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Making Net Phones Smart Business

By Peter Burrows One of the most significant recent technology trends has been making phone calls using gear based on the Internet protocol, rather than on the voice-only standards in networks built by phone companies over the past 100 years. It's a process called Internet protocol telephony, or IP telephony. Since most companies already use IP gear in their corporate networks, the theory goes, they can piggyback their calls on those same pipes. Why? To save big bucks by making better use of those networks and by slashing the monthly bill from the phone company.

Now, signs are emerging of a second, more intriguing act for IP telephony. Rather than just provide a cheaper replacement for the trusty old phone, a range of telecom-equipment suppliers are exploring integrating the phone with other corporate applications.

That way, for instance, the corporate sales-management system can automatically zip a phone call to the CEO's cell phone if should sales suddenly drop. Or a customer-service rep can send out an all-points bulletin to the one engineer with the answer to a major customer's problem -- not just an e-mail or instant message, but also calls to a cell or home phone, or even by scouring an online calendar to determine the hotel where he or she is staying.

WIN-WYNN? "We're living in a real-time world, so we have to find ways to use our technologies in more real-time ways," says Forrester Research analyst Elizabeth Herrell.

Certainly, it's a concept that the telecom-equipment industry has promoted for years. But judging from a series of announcements from equipment provider Avaya (AV) on May 2, it's finally moving closer to reality. Besides new networking gear, the Basking Ridge (N.J.) company -- once a part of AT&T (T) before it was spun off in 2000 -- unveiled a host of new software capabilities, along with a strategy to make its gear a platform for so-called business communications applications.

Avaya also unveiled a marquee customer -- Steve Wynn's snazzy new hotel on the Las Vegas strip, Wynn Las Vegas, which opened for business in late April. Each of the hotel's 2,000-plus rooms is outfitted with an Avaya IP phone with a color screen that guests can use to peruse a menu or show schedule -- and then hit a button to go directly to the right hotel staff person. Or a guest can take tutorials on blackjack or craps in the privacy of a hotel room, and call up a staffer for help if he or she gets stumped.

BEYOND FLASHING LIGHTS. The biggest impact of this new technology, however, might be felt within corporations. Avaya CEO Donald Peterson envisions a day when companies will use powerful notification systems to bring together precisely the right people within seconds to deal with an issue that crops up.

Researchers at the University of Maryland's Robert H. Smith School of Business, for example, created a prototype of a system that can instantly track down contractors, suppliers, and other experts via all manner of available communications, including phone. By tying in with collaboration programs such as Microsoft's (MSFT) Outlook, the system can even figure out whom to find in case a key person is simply not available by any means.

Or if a salesperson is on the line with a smaller-account customer when a major account calls with a problem, the system can whisper a warning into the salesperson's headset. "The real value of IP telephony is linking it to your business processes," says Peterson. "It's a lot more effective than just having some lights flashing and buzzers going off."

"REAL ROADMAP." Avaya announced a number of specific products, including upgraded telephony software and new low-end IP-telephony devices aimed at small offices. But just as important, analysts say, was Avaya's promise to support open communications standards -- and to try to catalyze the development of business communications applications by other software shops. While many of its rivals include proprietary features, Peterson promises that Avaya will be totally compliant with standards such as the session initiation protocol (SIP), which is championed by Internet standards-making bodies. "They showed a real roadmap for how to move forward," says Gartner Dataquest analyst Jeff Snyder.

Certainly, Avaya doesn't have all the technologies required to singlehandedly turn this promising idea into reality. Plus, rivals such as Siemens (SI), Nortel (NT), Alcatel (ALA), and Cisco Systems (CSCO) see opportunities to help customers do more via IP telephony than simply lower their phone bills. Gartner Dataquest expects IP phones to rise from 19% of all new phone lines in 2004 to 50% in 2007.

As these gizmos become standard issue and more workers get them, productivity can be increased by tying them in with other back-office information systems. Along these lines, Avaya expects the overall communications applications business to grow 18% a year, to $31 billion by 2006 -- with more than half coming from the services required to install and maintain all of this code.

This could be the year, says Forrester's Herrell, that IP telephony starts turning into more than just a high-tech way to lower the phone bill. Burrows is Computer editor in BusinessWeek's Silicon Valley bureau

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