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Cisco notches new Net phone deal

Bank of America signs a deal to deploy 180,000 Cisco IP telephones nationwide over the next three years.

Cisco Systems has racked up another significant Internet telephony contract.

The company on Tuesday will announce a deal with Bank of America to begin deploying 180,000 Cisco IP telephones throughout 5,800 banking centers and enterprise locations in 29 states and the District of Columbia.

In July, Cisco announced a similar contract with defense contractor and airplane manufacturer Boeing. Earlier this month, Ford Motor announced that it plans to install 50,000 Cisco IP phones in 110 offices throughout Michigan.

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The Bank of America deployment will occur in three phases during the next three years. The company is currently conducting a pilot program, which will conclude at the end of this year. The first phase of the production deployment will begin in early 2005, said Craig Hinkley, senior vice president of network architecture and strategic direction for Bank of America.

In total, the company plans to eliminate a disparate collection of 362 traditional telephone switches in favor of Cisco's IP telephony products. Systems integrator Electronic Data Systems will help Bank of America transition to its new voice and data network infrastructure.

Cisco has been the industry cheerleader drumming up interest among large businesses for voice over Internet Protocol (VoIP) services since it deployed its first phone back in 1999. VoIP is a relatively new breed of cheaper phone service that lets people place calls through the Internet, avoiding the telephone companies' local and long-distance networks. By routing internal phone calls over their existing data networks, large companies with geographically dispersed offices can save millions of dollars.

Today, Cisco is considered the equipment leader in this market. It has sold more than 3.5 million IP phones, displacing 8,000 traditional circuit-based telephones every business day, according to company officials. Cisco also claims to have more than 16,500 IP communications customers worldwide, 40 of which have already deployed more than 5,000 phones in their networks.

But while Cisco has been racking up big contracts, not every deployment has gone smoothly. In the past few years, several Cisco customers have canceled contracts with their systems integrators.

Last year, Merrill Lynch and the state of Alaska both canceled their contracts with integrators that had recommended Cisco gear be used in their VoIP networks. Merrill Lynch is now deploying a mix of gear from Cisco and its competitor Avaya.

In the face of these problems, Cisco has defended its technology.

"In these two cases, the customer said it was complications with their integration partners that became a problem, not Cisco's technology," said Hank Lambert, director of product marketing for enterprise call control.

In August, Dow Chemical, another large Cisco IP telephony customer, canceled its data networking contract with EDS, tapping competitor IBM to take over its data and voice projects. Cisco's Lambert said that Cisco's VoIP gear is still being used in the Dow Chemical IP telephony network, but he wouldn't comment on specifics about what has changed since IBM took over the project.

Cisco agrees that some customers have hit bumps along the way. These glitches are often blamed on a variety of factors involving the integrators, such as poor network planning and project oversight. Experts agree that despite the recent hype concerning VoIP, the technology is still relatively young, and customers, integrators and vendors such as Cisco are still working out the kinks when it comes to deployment.

"We've seen a lot of variability among the VoIP networks that have been deployed," said Dave Passmore, an analyst with The Burton Group. "The biggest thing to recognize is that ultimately the performance of the VoIP network rests on the quality of the underlying data infrastructure."

The data network that will be used to carry the voice traffic must be ready to carry the additional, latency sensitive traffic, Passmore added. Customers need to have a reliable, highly available and secure network in place before they can even think of deploying VoIP, he said.

Lambert said that Cisco has learned a lot during the past four years and is applying that knowledge to how it works with customers and network integrators today.

"The technology and the integrators' knowledge of deploying the gear has improved dramatically over the past four years," he said.

Hinkley of Bank of America said that his company has already been through a full upgrade of its data infrastructure. He doesn't anticipate any major problems as the network is rolled out.

"We're ready to support real-time traffic over a converged network that is highly available and redundant," he said. "We have a model in place for managing the outsourced project. We are working with our provider to maintain architectural direction and control. This is not a situation where they go away and come back two years from now saying, 'Here's you're network.'"