There are two approaches to cutting costs. Approach I is ‘Evolutionary’. This would be taking small pragmatic steps to "manage" costs. This is essentially through using alternate forms of communication to cut costs with no new investment required.

Approach II is ‘Revolutionary’ and involves taking a more dramatic route, which allows multimedia communication using a common converged network. Of course, there are some investments required upfront to get the RoI benefits which accrue over a number of years.

"In business, it’s useless to be a creative original thinker unless you can also sell. Management cannot recognize a good idea unless it’s presented to them by a good salesman" David M Ogilvy

How to execute Approach I: Evolution
Cut STD and ISD costs by using e-mail, chat and instant messaging, with or instead of voice. Instead of tele-conferences, use instant messenger software for chat applications. This is especially useful when the enterprise has already invested in leased lines, which are not currently being optimally used. IM has become a powerful tool, and there are several applications like technical support where a combination of text chat with some intermittent voice connectivity makes dramatic improvements in quality and speed of communication.

This is specially useful in small- and medium-sized enterprises, where existing investments on LANs and WANs, as a proportion of the toll traffic, is low.

How to execute Approach II: Revolution
Approach 2 envisages moving to converged networks. The first and biggest application of this would be using Voice over IP (VoIP).

The Benefits Voice and data communications services can be made a convenient target for cost-cutting, since they constitute the third-largest overall operating expense in most businesses. CIOs are, therefore, looking for alternate communication solutions, which offer them the following: Cost-savings Better customer service Reliable communication Faster business decision making Ease of deployment Key Contributors ISD calls—multi-location or bridge-based tele/ video conference to... Customers Own Office/Colleagues STD Calls Customers Own Office/Colleagues Faxes E-mails (group and cc mails with attachments)

In its present form, IP telephony requires a separate managed network similar to a LAN network using separate cabling. But for mass usage in large corporate environments there would be a need to integrate voice and IP-based telephony so that a corporate executive needs only one user terminal or telephone set on his table. The switch, on the other hand, would have to be intelligent enough to route certain set of calls (typically outbound long-distance calls) on the internet protocol and another set of calls on regular circuits. Similarly, all incoming calls—irrespective of the media of transport—should land on the same table at its usual connectivity and access instrument.

According to an industry estimate, 70% of any enterprise’s communications costs are in the form of intra-office STD bills. By implementing a VoIP solution, a company can actually reduce intra-office communications costs by as much as 60%.

Besides cost-savings, VoIP also presents value-added services like integrating voicemail, video, e-mail and fax (universal Inbox). Another advantage that a CIO gets from such an approach is considerable savings in the maintenance of a voice-carrying IP network, as against maintaining legacy switched networks.

Additionally, with the proliferation of VoIP from a limited application set to a larger one, the number of users, as well as the cost of user terminals would become significantly cost-effective.

For instance, mobile telephony is growing faster worldwide than fixed telephony. And this is inspite of a huge difference in the cost of a handset. The key value here is simple—anytime, anywhere access at affordable costs. When other typical features like address book, SMS messaging etc. are added on, this provides an unbeatable value proposition for the user.

Similarly, in the converged network, though the primary reason for implementing IP telephony solutions would be cost. The sustainable value proposition lies in the value-add solutions, which allow seamless integration of voice, video and data and thus enhance efficiency within an organization.

IP and switched networks: Bringing them together
Presently data networks and circuit-switched voice networks are essentially independent units with limited interconnect. There is a great need to develop cost effective systems that would carry voice and data over the same existing set of copper cables at speeds that would meet the requirements of data communication and voice communication within an enterprise. This would allow a much more efficient use of bandwidth, even within the office premises. Since, IP telephony is based on the bedrock of data packetization, a given bandwidth on the corporate LAN is shared for multiple channels of communication, while in a circuit switched environment each communication channel would require and consume dedicated bandwidth.

But that doesn’t suggest that an enterprise which has already invested in a circuit switched network needs to completely replace it with an IP network. Despite the transport cost the circuit switched environment cannot be ignored because of the vast availability of this legacy telecom network and also because the end customer premises equipment (telephone instruments) on these networks are extremely cost effective. What it means is that the telephone or a device to convert our voice signal into a transportable form on circuit switches are much cheaper than their generic substitutes for doing the same on IP or data channels. Additionally, circuit-switched networks continue to score on quality of service.

What lies beneath?
So, as the first step, an enterprise, should try for an efficient intermix available through an integration of the two networks to take advantage of cheaper transport on one side and of cost effective end customer equipment like analog telephones, faxes and answering machines on the other hand. This can be achieved by investing in the right software solutions, that would provide transparent interconnect between the existing copper, with the other elements in the network.

VoIP becomes cost-effective for enterprises that already use leased lines on a WAN. Vendors have anticipated this requirement much in advance and the market is flooded with VoIP solutions. There are IP phones, VoIP gateways and interfaces available, and network integrators can tie all this into the existing enterprise WAN. One can choose either an end-to-end solution or just voice-enable existing routers and interface these with existing EPABX equipment.

The idea is to provide integrated solutions for circuit switching and data switching needs of corporate business houses using a single device. Using VoIP hardware is one way this can be achieved. An in-built Voice over IP card can be used for supporting long distance communication over Internet. These VoIP cards have powerful DSPs for doing voice compression, echo cancellation, comfort noise generation and packetization.

Hardware cards, as a concept, are about developing the packetizing capability into the switch itself so that it is used as a shared resource instead of providing this capability at the customer end through a SIP phone or H.323 device. Some network integrators are following this concept of shared resource development to bring down the costs offering VoIP cards along with the simple telephone instrument as an alternative to the SIP or H323 device connected to the Internet.

The switch will essentially have the router capability, whereby it would allocate IP addresses to each analog and digital extension user to be able to integrate data switching and dynamic bandwidth allocation to the user extensions. Such router capabilities providing independent IDs can have additional advantages like setting up a pool of extensions for receiving fax, voice mail or modem calls. Router capabilities would further allow telephone and data calls to be routed by name as well.

Such voice and data servers would also essentially shrink the intra-corporate telecom world much the same way as Internet has brought people together.

The most common corporate business application for VoIP is its preferred use as a mode of communication for long distance telephony. This is the only integrated solution that does not require a separate data network for VoIP calls and would allow usage of existing low cost analog telephony equipment for transparently receiving or making calls. Alternative solutions are expensive requiring separate data networks using computers with multimedia kits or IP phones for voice communication that makes the solution not only expensive but also difficult to operate as the user will have to make and receive calls from the circuit switched world on separate telephones.

The solution, however, will need to be intelligent enough to automatically route certain calls over IP networks and others over circuit switched channels. It will envisage using the same telephone instrument for accessing both channels and hence reduce the need for separate networks.

Converged networks for integrated communications
Integrated communication solutions allow enterprises to combine different types of communications, such as voice, video, data, email, web and fax over a single packet-based infrastructure. By combining this traffic on a single network infrastructure, enterprises can dramatically reduce their communication costs. Network topologies are simplified and networking components are eliminated or standardized. In some cases, enterprises can reduce their communication costs by up to 50 percent.

Phones and PCs become the nodes of an integrated communication solution supporting data, voice, fax, web and video. Using such an integrated communications solution, an enterprise will enable higher employee productivity, enhance customer service and encourage greater collaboration. In addition, network managers can minimize the cost and complexity by managing just one integrated multi-service network.

Internet VPN solutions
As more and more enterprises begin to migrate their decision tools like supply chain management through CRM, ERP to the Internet, an increasing number of enterprises have begun to migrate their existing wide area network infrastructure to an Internet-based VPN implementation. An effective IP-based VPN solution enables not only site-to-site communication and information sharing over the public data network like the Internet but also addresses critical issues like security, quality of service and manageability.

Using such a VPN makes dramatic cost savings possible as leased lines and expensive private network infrastructure is not required. Additionally, the inherent efficiencies of having decision-making data and communications on the move, make this a must-have for a number of CIOs planning to improve business communication RoI.

The road ahead
But for sustainable cost-savings from reduced communication costs and enhanced business efficiencies from greater real-time decision-making through faster, cheaper anywhere, anytime, access CIOs need to plan on migrating to all-IP networks. In addition to the IT/ telecom and BFSI sectors, companies with huge communication overheads, or customer-service-oriented companies like call centers will be major adopters of such converged networks.

A move to an all-IP network not only addresses the need for reducing connectivity costs but also facilitates enhanced connectivity and multi-media access. Network enhancements today, should be thought through with a roadmap for implementing wireless LAN compatibility and should take into account the benefits that are and will continue to be available and enhanced through GPRS and 3G public mobile networks. These not only offer savings in communication costs but also many value-added services. That's why more enterprises worldwide are upgrading their WANs for voice and video over fixed line and wireless.

With the communications industry gearing up to meet the demand, an increasing number of solution vendors and network integrators offering VoIP based solutions and with increasing competition, we can expect equipment costs to become more cost-efficient. Vendors are aware that enterprises want to protect their investment in communications infrastructure, so they will offer solutions that interface with legacy communications equipment.

Manoranjan Mohapatra
The author is the chief operating officer of Hughes Software Systems.