IP Communications: A New Era in Corporate Communications

In preparation for the Enterprise Networks 2004 show this month (April 26-28 in Boston), conference organizer and star IT guru Nick Lippis previews the show with an analysis of architecting IP networks entitled "IP Communications: A New Era in Corporate Communications." We hope you enjoy it. Even though the show is just around the corner, you can still register to attend.

IP Communications: A New Era in Corporate Communications
by Nick Lippis Column April 14, 2004

Over the past 3 years most network executives were tasked with finding ways to reduce network and communications cost rather than designing networks. Most corporations kept their network structure relatively constant, while making it more efficient and secure.

Thankfully, enterprise network design is back in vogue. No longer are designers singularly sniffing out cost savings. Most of the Fortune 1000 are in fact analyzing, planning and starting to implement structural changes to their network. Most realize that the economic efficient phase has run its course and now the only way to increase productivity and achieve a further 15 to 30% + reduction in spend is to redesign their network. And what is on the minds of most network architects? In a word, convergence. Convergence is the structural change to infrastructure that occurs as voice and data are combined into one IP network. The time for convergence is right thanks to the maturity of IP Telephony offerings, the need to gain control of proliferating mobile devices and a slightly more lenient time frame for Return on Investment (ROI) calculations. In short, a post recession network is an IP converged network that wraps IP communications around corporate profit drivers. IP Communications ride on top of a converged network, delivering a new set of communication services to corporate employees.

Over the past few months I have consulted to more than 10 Chief Network Architects (CNAs) of Fortune 1000 firms, all of whom wanted help in developing an IP convergence strategy and plan. Most, if not all, enterprises have taken as much as they can out of their IT and total cost of network ownership. That is, the cost for capital, operations (meaning staff and maintenance) and facilities (meaning wide area transport and toll charges) have all been lowered to the point where there isn't much more fat in the system. The Fortune 1000 firms I have worked with have reduced IT spend by as much as 25% over the past three years and don't see a way to further reduce spend with current separate voice and data infrastructure designs in place.

The fundamental change in corporate network procurements is that ROI is being extended from 12 months or less to now 24, and in some cases 36 months. This means CEOs/CFOs/CIOs and other key financial decision makers are willing to make network investments that pay off further out in time. In fact, on average, corporations will increase IT spending by nearly 7% according to a recent CIO magazine poll. Most CEOs, CIOs and CNAs are coming to the realization that the only way now to reduce spending, and increase flexibility and profitability is by re-thinking how their enterprise network and communications support their business operations, as simple cost cutting has bottomed out. Key in this thinking is the fact that during the economic downturn most corporations sought efficiency and cost reduction. This three-year efficiency exercise established new business processes, which are now being supported with new applications. But network spending to support new applications lagged since budget was held back to a tight 12 month ROI.

In short, corporations could not spend to gain more efficiency. With ROI being extended, CNAs are now getting the go-ahead to seek out "structural" changes that will reap huge rewards even if it takes a few years to realize.

Not only is this good news for CNAs but for the equipment suppliers and service providers as well. A longer ROI metric will allow a longer protracted recovery in the networking industry. But companies don't just re-architect their network because they can; there has to be a compelling reason because it's very hard work. In the companies I've been working with, we have been able to reduce total cost of ownership by as much as 30% and in one case that meant $30 million/year while increasing flexibility and productivity. How, you ask? Convergence through IP Telephony is the answer. So the new mantra is re-design your enterprise network and think convergence.

Chief Network Architects are still very interested in reducing network spend, but the smart designers are now able to architect a converged network, thanks to longer ROI return metrics being put in place. Converged networks are not just about combining voice and data networks into one to obtain reduction in operational, facilities and capital cost. The phase after convergence is IP communications which re-engineers communications around corporate profit drivers.? IP communications is a business platform that delivers real time communications, be it voice, text, chat, video, etc., to employees while they are in the office, home office or in between. To obtain the most utility out of a converged network, the wide scale use of mobile phones, now shifting toward smartphone platform is essential to integrate as mobile phone usage is so high and corporations so mobile. To leave out mobility as part of a converged network architecture is missing a major opportunity to reduce cost and complexity and increase productivity. If examined, most network planners will realize that the consumption of cell phone minutes has doubled nearly every two years over the past five

Also, while cell phone bills have gone up, their unit cost/minute has fallen far more precipitously than toll. This increased use and decreased unit cost boosted cell phone consumption to the point where it could represent between 20 and 30% of overall annual voice spend.?

In short the set of communication tools we use to collaborate are many and our options will only grow in number. The glue that ties all these devices together is IP. What makes them useful is IP Telephony. What will make corporations achieve another level of productivity during the convergence era is collaboration through a set of IP communications that use the right medium, be it IM, email, voice, video, text, etc., to bring colleagues together to solve a problem or seize an opportunity. The industry is entering a new, post recession stage where convergence is the driver, IP Telephony is the platform and collaboration is the killer application. To put all this together for your corporation will take work, but it's worth it.