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Can small business count on VoIP?

Last week's Skype outage left many small businesses in the lurch and emphasized the importance of having a backup for when IP services fail.

Shawna Hampton, a small business owner from Kansas, knows she always needs to have a backup for her Skype Internet telephone service.

Hampton, who runs what is essentially a one-woman Web development company in Kansas City, said she was glad she had her cell phone handy when she was unable to make or receive calls from clients for 48 hours during last week's Skype outage. She had decided to make Skype's $40-a-year unlimited domestic calling her primary phone system to save money when she started her company.

"I always knew I needed a backup for Skype," she said. "I was annoyed by the disruption, but since I was able to use my cell phone, it wasn't that big of a deal."

Hampton's point is well taken: while many large companies have already made the switch to IP telephones, small business may not want to cut off their traditional phone services just yet.

Indeed, many experts agree that it's risky for small businesses to rely too heavily on services that use voice over Internet Protocol (VoIP) technology that leverages the public Internet. The reason is simple. The public Internet is still what is considered a "best-effort" network. Priority is not given to any type of traffic once it hits the public Internet. And even though voice packets don't take up much bandwidth, the technology is very sensitive to latency, which means that late-arriving packets could distort voice quality or cut off voice calls altogether.

While dropped calls or garbled connections may be tolerated by some consumers, business users generally have higher expectations for quality and reliability.

"The public Internet just can't provide the kind of quality of service that is needed to offer a business-class service. And small businesses don't typically have the money to upgrade their networks. So they shouldn't rip out their analog service to go purely to VoIP."
--Chris Lyman, Fonality chief executive

"The Internet itself is not business class," said Lisa Pierce, a vice president at Forrester Research. "Performance of the network is largely unpredictable. It's like the freeway. Sometimes you can sail through with no traffic, and other times you can be stuck in a traffic jam for hours."

Different for enterprise VoIP
By contrast, big companies deploying VoIP technology from suppliers, such as Cisco and Avaya, don't use the public Internet to transport their voice traffic. They use their own IP networks to transport calls within their campuses. And for calls traveling to other branch offices, they use leased data links rented from service providers like Verizon or AT&T. As a result, large VoIP installations often require companies to invest millions of dollars to upgrade their local-area and wide-area network infrastructures.

There's no question that these enterprise-class VoIP systems are too expensive for companies with fewer than 50 or 100 employees. But even the small-business offerings from Cisco and Avaya are often too pricey for many companies, especially those with fewer than 10 employees.

And yet the tiniest of companies want the features and flexibility that IP technology provides. Skype claims that nearly 30 percent of the 220 million people who have downloaded its peer-to-peer calling software client around the globe use the service for business purposes. In January, the company , which builds upon its existing calling features, such as Skype-to-Skype, Video Calling, SkypeOut, SkypeIn, conference calling, file transfer and chat.

But even though Skype is going after the "business" market, the company says it's only addressing the very low end of the market.

"Skype is ," said Skype spokeswoman Jennifer Caukin. "Small businesses, however, should find it a very useful tool that complements their existing communications methods, and helps them reduce communication costs and increase productivity."

Caukin said last week's outage was regrettable, and she added that the company has always encouraged customers to have backup communications.

"It is important to remember that Skype is not a replacement telephony service," she said. "While Skype is extremely resilient, users, especially businesses, are advised to have alternatives in place for the unlikely event that Skype access is disrupted, either because of Internet access problems or other reasons."

Will the public Net suffice?
But some companies, such as 8x8 and Vonage, are marketing their services as a replacement for traditional telephone services. 8x8 offers a hosted PBX service called Virtual Office that provides call functions like four-digit calling, call forwarding and auto-attendant, plus some unified communications features, like e-mail-accessible voice mail. The service starts at just $49.99 per month.

A PBX, or private branch exchange, is used within a private telephone network and allows users to share a certain number of outside telephone lines for making phone calls.

Like Skype, 8x8's service uses the public Internet to carry voice packets. Huw Rees, vice president of sales and marketing for 8x8, said concerns about the reliability of VoIP over the Internet are overblown.

"The public Internet is more than adequate for providing a business-class voice system if you have a decent broadband connection," he said. "We have more than 8,000 business customers who range in size from 2 to 600 employees using our service. There may have been issues with Internet VoIP a few years ago, but not anymore."

But Chris Lyman, chief executive for a software PBX company called Fonality, disagrees with Rees. He said businesses that can't afford to invest in upgrading their own wide-area and local-area networks should use a hybrid solution that allows them to fall back on the traditional phone network if their Internet connection is interrupted. Fonality sells a software PBX solution that does just that.

"The public Internet just can't provide the kind of quality of service that is needed to offer a business-class service," Lyman said. "And small businesses don't typically have the money to upgrade their networks. So they shouldn't rip out their analog service to go purely to VoIP. They're not ready for it."

Fonality's products are similar to ones offered by Cisco and Avaya. But because Fonality's software is based on open-source technology, Lyman says it costs 40 percent to 80 percent less than competing products from these big companies. Using open-source and standards-based technology means Fonality's software can be deployed on any server and any desktop phone. By contrast, Cisco's IP PBX solution runs on Cisco hardware and companies using it must buy Cisco's IP phones.

Even Fonality's solution, however, can be too expensive for some businesses. It costs roughly between $300 and $500 per employee.

At the end of the day, small companies looking to deploy VoIP must weigh the pros and cons of the services or solutions they can afford.

"There is a portion of the market at the low end that simply can't afford these more expensive options," said Forrester's Pierce. "So an Internet-based VoIP solution may hit the right price point. Call quality and service reliability may suffer, but it's a tradeoff. And compromises have to be made."

Indeed, Shawna Hampton said that as her company grows, she will likely invest in a more robust phone system. But until then, she will continue to use Skype.

"For right now, Skype is a great service for me," she said. "But I'm glad I have a cell phone, too."