Since Alexander Graham Bell''s day, businesses have bought telephone services the same way they''ve purchased electricity and water — as packaged offerings defined by an external provider. Sure, companies could choose from a menu of configuration options and service plans, but, in the end, the vendor called the shots.

In the US, 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 by the legacy phone systems they have depended on.

That scenario is changing rapidly. While the vast majority of individuals and companies still rely on conventional phones, an estimated 30 percent of international phone traffic now travels over the Internet using Voice over Internet Protocol (VoIP) according to an A.T. Kearny study last year.

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 voice. Internet protocol (IP) 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.

VoIP, also known as internet telephony is rapidly replacing the conventional kind. This year, for the first time, US companies bought more new internet-phone connections than standard lines according to research firm Forrester. The major driver behind this change has been cost. It is fundamentally changing how companies use voice communications making it simple to provide all the functionality of a corporate phone such as call features, directories, security etc, to anyone who has broadband access. That fosters new kinds of businesses such as virtual call centers, where widely dispersed agents work at all hours from their homes.

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 allows businesses to create their own customised phone applications, it will shift control of phone services from providers that have historically defined them to the companies that use them.

VoIP will serve as the unifying platform for such applications, supporting customised, 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 could not have been done before.

Linking VoIP to strategy
When the telegraph first appeared in the mid-1800s, savvy traders used it to obtain critical information about stock prices. Before long, the telegraph was an essential and ubiquitous technology on Wall Street, in the form of the stock ticker, but it was no longer a competitive differentiator among firms.

VoIP will follow the opposite trajectory. It will become more strategically significant over time.

Most companies will deploy VoIP at first in ways that give them a return on investment but with little strategic value. They may not be ready to think about the deeper potential of VoIP but will still install VoIP equipment and software for practical reasons. With that infrastructure in place, companies are in a position to develop a true VoIP platform.

In deciding whether and how to adopt VoIP, managers will ask the usual questions that accompany any major technology investment: What is the ROI model? What legacy equipment and software need to be thrown away, and what are the migration and integration challenges? Is the technology reliable, scalable, and secure enough?

What managers should be asking is how VoIP can improve — or transform their business. Successful adopters of VoIP concentrate on two things.

First, they focus on achieving business objectives rather than saving money. The huge cost savings that this technology affords in terms of integration, maintenance and scalability is only one part of the picture. The move to converged networks also allows easy re-configuration to accommodate an unlimited number of new users and leads the way to a vast range of multimedia applications and services.

Second, early adopters view everyone in an organisation as a resource. Businesses that push VoIP capabilities out to their employees, partners and customers will gain efficiencies over those who continue to think of communications as a scarce, centrally controlled resource. Companies that harness VoIP to achieve business objectives will find that it is much more than an undifferentiated commodity technology.

Deployment may be incremental, but companies should be thinking about where VoIP could take them. Executives should explore ways of connecting their employees, customers, suppliers and partners virtually with shared access to modern communications and computing. They should take a fresh look at their business processes to find points at which richer and more customisable communications could eliminate bottlenecks and enhance quality.

VoIP has definitely arrived. The important dividing line will not be between those who deploy it and those who do not, or even between early adopters and laggards. It will be between those who see VoIP as just a new way to do the same old things and those who use it to rethink their entire business strategy.

*The author is senior vice president, Cisco Systems India & SAARC