I'm going to tandem on a post by Rich Tehrani this morning. In his post VoIP Applications are Coming, Rich says

The future of VoIP is in how it will enable and integrate with future applications. That is where the excitement is for me. After covering the space for ten years I am happy to see that new applications are beginning to emerge that are enabled by VoIP. It will be interesting to watch the market and see which applications will gain critical mass. Will the large PBX vendors own the VoIP applications market, will it be service providers, application developers or ASPs. The likely scenario is that all of the above will enable sticky applications allowing VoIP to proliferate even more rapidly into our personal and business lives.

Rich's post took me back five years in my own thinking. When I wrote IP Telephony Demystified, here are some points I made:

Disruptive Technology Takes Center Stage

Perhaps the most defining text lately addressing disruptive technologies has been The Innovator’s Dilemma by Clayton Christensen. It describes the differences identified between sustaining and disruptive technologies. The telecommunications industry has provided innovation over the course of its history, but for many years now, has rested firmly on the laurels of prior achievements and settled into the comfortable rut of sustainability. Sustaining technologies provide incremental progress and small enhancements to existing technologies. This is precisely what the traditional telecommunications providers have delivered to the market for the past 20 years or more.

Disruptive technologies are by nature, very different. They arrive significantly lower in the market chain, perhaps even focused in other markets. They are simpler, and less expensive. Disruptive technologies are often lower performance solutions than the incumbent sustaining technologies, and they offer lower profit margins. Historically, mainstream companies tend to look down their noses at these disruptive upstarts, often ignoring them entirely.

The classic example of a disruptive technology is the 5¼” Winchester disk drive introduced in 1981 that dominated the PC market for several years. Prior to this, disk drives were much larger, in 8” and 14” varieties. Large computer companies ignored the 5¼” drive because it was slower, of lower quality, and had a smaller storage capacity. This was clearly not a product that could sustain the mainframe computer market. Rather than fade away, we saw these inexpensive disk drives find a fit in the desktop personal computer, where the lower cost was a benefit, the performance acceptable, and the capacity not an issue (at that time). In 1981 there were four leading makers of the 8” drive, but by 1985, three were gone from the business. Of the 14” drive manufacturers, not a single one survived. What changed wasn’t the sustaining technology, but rather a new evolution of computing in general, fueled by smaller, less expensive components and a fundamental change in the way people used computers.

Market leading companies experience tremendous difficulty in embracing disruptive technologies. It’s the nature of their business to support existing customers and sustain an ongoing revenue stream. This requires the adoption of widely deployed standard technologies. The motivation isn’t to innovate and do something completely new and untried. The motivation is to not rock the boat, but rather, to maintain status quo.

Disruptive technologies lead to new markets, which are difficult to analyze, and harder still to project. The traditional old-school planning methods used in the telecommunications industry make this task nearly insurmountable because the value created by the disruptive new technology is incompatible with the business model and processes, even the corporate culture, of the incumbent providers.

The telecommunications industry didn’t begin as the mature, even lethargic behemoth it is today. It began as a disruptive technology, displacing the telegraph system with a completely new, real-time, interactive communications tool. But no technology can remain disruptive. Once it becomes the mainstream, as the public switched telephone network did long ago, it becomes a sustaining technology. And once the sustaining technology matures, incremental advancements slow, and the door to disruption from outside opens.

Let’s perform a quick side-by side comparison of traditional telephony and IP telephony and see just how disruptive this solution might be.

IP telephony pretty clearly sits in a position to seriously disrupt the telecommunications industry. Called minutes billed to IP telephony are rising at dramatic rates, with expectations of an ongoing multi-billion dollar revenue stream. Over the past year or two, there have been ongoing advancements moving IP up the market chain making it more and more viable, and worth serious consideration.

Instant messaging applications play a role in this disruption activity as well. This tiny little application has become one of the most widely used utilities on the Internet. As companies discover employees using instant messenging in productive business ways, they will embrace it more, and more. There’s a fairly tight synergy between instant messaging and telephony, with the ability to shift from short messages by simply clicking a button to speak to someone. These applications will converge to some degree over the next year or so as both continue to mature.

IP telephony services and application are poised to move quickly from a minor, yet significant portion of the telephony market to a major and growing share. As the existing providers struggle to find a new identity in the market, and fight to regain consumer and investor confidence, the providers that only offer IP related service have an opportunity to seize major market share. The advancements in features and technology are continuing and a rapid pace. The products are maturing, and while they haven’t fully matured, analysis of cost vs. benefits will often tip the scales solidly toward IP telephony as the best solution for many businesses. That trend will continue, and IP telephony will very likely become at least equal to traditional telephony in the markets that are most technology oriented (North America, Europe and much of Asia).

This is a pretty clear wakeup call to the telecommunications industry. There’s a barbarian at the gate, and it’s called IP telephony. As users find new ways to implement and use the technology, this particular barbarian could overrun the city leaving few survivors profitable in the traditional telephony sector.

Five years after I wrote that, VoIP remains a disruptive influence in the telecommunications industry that is still shaking up the incumbent telcos, still changing the scene, and still working towards its potential. Later in that same chapter, I wrote:

The Future for Business Users

This book is about a technology, but the technology is merely a tool that brings us a step closer to full convergence of voice and data networks and services. Let’s consider just why this type of convergence is important to business.

The two most valuable assets a company has are its people and its intellectual capital. Intellectual capital might be housed inside network servers and data center archives, but it’s often most commonly found inside the staff of employees. Data, information and knowledge are more valuable that inventory and cash reserves. Yet even this mindset fails to account for human capital. The information model in the following visual takes this concept one step further.

The raw data is easily turned into information that tells use Ken is 6 feet tall, lives in Vermont and has a dog named Zoe. Even automated systems can incorporate logic rules that can extrapolate knowledge from this raw data. We know Ken is easier to reach by phone that email because we have a telephone number, but no email address. Wisdom is only gained through the human factor. Only personal conversations on a human level discover that Ken takes Zoe for a walk in the woods or to play in the lake in the late afternoons. This wisdom cannot be extracted by machine. It requires that one computing device that can think extemporaneously, building relationships between data elements dynamically . . . the human brain.

 

Raw data is easily collected. In the past, it often went into archival storage, buried in a tomb from which it could never be retrieved. The past few years have focused attention on data warehousing concepts, which rapidly evolved into knowledge management solutions. Wisdom remains in the human domain, outside the reach of computers.

For a business to take advantage of the wisdom in human capital among the staff, that business must give the staff tools and knowledge upon which decisions can be based. The closer at hand the tools are, the more efficient and productive a company will be. The way to bring the tools closer to hand is to create that converged environment where access to any piece of information and any communication need is available instantly.

Business customers have a great challenge, because new technologies cannot be overlooked. They must be evaluated and business case analysis performed, but the analysis must be done swiftly. Implementations must be quick and efficient. Don’t place unwarranted faith in an equipment vendor or provider. You are managing your business; they are managing their business. Insist on performance commitments and service level agreements. Don’t assume you’re getting what you’re paying for. Monitor your systems and know what you’re getting.

Managed services may offer the best hope many businesses. Evaluate them closely. IP Centrex clearly needs to be called something else. Coupled with data center hosting services, it provides the truest service convergence a provider can offer. Today the offerings are limited, but they’re improving. Work closely with service providers. Above all, be vocal. When offerings fall short, make the shortcomings known. The world of telephony is far more than dial tone now. Don’t settle for dial tone.

A converged single network creates perhaps the greatest differentiator between competitors in business. Build your business with an eye to the future. Incorporate technologies directly into your business when they fit with the core competencies. Outsource to qualified providers when appropriate, but manage the providers lest they manage you. Give employees the tools to do the best possible job in order to receive the best possible results.

Again, the advances have been slow in coming, but five years later they're still coming steadily. While some of my thinking regarding managed services has changed, some ideas remain constant. What we do see today is an increase in VoIP applications that bring greater value to business. We see the beginnings of integration between CRM and VoIP with a recent Oracle purchase. We see true presence signifiers, and the idea of relevance from companies like iotum. We see real integration of VoIP and video collaboration tools from companies like SightSpeed.

If I were to deliver a message to my colleagues still working in the traditional telecommunications sector (some of those are about to be dramatically impacted be their role at SBC, AT&T or Bell South), it would be this - hang on tight, the disruption isn't over yet.

We've seen a steady stream of innovation and entrepreunerial spirit that's really just now gaining a full head of steam. We've got some interesting times ahead. Hang on for the ride, and leverage every option for all it's worth.

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