In 2003, Ford Motor Co. became an early adopter of Voice Over Internet Protocol (VOIP) when it installed several lines from its Dearborn, Mich., headquarters to offices in Asia and Latin America and ran voice calls over the same lines that carry e-mails and other data. The savings, in drastically reduced per-minute charges, so impressed Ford executives that they recently
expanded the program.
Today, George Surdu, Ford's director of global information technology, is overseeing one of the largest corporate conversions to Web-based telephony to date. The automaker hired Cisco Systems Inc. and SBC Communications Inc. to connect more than 50,000 users in 110 facilities across Michigan, and despite the estimated $100 million price tag for the three-year project, the company says it is confident about its investment. "The savings are not trivial," says Surdu. Although he declined to put a number on the savings, "reductions in moves-and-changes charges, service reductions and transport reductions all came into our total savings proposition."
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Ford's experiment notwithstanding, big corporate VOIP rollouts have been few and far between until recently, and with upfront costs for some in the $100 million range, it's little wonder why. That may be changing as the telephone conversion cycle advances and companies consider potential long-term savings. More than nine million, or 11%, of total telephone lines at North American companies ran on VOIP in 2004, up from 4% two years ago, according to Gartner Inc. This number is expected to reach 34 million, or 41%, by 2008. "I don't think there's any great rush," says Gartner analyst Steve Koppman, but "it is the way the industry is moving, and it does provide long-run cost and functionality benefits. People not adopting it will face cost disadvantages."
Accounting firm Grant Thornton LLP used to spend more than $800,000 a year on long-distance calls made from its 49 U.S. offices. It now spends less than half that amount because calls made on its VOIP network are covered by a monthly charge similar to the charge for Internet use. "Initially we thought we were going to save about 25% on long distance, but we ended up saving over 60%," says Kevin Lopez, Grant Thornton's national telecom manager. Local phone charges fell 40%.
Savings come from a variety of sources. Running voice and data transmissions on the same line reduces the hardware, maintenance and service needed. VOIP also reduces the cost of reconfiguring the network every time an employee switches offices. By typing preferences into a program on the computer, a user can also ensure that certain calls are forwarded to a cell phone while others go straight into voicemail. In a popular function known as unified messaging, VOIP users can check messages left at different numbers on one centralized platform.
It's not a simple switch, however. Many choices need to be made, such as whether to keep the equipment on site or hook on to a carrier's remote network. Some experts recommend having the provider manage the system, since many corporate telecom managers aren't up to speed on the technology yet.
Despite the drawbacks, analysts predict growth for VOIP. "A lot of companies upgraded their PBX in 1999 for Y2K, and the typical replacement cycle is between five and seven years," says Lisa Pierce, an analyst at Forrester Research Inc. "I suspect a number of companies are going to be evaluating VOIP over the next couple of years."
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