In 1999, Mark Spencer needed a phone system for his startup, Linux Support Services. The company's aim was to provide technical support to businesses and programmers for Linux, an operating system for which the source code is free, making it an appealing alternative to Microsoft's (MSFT) Windows. But, Spencer was still a student at Auburn University and he had raised a mere $4,000 in startup capital. "I thought I really needed to get a phone system, but they were simply too expensive," he says.
So he did what any programmer wise in the ways of open-source software would do: He created his own. Using a combination of Linux and C programming, he created an open-source telephone switch called Asterisk, and then made the software available for free to others who wanted to use it.
Without realizing it at the time, Spencer was at the forefront of a movement to bring open source to telecom. By 2001, Voice over Internet Protocol (VoIP)—the technology that routes voice calls over data networks—had started to take off. And it became clear to Spencer that the market was ready for open-source telecom systems. So, he changed the focus of his company to the Asterisk switch and in 2002 renamed the company Digium.
SIGNIFICANT SAVINGS. Since then, others have followed Spencer's lead. Today, Pingtel and Signate also make corporate open-source telephone systems that take advantage of VoIP. Open-source products—still at the leading edge of the enterprise telephony market—are less expensive than the home-grown systems from companies such as Avaya (AV) and Nortel (NT).
Signate CEO Paul Mahler says that his company's open-source phone systems can save companies 50% or more compared with proprietary voice systems. This is largely because open-source software is available at little or no cost, and it runs on off-the-shelf computers or servers. With open-source telecom systems, companies also avoid getting locked into a relationship with one vendor and don't depend on that vendor to create new features. Instead, any programmer versed in Linux can customize a telephone system to the needs of a particular business.
BusinessWeek.com writer Rachael King spoke to Spencer about the impact of open-source telecom systems in the corporate market. Edited excerpts follow.
What is the primary benefit of using open source in a corporate telephony environment?
There are several benefits. First, there is very significant cost savings, which becomes more dramatic when you compare it to feature-rich telephone systems like those used in call centers or for conferencing.
Features like conferencing are usually very expensive. But when you have commodity PCs—and we make very inexpensive hardware that allows you to connect those PCs to the conventional phone network—and you combine those together, all of a sudden there's a dramatic cost reduction. We were talking to one enterprise customer and we compared the cost of what they were buying and what it actually costs—literally just the software, the PC, and the hardware—and the actual real cost was less than 5% of what they were paying.
What are the benefits other than cost savings?
There is also the flexibility to be able to customize the product. There is a company that sold a (rival's) system into a group of doctor's offices down in Birmingham (Ala.), and after they got the whole system installed, the doctors realized they could not program the speed dial from their phones. It had to be done by an administrator. These guys were up in arms about it because they had always been able to program their own speed-dial numbers on their old system. There was nothing the reseller could do about this. They were powerless to make any kind of change to the product.
By contrast, there was a City of Manchester (Conn.) installation of Asterisk where the reseller there created its own application for the city schools, which permitted the teachers to take the roll by phone and then have the phone system automatically call the parents of pupils who didn't come to class. That's the contrast of how valuable being able to customize the software is.
Is Asterisk a Voice over IP product?
Well, it's a hybrid, so it supports not only just Voice over IP, but also time division multiplexing (conventional private branch exchange [PBX] technology used in many enterprises). This is one of the other huge benefits of Asterisk. Asterisk can talk to both Voice over IP stuff and the traditional old-school telephony, so you can just mate it up to existing systems.
In Huntsville (Ala.), there's a company that makes bookkeeping software for libraries, and they had 70 phones on old key systems (a low-cost basic phone system) and they didn't even have voice mail. So they just hooked Asterisk up to it and were able to add IP handsets and conferencing and voice mail to this old key system. They didn't have to throw anything away.
Do you need to be a Linux expert to deploy Asterisk?
People think, "Oh, I've got to be an expert at Linux in order to use it," and that's not really true. While you can, if you are an expert, do everything yourself if that's the direction you want to go. Or, there are people like Digium, who are happy to hold your hand through the whole process and give you a solution that is much more of a packaged solution, and you still get to benefit from all those benefits from open source.
So, if you're a CEO buying one of these systems, do you want to think about what kind of expertise you have in-house?
Exactly. If they need help with that, then they can certainly contact us. That's one of the things we do. People can come to us and say, "Hey, I need a whole PBX," or "I've got some Linux-savvy people and all I need are some cards," or "I need some tech support with this specific problem we're having," whatever it is. And we have definitely seen enterprises that go both ways.
Where are the majority of your installations? Are they larger companies or smaller companies?
They are really all over the globe and all over in terms of size. Generally speaking, bigger companies tend to use Asterisk in a more targeted way, to solve specific problems in their networks.
How does pricing work?
There are two versions of the software. There's an open-source version, which is freely downloadable, and then there is the business edition, which is more traditionally licensed, warranted, and supported. In that case, the business edition is really more. It's the same software, but it's presented in a different way, with more traditional licensing, more traditional support. There are certain third-party proprietary modules that are available for the business edition to do things like speech recognition and text-to-speech and some features that don't exist in open source today, that are enabled through the business edition.
To be clear, the software we produce is all open source, but sometimes there are other companies that have proprietary products—whether it's because of patents, or because of the nature of their software, or their business model is not open source—that we can enable through the business edition. Obviously the open-source one is a free download, and the business edition, I believe, is $995, and a typical installation would support 160 users.
So services are what typically cost the most?
The services will typically be where you'll spend the money in terms of the integration and if you want to get a higher grade of support; for instance, if you need 24/7 support. Even if you start lumping all that stuff in, it's still very competitive.
I can tell you there was one large enterprise that had come to us to get a solution, and we really put everything we could think of, including the kitchen sink, and put everything at list price because we knew this was going to be a problem. And even so, I think we ended up coming in at 40% of the next highest bid, and they simply didn't believe it. They wouldn't do it because they didn't believe that it could really be that inexpensive.
When I was at the O'Reilly Emerging Telephony Conference (ETel), I heard lots of nonprofits and activists talking about how Asterisk gave them an affordable PBX. Are you surprised at the way Asterisk has been used?
Well, it's always been my theory that when you make something open source, that people will be able to extend it and will extend it to do new and creative things above and beyond just duplicating what technologies exist today. What's so interesting to me, this year in particular, is seeing the first sprouts of completely novel ideas that nobody would have ever thought of before, that are being enabled because of Asterisk.
ETel was a place that it was most visible of all the shows I've been to. There, I saw Spark parking, people paying for parking spaces by phone, or the people from (New York University) that had this application where you'd put stickers on the wall and then they'd have a phone number and an identifier that was unique to that sticker and you could record a phone blog for that location. When someone else called, they could hear your story about that location, maybe add another story. These are not necessarily big money makers, but they're really new.
There's even a guy who wrote an alarm receiver for Asterisk, which can receive signals from an alarm panel, so you can have the PBX call people and page people based upon alarm events rather than having them go to an alarm company. That's obviously a niche area, although it has general value. We've seen other people that use that application, but on the scale of a PBX, is that ever going to be on Nortel's feature list? Probably not. It's outside the scope of what people consider the features of a PBX.