, of dollars annually in overseas calling charges and conference calls.
Planning for network screwups in advance can help reduce their likelihood and severity. John Davis, director of technology at Pavia & Harcourt, a New York City law firm, spent months upgrading the firm's IT network before replacing its 10-year-old digital phone setup in 2005. The 80-person firm had recently opened a satellite office in Milan, Italy, where there was usually only a single attorney present. By deploying a VoIP network that could ring in New York when the Milan office wasn't occupied, the firm hoped to be more accessible to European clients. The new system also would significantly reduce long-distance costs. Outside consultants and employees at the firm's provider, Avaya (NYSE:AV), assisted with the deployment, which cost about $75,000 and included 15 IP phones, 60 digital phones, a switchboard console, support for two years, and a "soft phone" in Milan--installed software that turns a PC into an IP-based phone.
But before even shopping for a vendor, Davis purchased and installed new network switches to handle both voice and data traffic. As a result, the transition to VoIP went smoothly. "I read every piece of documentation from Avaya so I knew everything the system could do," Davis says. "I didn't want to buy something I didn't know how to use."
It also pays to move slowly. In late 2005, for example, Launchpad Communications, a Los Angeles-based marketing firm, added about 20 IP phones to the homes of remote call center agents. It wanted to expand and increase the flexibility of its outdated digital phone network, according to Brian Pick, the firm's director of IT operations, who began working at the company after VoIP was installed. Thanks to extensive planning, Pick says, the rollout was relatively trouble-free. But there are still concerns with delivering calls over a public network. Occasional echoes and slight transmission delays can make the VoIP phones sound like cell phones, he says.
Launchpad is considering upgrading its current setup to better integrate a new Siebel customer relationship management application with its call center. Pick says the experience implementing and using VoIP will inform the company's next move. "Without that step, we wouldn't have known what's available," he says. "Now we know some of the gotchas."