|Issue:||Latin America 2004|
|Topic:||VoIP in Brazil’s future|
Otávio Lazarini has been Westcon Brasil’s general manager since the company was established in the country, in 1998. Mr Lazarini earned his degree in telecommunications engineering from PUC (Pontifical Catholic University) in Rio de Janeiro, Brazil. Mr Lazarini also holds a master degree from Purdue University’s Krannert School of Business in USA.
VoIP promises to change the telecommunications industry and the way companies, in general, operate and do business. VoIP benefits include, low cost, ease of installation and maintenance, lower communications costs and the ability to use many advanced productivity enhancing applications. Unified messaging, mobility, collaboration systems and multimedia contact centres are among the most promising applications. IP telephony is expected to handle 45 per cent of the long distance and international telephony by 2005 and 75 per cent of voice services, worldwide, by 2007.
Unlike other industries – say, automotive or soft-drinks – the information and telecommunications technology sector as well as other high-tech industries tend to evolve due to innovations that cause discontinuity, change the paradigms of the industry itself and even change the way companies in general operate and do business. Voice transmission over IP (Internet Protocol) networks is becoming more and more common in the business environment. The acceptance of these networks in Europe and the United States points strongly to and indicates that Brazil and other Latin American countries will soon be adopting convergent communications systems that combine voice, data and image. The economic benefits of using IP networks to communicate data and voice over are clear: – The low cost of the network and its management; – Easy network implementation and upgrade; – Lower cost telephone communications; – Integration of applications among desktops and new IP telephony devices. It is also clear in business terms that the future points to: – A much more mobile workforce; in the United States, according to Gartner, 45 per cent of the workforce is already mobile; – The unification of message systems; – To even more sophisticated Customer Management Relationship (CMR) systems. All of which VoIP certainly helps to create and improve. All marketing studies about technology show that companies that invest in a rising segment harvest the best when the market matures. The VoIP market is, at this moment, rising. Therefore, this is the time to invest globally and include Latin America. The Latin American market now totals 3 to 3.5 per cent of the world’s high-tech market. Brazil holds an outstanding position, accounting for 1 to 1.5 per cent of world sales. Analysing the international economic context and the outlook for the coming decades, Stephen Kanitz (2004), professor of Economics and Business Administration and consultant, sees a stable situation in the short run; there are no ‘bubbles’ to blow up, as with NASDAQ, and the economy is operating normally. Countries in Latin America that were near bankruptcy went bankrupt in the last ten years including Mexico in 1994/1995 and more recently, Argentina. Professor Kanitz (2004) says that Brazil is an economically feasible and promising country for those who invest in the right sector in the right time. Undoubtedly, the Brazilian economy is growing: – Brazil now has a balance of trade surplus of about 30 billion dollars and is expected to increase its exports next year; – Brazil’s country risk rating is going down steadily – from more than two thousand points in 2002 to about 600 now; – The stock market is rising and is expected to continue to grow in 2005 and 2006. Kanitz (2004) also believes in Brazil’s long-term economic development. The country is one of the few in the world, such as China and the United States that has an ‘imperial territory’. Brazil has considerable natural resources, including 20 per cent of the world’s drinkable water and 20 per cent of the planet’s ‘sun and photosynthesis’, and has gone a long way towards self-sufficiency in oil. Considering the structure of its population, its future growth is expected to be balanced. Since 1950, in one generation, the country’s population has grown 321 per cent. This has caused some problems and has put pressure upon its Social Security system. During the next 50 years, though, population growth is expected to be only 25 per cent, and the majority of the population will be in its most productive years. Convergence, a growing market Data from international markets show that US$ 2.5 billion was spent last year for converged data and voice technology products and services, compared to US$ 1.7 billion in 2002. Research companies like IDC and Gartner show the growth trend of the Voice over IP –(VoIP) market. Researchers predict that by 2005 IP telephony will transmit over 45 per cent of the long distance and international telephony. By 2007, VoIP systems will account for more than 75 per cent of voice services around the world. The first users of VoIP systems appear to be quite happy and more than 90% stated that the cost reduction obtained fulfilled their expectations. Cost reduction is a crucial issue at this moment, as the market changes its focus from hardware to software and from technology to results. The market puts great value on technologies that provide a strong return on investment (ROI) and have a low total cost of ownership (TCO). VoIP provides not only a good return on investment, but a low TCO as well. For example, in one study of 432 users in six locations that compared VoIP with traditional voice systems, the savings on TCO with VoIP exceeded 800 thousand dollars in five years. Cost savings for telephony and data transmission are also significant to the user, as is the ease of installation of these systems, their easy low cost management and maintenance. IBM, for instance, is implementing a VoIP network and expects a 25 per cent drop in voice and data transmission costs. In addition, voice and data integration makes a series of new applications possible that help businesses be more efficient and productive. These applications include unified messaging, mobility and use of IP telephones to improve individual productivity, and collaboration systems and multimedia contact centres bring improvements in group productivity. Convergent networks using IP became practical because of protocol standardisation that allows users to build their networks with equipment from several vendors, instead of being tied to proprietary networks as in the past. The handset industry already offers IP telephones. These are still more expensive today than digital devices, but they will become cheaper with time. Work is also in progress not only to improve softphones by incorporating features that integrate the telephone to the desktop computer, but to improve the quality of voice over IP networks. WLAN (Wireless Local Area Network) handsets are already available in the market. Handsets are also being developed that will work as wireless handsets or WLAN terminals. There are still some challenges to overcome before voice and data over IP networks can be widely adopted. The challenges include improving such items as: – The reliability of convergent solutions; – The PBX-IP; – Security; – Building sales and maintenance channels to install and maintain the solution; – The lack of sufficient technical support from the manufacturers; – Bandwidth bottlenecks in the network. However, none of these problems is insurmountable. To implement successfully VoIP and IP telephony applications, the IP network must offer the same reliability as a traditional PBX. This problem is being addressed in two ways. Initially, IP devices will be manufactured to handle uninterrupted operations; subsequently, IP networks will be configured with several possible routes between the caller (sender) and the destination (receiver). A well-designed network project can considerably boost the data network’s availability and consequently enhance its application. Security is also crucial. Who can guarantee that a telephone conversation will not be recorded through an IP tap? Who guarantees protection against hacker attacks, viruses and malicious content? Today, the IP network is constantly under attack. The same network will soon be used for new services of every type, including IP telephony, and all will be at risk. These are valid concerns. Accordingly, VoIP applications need the same level of protection as critical data applications and must use the latest and best security protection technologies available. Once again, good design is vital. An efficient IP security system can be quite secure, perhaps even more so than traditional telephones, which over the years have proven to be easy to tap. Recently, there has been a shift from a product-driven to an applications-driven approach. Productivity gains are considered vital, so new converging applications offer end-users a broader range of functional options with lower operating costs. There is a gradual trend towards widespread adoption of this strategy. Data channels will specialise in offering a consistent IP infrastructure with good performance and high availability ratings. Security channels will handle the next layer, which will protect data integrity. Voice channels will, generally speaking, own the applications, as they have experience with services that ranges from basic transfers, conferences, voice mail and the like, through to more complex applications such as unified messaging, CRM and multimedia contact centers. Bandwidth bottlenecks are also a challenge that must be met. On the LAN (Local Area Network) side, the network is simpler because bandwidth is cheap. LAN equipment already offers good Quality of Service (QoS). It can assign higher priority to time-sensitive information packages, such as those carrying voice transmissions, for instance, and assign lower priority to file transfers that are normally not time-sensitive. On the WAN (Wide Area Network) side of the network, the bandwidth is narrower and still expensive despite a drop over time. Better QoS is crucial for the WAN in order to ensure available bandwidth for time-sensitive voice applications. Once again, good project design is crucial to avoid future problems with IP telephony applications. Manufacturers and service channels are mounting massive efforts to cope with these challenges. All these concerns are relevant and are being handled with the necessary care; nevertheless, detailed project designs are crucial for the success of any installation. Poor design undermines the final outcome, frustrates expectations and gives rise to the mistaken conclusion that VoIP does not work. VoIP does work, and works very well, but it must be properly designed and implemented. As always, it is up to the vendors to educate the customer and up to the users to assess the benefits that a new technology such as VoIP will bring to their business.