Answer The IP Telephony Wake-Up Call

As Brett Favre and the Green Bay Packers emerge from the huddle, Favre surveys the defense. Sensing a problem with the play, the veteran quarterback quickly moves into the shotgun position. The din of the crowd is deafening as he shouts out a new play to his teammates. It's an alternative form of communication in football called an audible, and this time it works. The Packers score.

Among the throng of fevered fans sit two men who understand all too well the value of alternative communication methods. Peter Helander is president and treasurer of Heartland Business Systems (Little Chute, WI), and Tim McNicoll is one of the company's systems consultants. Heartland sells bar coding and networking hardware and software. In 1998, Heartland began selling IP (Internet protocol) telephony phone systems, an alternative to traditional PBX (private branch exchange) phone systems. Although IP telephony products only account for 10% of Heartland's current sales revenue, Helander and McNicoll expect their sales of this technology to double in 2003 and then double again in 2004. However, that success is dependent on the company's ability to convince customers of the advantages of this technology.

What Is VoIP?
Basically, IP telephony, or more specifically, VoIP (voice over Internet protocol), is a way of using an Internet connection to make phone calls. (See "An Introduction to VoIP" on page 72 of February 2001 Business Solutions.) With VoIP, a call becomes a digital packet of data that is transferred over the Internet's packet-switched connections rather than the circuit-switched connections of the public switched telephone network (PSTN). Phones and computers are connected together and linked to a single data network via a Cat-5 cable.

While early incarnations of VoIP systems had problems such as poor sound quality and lack of common phone services (e.g. call waiting and caller ID), McNicoll says most of these problems have been resolved. (Editor's note: Heartland uses an IP telephony system, and I didn't notice any difference in sound quality during my phone conversations with McNicoll and Helander.) As a result, many research firms are now predicting big growth for this technology. For instance, Allied Business Intelligence expects enterprises to migrate from traditional voice networks to data networks at a rate that will create a $16.5 billion IP-PBX market worldwide by 2006. Furthermore, Frost & Sullivan predicts VoIP will account for approximately 75% of world voice services by 2007.

A Cross-Selling Opportunity
So far, Heartland has sold 50 3Com (Santa Clara, CA) IP telephony systems (see the sidebar on this page). According to McNicoll (who Helander credits with bringing IP telephony to Heartland), of those 50 clients, 1/3 were building new offices, and the remaining 2/3 were companies that either needed new phone systems or were remodeling existing buildings.

"The majority of Heartland's existing 2,800 customers have between $10 million and $100 million in sales revenue," McNicoll says. "We've achieved much of our IP telephony success by cross-selling our technologies to this client base." For example, one of Heartland's earliest IP telephony customers was a paper converting company that made products such as poster boards, file folders, and CD packaging. The customer wanted to track these items for inventory purposes, so it bought bar code labels and scanners from Heartland. To transfer the bar-coded data, the customer had Heartland install a data network. Months later, when the customer was remodeling its building, McNicoll went back and sold them an IP telephony system that would use the existing data network.

"An IP telephony system is really just another network device," Helander says. "In fact, we didn't have to hire any new technical staff when we began selling these products. Instead, we had our engineers and many of our salespeople become certified on 3Com's NBX [network branch exchange] IP telephony products."

No More Long-Distance Tolls Or Phone Service Fees
Customers new and old want compelling reasons why they should rip out their existing PBX systems and switch to IP telephony solutions. Discussing the cost savings of this technology is always a good place to start.

Companies using IP telephony can save money two ways. First, a customer's long-distance tolls are significantly reduced (at the most users may pay three cents a minute), if not eliminated, because calls are not being transferred over the PSTN. For example, using an IP telephony feature called least-cost call routing, users can route calls via the cheapest method between IP-PBX units. Using this feature, the IP-PBX unit where a long-distance call originates will route the call across the network (e.g. frame-relay, point-to-point, Internet) to the receiving NBX to save on toll charges.

The second way IP telephony can save a customer money is by eliminating the fees a phone company charges every time a customer wants to add, move, or change a phone extension. "Some of these phone company charges could range from $75 to $175 per hour," comments McNicoll. "With an IP-PBX system, customers can make changes to the system themselves. However, if they wanted to make a large change like adding a call center, they would probably need our help."

Minimize Customer Downtime
Imagine the impact on your business if you didn't have the use of your phones for a day. Unfortunately, for companies that install new PBX systems, that could be the amount of downtime they experience during the crossover to a new system. On the other hand, an IP telephony system requires almost no downtime to install. "If the customer has an analog PBX, we can install an NBX system on their data network and run the PBX and NBX at the same time." Helander explains. "Until it comes time to take the old phone system down, the customer can become familiar with the NBX system's features. When we finally unplug the phone lines from the PBX and plug them into the NBX, the customer only experiences a few minutes of downtime."

McNicoll described one customer that experienced both the lack of downtime and the cost savings associated with IP telephony. The customer is a cheese manufacturer with three locations. The company initially contacted Heartland to install a data network. Later, when the customer wanted voice mail capabilities at its headquarters, Heartland came back and installed a 10-phone NBX system. When the company built a new manufacturing facility, it consolidated its three locations into one. Thirty more phone users needed to be added to the NBX system. However, all the company had to do was plug in the new phone lines to the NBX and have Heartland assign the extensions and user names.

"One of the biggest advantages of IP telephony systems is that they are nearly maintenance free," McNicoll says. "With any initial proposal, we sell an amount of support [e.g. 40 hours, 100 hours, 200 hours] that covers the initial install as well as any future modifications. After a customer becomes more familiar with an NBX system, they often call us back for help with configuring more advanced features such as auto attendants, different call routing, and call groups."

Let IP Telephony Redefine Your Company
There are 56,000 names on the Green Bay Packers' season ticket waiting list. Unfortunately, Heartland doesn't have this kind of demand for its IP telephony products. However, Helander and McNicoll expect this technology to become the main focus of Heartland in the next few years. "We are already advertising as though we are a phone services company as well as a data company," Helander concludes.