Since Alexander Graham Bell’s day, businesses have bought telephone services the same way they’ve purchased electricity, janitorial functions, and water for the cooler—as packaged offerings defined by an outside provider. Sure, companies could choose from a menu of configuration options and service plans, but, in the end, the phone company or vendor called the shots. The breakup of telephone monopolies such as AT&T in the 1980s changed the mix of providers, but it left intact the century-old public-switched telephone network they employ, and it left service decisions up to suppliers. As a result, companies have been constrained—more than they know—by the legacy phone systems they’ve depended on.That’s changing fast. While the vast majority of individuals and companies still rely on conventional phones, an estimated 10% of international phone traffic now travels over the Internet using voice over Internet protocol, or VoIP. Most telling, this year, for the ﬁrst time, U.S. companies bought more new Internet-phone connections than conventional phone lines (see the sidebar “How Big Is VoIP?”).VoIP isn’t just a new technology for making old-fashioned calls cheaper. What makes it so potent is that it turns speech into digital data packets that can be stored, searched, manipulated, copied, combined with other data, and distributed to virtually any device that connects to the Internet. Think of it, basically, as the World Wide Web for the voice. IP, or Internet protocol, simply refers to the technical standards that govern how digital information is encoded. Because of these common standards, VoIP can interact seamlessly with other Internet-based data and systems.
These might seem like technical nuances best left to your CIO. But consider this: Since VoIP turns voice into Internet-friendly data packets, it can—and will—replace the rigid, packaged phone services that most companies still use. And because it will allow businesses to create their own customized phone applications, it will shift control of phone services from providers that have historically defined (and limited) them to the companies that use them. VoIP will serve as the unifying platform for such applications, supporting ever more customized, intelligent, and strategic uses of voice communications. As some innovative firms are already showing, this flexibility can fundamentally affect how companies use voice to compete, allowing them to set up and conduct business in ways that simply couldn’t have been done before—or that were so impractical that no one would have bothered.
When you call a colleague’s office from yours using a traditional virtual phone system circuit-switched phone, the call originates from the hardware on your desk, travels along one of a limited number of paths on dedicated telephone networks, and arrives at a specific location—the phone on her desk. VoIP calls, by contrast, are just bits of data on the global Internet. They are not tied to physical locations (such as the building where you work) or specific devices (such as your office or cell phone). And because VoIP uses common standards, it can talk to any device that uses Internet protocol. It can just as easily go to an e-mail in-box on a laptop computer connected to a wireless network in a London café as to the phone on that colleague’s desk.
Making VoIP calls need not involve any visible changes for users. A caller can use an ordinary telephone connected to a VoIP converter box, which plugs into an Internet connection. Or he can use an IP phone that looks like a conventional telephone but connects directly to the Internet instead of a phone jack. Finally, he can install “softphone” software on any personal computer (and many personal digital assistants) and use a headset or microphone to make VoIP calls.nstalling front-office devices—the phones, converters, or software that employees see—is the initial step in developing a VoIP platform. Next, companies must install VoIP gear to replace their back-office private branch exchange (PBX) equipment—their conventional phone networks. The new VoIP software and hardware infrastructure controls what features are available and how the VoIP devices connect with corporate IT systems. (Smaller organizations may outsource this infrastructure function to a provider or simply link together individual VoIP phones and other devices.)
In a VoIP world, a phone system isn’t static; it’s an environment for developing and managing any capabilities that use voice or other IP communications. Building applications to take advantage of all the newly accessible IP resources is where the real benefits arise. Adding a function like videoconferencing to a VoIP system doesn’t involve a major equipment change; it’s akin to installing a software package on your PC. More significant, it means VoIP will be able to support new communications functions that don’t even exist today. Just as the initial wave of static corporate Web sites a decade ago gave way to dynamic, interactive, truly business-enhancing uses of the Internet, VoIP will serve as a platform for more strategic communications that combine voice with other data—so-called “converged communications.”In thinking about VoIP’s potential as a strategic tool, consider its roles in terms of three types of capability: virtualization, customization, and intelligence.